While conferees rejected last minute efforts to attach provisions of both the CARE Act and the Houses of Worship bill to the corporate tax bill, the legislation sent to the president does contain three provisions of particular interest to the nonprofit sector. The final bill:

• Limits charitable deductions for vehicle donations to the sale price obtained by the charity
• Limits the value that taxpayers can claim on the donation of a patent or intellectual property to a charity
• Requires increased reporting for non-cash charitable contributions such as property.

Vehicle Donations Beginning Jan. 1, 2005, when a person donates a vehicle and claims the value is $500 or more, the exact deduction will depend on how the charity plans to use the vehicle. If the nonprofit sells the vehicle, the donor will only be able to deduct the amount that the organization got from the sale, if the charity notifies the donor of the final amount. If the nonprofit uses the car for "significant" tax-approved charitable work, the donor can claim the fair market value of the donated vehicle. Nonprofits will be penalized for providing fraudulent acknowledgments to donors. Sen. Charles Grassley (R-IA) calls the changes "commonsense reforms [that] will go a long way toward ending the abuses in car donations" documented by the Government Accountability Office. The GAO found wide discrepancies between the values that some auto donors claim on their tax returns and the actual worth of the cars they give. A November 2003 GAO report notes that excessive tax valuations of donated vehicles cost the U.S. Treasury $654 million in tax revenue in 2000. In a letter sent to Treasury Secretary John Snow during consideration of the changes, representatives of two dozen charitable groups argued, "Under such a proposal, a taxpayer's actual deduction amount would be uncertain at the time of a contribution, and potential donors would not be able to compare the relative benefits obtained by donating their vehicles, trading them in to a car dealer, or selling the vehicles themselves. ... We believe this approach would greatly discourage and reduce future vehicle donations to charities and increase the cost of administering such programs, and we would respectfully ask that the Treasury join us in opposing any such proposal." Lawmakers, however, believe that the current problems with vehicle donations necessitate the changes and that the new law will not be overly burdensome. The U.S. Treasury will develop rules implementing the new law in the coming months, and lawmakers and charities will be watching closely. Contributions of Patents or Intellectual Property In December 2003, the Internal Revenue Service (IRS) issued a notice that states the IRS "is aware some taxpayers, who transfer patents or other intellectual property to charitable organizations, are claiming charitable contribution deductions in excess of the amounts to which they are entitled under §170 of the Internal Revenue Code." Congress decided to act to remedy this problem. HR 4520 provides that if a donor contributes a patent or other intellectual property to a charitable organization, the donor's initial charitable deduction is limited to the lesser of the donor's basis in the contributed property or the fair market value of the property. The donor is allowed to deduct additional amounts in subsequent years based on a percentage of the income received by the charity with respect to the contributed property. The charity must report income received or accrued with respect to the contributed property to the IRS. The donor must obtain written confirmation from the charity regarding any income from the donated property. It will be effective for contributions made after June 3, 2004. Non-Cash Donations Current law requires individual donors to obtain a qualified appraisal of the property being donated for deductions over $5000. HR 4520 will extend this requirement to C corporations. It will be effective for contributions made after June 3, 2004. It also requires donors to attach the appraisal to their tax return if the contribution exceeds $500,000. Charities acknowledge that there are problems with the current system of monkish and in-kind donations, but many feel that the burden of policing tax breaks should not be on recipient organizations. There is also concern that the new rules will chill these types of contributions. The charitable deduction provisions in the bill could be just the beginning of a series of tax changes affecting charities. The Finance Committee is currently considering proposals to curb what they call "a wide range of abuses" in the charitable arena, including "charities used as tax shelters for corporations and charitable board members steering business to their private firms."