DETROIT - One Metro Detroit charity was forced to move its offices into a doublewide trailer. Another lost its headquarters to foreclosure, according to the Detroit News newspaper.
Volunteers of America (VOA) and Motor City Blight Busters, among others, have slashed services, including closing a homeless shelter and cutting back on soup kitchens and low-income housing. It's because of a new law that gutted the financial incentive of donating one's car to charity, which had been a popular tax write-off.
Since the change went into effect Jan. 1, the number of vehicles donated in Metro Detroit has dropped 40 percent, according to six groups that rely on the gifts. "It was a big blow to us," said Norman Yatooma, chairman of Charity Motors, a Detroit nonprofit. "It has a devastating impact on Charity Motors and all the charities we work with."
Under the law, taxpayers no longer can deduct the fair market value of the donated car from their taxes. Rather, they're limited to the price the vehicle fetched when it was sold by the charity, reported the Detroit News.
Congress enacted the change after studies found that taxpayers were abusing the tax break by taking deductions far above the actual selling prices. A review of 54 donations in 2003 found that charities received 5 percent of the amount donors claimed as deductions, according to the General Accounting Office.
In a clarification earlier this month, the federal Treasury Department said residents could continue to deduct the fair-market value if they donate their car to a charity that resells it to the poor. In southeast Michigan, Charity Motors is one of the few charities that do so.
To qualify as low income, Michigan residents can show their state Bridge Card, which is issued by the Family Independence Agency for food or financial assistance.
Volunteers of America Michigan is preparing to close a homeless day shelter in Lansing on July 1, President Alex Brodrick said. The shelter, which provides food, job training and other services to 100 people a day, was supposed to close in January but an anonymous $100,000 donation kept it open, reported the Detroit News.
The VOA has closed one of its two car auction lots, fired 20 of its 95 workers, and moved its headquarters from a two-story brick building to a trailer on a car lot in Pontiac. Its budget will drop from $9 million to $7 million in the next fiscal year, which begins July 1.
The drop in car donations comes at a vulnerable time for charities, they said. Their other funding sources, such as contributions from residents and businesses, also are low because of the sputtering Michigan economy. The limping economy not only dries up their sources of income, but also creates more people who need their help, said John George, executive director of Motor City Blight Busters to the Detroit News.
Blight Busters, which renovates or demolishes substandard housing in Detroit, has cut production in half, now building just two homes a year. Its budget has dropped from $1 million in 2001 to $500,000 this year.
The group's four workers sometimes go without pay and the organization has fallen $50,000 into debt, George said. It's trying to re-buy the building housing its headquarters after it was foreclosed last Christmas Eve.
Detroit resident Wiltrice Rogers had hoped that Blight Busters would have torn down the crack house next door to her westside home by now. But its lack of money has slowed the progress. Relief finally arrived earlier this year when Blight Busters boarded up the home and recently began tearing down its garage and porch. It's waiting for a permit from the city to raze the main structure.
Besides getting fewer cars this year, charities said they also seem to be receiving ones in poorer condition, including ones that barely run. The possible culprit is the economy, they said. With people less secure of their finances, they may be hanging onto their vehicles longer than they usually do. The old vehicles don't give the charities much of a chance to make money, said George Fink, general manager of Mother Waddles, a Detroit charity to the Detroit News.
As for the number of cars donated, Mother Waddles has seen the number fall 46 percent this year, he said. The yearly revenue from donations will probably drop from $750,000 to half that next year.
Because of the drop in funding, the charity will reduce its feeding of the poor from weekly to biweekly at its car lot in Detroit, Fink said. It costs up to $3,000 to distribute the 80 to 100 food baskets containing chicken and fruit.
At the Society of St. Vincent de Paul, another Detroit charity, the amount of money raised from car donations will probably drop from $400,000 a year to $300,000, Executive Director Bill Brazier said.
That means the group will dispense many fewer vouchers that the poor use for rent and transportation. "The pie isn't getting any larger," Brazier said. "We'll have to go into our reserves to cover the vouchers."