Contributions of Motor Vehicles, Boats, and Airplanes
Effective January 1, 2005, Minnesota State Colleges & Universities must comply with additional tax reporting obligations regarding the receipt of charitable donations of motor vehicles, boats, and airplanes with a claimed value which is more than $500. Colleges and universities are required to follow new guidance regarding the content of acknowledgements that they provide to donors of motor vehicles, boats, or airplanes. Severe IRS penalties can apply to colleges and universities if proper acknowledgement is not given to the donor.
For purposes of our discussion, "vehicle" means any motor vehicle, boat, or airplane (but this does not include vehicles that would be considered inventory to the donor if on hand at the close of the taxable year, or property primarily held by the donor for sale to customers in the ordinary course of his trade or business).
The content of the acknowledgement will depend upon what the college/university does with the donated vehicle. The acknowledgement can take two alternative formats depending on whether the college/university sells the donated item or whether the college/university first uses or improves (retains) the donated item. As long as the acknowledgment contains the required information, the donee can provide the acknowledgment in any reasonable manner.
1) If the college/university sells the vehicle without any significant intervening use or material improvement:
Content of acknowledgement college/university must provide the donor within 30 days of the date of sale:
(i) The name and taxpayer identification number of the donor.
(ii) The vehicle identification number or similar number.
(iii) A certification that the vehicle was sold in arm's length transaction between unrelated parties.
(iv) The gross proceeds of the sale.
(v) The date the vehicle was sold and
(vi) A statement that the deductible amount may not exceed the amount of such gross proceeds.
(vii) Date of the contribution.
2) If the college/university first uses or materially improves(retains) the vehicle: Content of acknowledgement college/university must provide the donor within 30 days of the date of the donation:
(i) The name and taxpayer identification number of the donor.
(ii) The vehicle identification number or similar number.
(iii) A certification of the intended significant use of the vehicle and the intended duration of such use or the intended material improvement by the donee organization and
(iv) A certification that the vehicle would not be transferred in exchange for money, other property, or services before the completion of such use or improvement.
(v) Date of the contribution.
Steps campuses should follow to properly report motor vehicle, boat and airplane donations:
1) Keep a copy of each motor vehicle, boat, and airplane donation acknowledgement that the institution provides to the donor as this is the information the IRS will require. Retain a copy of the title.2) Complete Office of the Chancellor, Tax Services spreadsheet entitled "Form 1098-C Reporting Spreadsheet;" provide details of each motor vehicle, boat, and airplane donation on the spreadsheet
3) Email the completed spreadsheet by January 12, 2007 to: ann.page@so.mnscu.edu. Please recheck for errors prior to emailing.
See Tip for Reporting Form 1098-C .4) Office of the Chancellor, Tax Services on behalf of all colleges/universities will file all Form 1098-C's with the IRS.
If the donation is to the foundation, then please do not report contributions to Tax Services, Office of the Chancellor. Foundations should seek guidance on their own separate IRS filing requirements.
NOTE: Different requirements apply for vehicles with a value of $500 or less
Contemporaneous written acknowledgment is also required to substantiate a qualified vehicle contribution of $250 but not more than $500.A contribution of an auto, boat or airplane with a claimed value of at least $250 must be substantiated by a contemporaneous written acknowledgment of the contribution by the donee organization. For a vehicle with a claimed value of at least $250 but not more than $500, the acknowledgment must contain the following information: the amount of cash and a description (but not value) of any property other than cash contributed; whether the donee organization provided any goods or services in consideration, in whole or in part, for the cash or property contributed; and a description and good faith estimate of the value of any goods or services provided by the donee organization in consideration for the contribution, or if such goods or services consist solely of intangible religious benefits, a statement to that effect. To meet the contemporaneous requirement, the acknowledgment must be obtained by the donor on or before the earlier of the date on which the donor files a return for the taxable year in which the contribution was made, or the due date (including extensions) of that return.
Each vehicle donation should be reviewed based on the facts and circumstances to determine the type and timing of the required acknowledgment.
