Charities that conduct vehicle donation programs may jeopardize their tax-exempt status by operating the program in a manner that improperly benefits private parties. Generally, a charity’s tax-exempt status won’t be affected if it does any of the following with donated vehicles:

  • Sells the donated cars and uses the proceeds exclusively to fund its charitable programs
  • Uses the vehicles regularly for a significant period of time to conduct activities that substantially further its charitable programs
  • Sells the cars after it makes a material improvement to them and then uses the proceeds to exclusively further its charitable programs
  • Distributes the automobiles at a price significantly below fair market value to needy individuals in fulfilling its charitable purpose of relieving the poor, distressed, or underprivileged who need a means of transportation