The advertisements seem to be everywhere these days, along the lines of “Get rid of your junk car with a single phone call while donating to your favorite charity.”
Charity car auctions have become a booming business nationwide, raising hundreds of millions of dollars for nonprofit groups each year, according to congressional estimates.
But the business has an unseemly side as well. Most of the time, donated vehicles sell for far less than the owners claim in tax deductions. Many vehicle auction companies keep a huge chunk of the proceeds, delivering only a small portion to the charities that are supposed to benefit.
An influential U.S. senator from Iowa wants to crack down by restricting tax deductions. But a Valley auction owner is among those lobbying against changing the tax code.
“This amendment is one that looks like it could kill the industry,” said Greg Roberds of Mesa, owner of FasTrak Charity Auctions.
Roberds said he stumbled into the charity car business nearly three years ago. He was operating a wholesale auction shop in west Phoenix when he offered to use his tow trucks to pick up donated cars free of charge. Roberds said he expected there were two or three extra cars a month.
Instead, Roberds’ company collected 67 cars in three weeks and was quickly overwhelmed. Seeing an opportunity, Roberds changed his entire business to focus on “motor-donor” programs, becoming the state’s largest charity auction dealer. From October 2001 to January 2004, Roberds said his company sold 6,772 vehicles for a total of $2.8 million. FasTrak sent 72 percent of those funds, $2 million, on to charities such as Valley of the Sun YMCA and Catholic Social Services, he said.
The program has become so popular for Make-A-Wish of Central and Southern Arizona that it raised $200,000 last year. That’s 10 percent of the chapter’s budget, paying for an estimated 40 wishes for terminally ill children, said Donna McDonald, Make-A-Wish’s director of development and communication.
“What (Roberds) provides for us is an opportunity to fulfill our mission,” McDonald said.
But FasTrak might be an exception in a less-than-scrupulous industry.
The U.S. General Accounting Office issued a critical report in November after reviewing hundreds of thousands of tax returns and tracking 54 individual vehicles through auctions.
The GAO said charities received less than 5 percent of the amounts claimed by the donors on their tax returns. If that figure is extrapolated to all donated vehicles, the federal government potentially lost an estimated $622 million in 2000 alone.
Sen. Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee, has said in published statements the charity car industry is defrauding taxpayers.
Part of the problem is that donors are allowed to claim the “full market value” of their vehicles, normally found in buying guides such as the Kelley Blue Book. But vehicles sold at auction usually bring in much less.
Grassley has attached an amendment to S1637 that would require donors to claim only the auction sale price on their tax returns. The amendment wouldn’t affect high-profile charity events such as Scottsdale’s Barrett-Jackson Classic Car Auction, in which rare and vintage vehicles almost always sell above any listed price.
But the proposal could be devastating to programs operated by companies such as FasTrak. Roberds said people won’t know how much their donations would be worth when they are deciding whether to give a vehicle away or sell it themselves. “If there were legislation that would not allow people to get the ‘blue book’ deduction, it would completely hurt the program for hundreds and hundreds of nonprofit agencies here in Arizona and nationally,” said John Youngberg, YMCA’s senior vice president for financial development.