Running a nonprofit often means dealing with a variety of generous donations from supporters. Well, sometimes the donation doesn't exactly fit your current needs. A recent question from one of my nonprofit leaders illustrates this… 

“Someone donated an RV to my nonprofit and we don't need it. Can we sell it? This donation was receipted as a tax deductible gift.”

     Well, the simple answer is, “Yes!” You can sell it. The IRS permits nonprofits to sell donated items, including vehicles, even if they are receipted as tax deductible gifts. But there's some important things to know before listing that vehicle for sale!

5 Steps for Selling a Vehicle That Was Donated to Your Nonprofit

1. Determine the Fair Market Value of the Donated Vehicle

     Before you even start the process of selling a donated vehicle, you need to determine the fair market value. This step is crucial for both the donor's tax purposes and for your records. Some online resources for determining fair market value include Kelley Blue Book and the NADA guides which can help you determine the market values for something like an RV, in my client's case.

2. Document the Sale

     It is so important to keep thorough records of the sales process, including any market value estimates or appraisals you’ve received and any kind of advertisements that you used to sell the vehicle. Then, you’ll want to document your final sales price. This is crucial documentation that you’ll need for reporting but it also increases transparency, should you ever need it.

3. Notify the Donor

     While you're not legally required to do this, if there's any possibility that the donor thinks you're going to retain that donated vehicle or RV for your mission, then you’ll want to communicate with them to clarify the expectation. This practice helps to maintain transparency and trust with donors. The last thing you need is to have already sold a donated asset, only to have the donor ask you where it was because they believed you were going to keep it and use it.  It's a lot easier to clarify the expectation on the front end than to explain a misunderstanding on the back end. 

4. Use IRS Form 8282 Donee Information Return

     If the vehicle is sold within three years of its donation and the sales price is more than $500, you must file IRS Form 8282 Donee Information Return. You’ll also send a copy to the donor. This form notifies the IRS that the nonprofit has disposed of a donated item. It's a very important step that should not be overlooked. 

5. Allocate the Proceeds of the Donated Vehicle’s Sale

      what do I mean by that? Well, I’m not saying you should go spend those funds on something else! In fact, those proceeds should all be a part of funding your mission. You can decide how they're going to be used, but I want to emphasize that these resources are not an extra set of funds that can be spent on anything you want. Rather, the sales proceeds are subject to the same accountability and stewardship as a cash donation. So, fold them into your normal operating cost. Use them to fund your mission. 

     While vehicle donations can be beneficial, they can absolutely come with their share of burdens. In fact, these burdens are so heavy that most nonprofits that I work with do not make a habit of receiving vehicle donations. 

3 Reasons Your Nonprofit Might NOT Want to Accept Vehicle Donations

1. Donated Vehicles Require Administrative Overhead

     Your nonprofit has to handle all the paperwork.  This includes completing all the steps described above. Sometimes, managing that whole process can require significant administrative effort and resources, which creates a drain and distraction from the main mission. 

2. Storage and Maintenance

     If that donated vehicle cannot be sold immediately, you'll have to arrange for it to be secured and maintained Those needs represent additional costs that the nonprofit will incur. 

3. Liability Concerns

     Until the donated vehicle is sold, your nonprofit is responsible and liable for any taxes, insurance, title transfer, and registration. 

With all of the administrative burdens listed above, why or when should your nonprofit accept a vehicle donation? 

4 Factors Every Nonprofit Should Consider Before Accepting a Vehicle Donation

1. Does the vehicle donation align with your mission?

      If your nonprofit doesn't operate a ministry or activity that uses vehicles in its programs (either within your daily operations or as part of the actual services you provide to your clients), it may not be prudent  to receive a vehicle donation. It might be more practical to decline the donation in this case. 

2. Does your nonprofit have the capacity to manage the administrative and logistical challenges listed above? 

     If your staff is stretched thin and you already have more administrative needs than support, the realistic answer may simply be,“No.”

3. What is the potential impact of this particular vehicle donation?

     Sometimes, the expected proceeds from selling the vehicle far outweigh the cost and efforts involved in the sale process. If this is the case, it may actually be worth accepting the vehicle donation.

4. Do you have a clear vehicle donation policy?

     Lastly, I cannot overstate the importance of having a clear policy in advance. Make sure your vehicle donation policy is documented.

     For example, does your policy state that your nonprofit will always receive non-cash donations of vehicles and that you will immediately sell them and turn them into cash to support your mission? Does your policy outline a process in which the board reviews each vehicle donation upon its initiation to determine whether you will accept or decline the donation? The process of clearly documenting your policy will help streamline your decision making process and manage your donor expectations.

If you have specific questions like this pertaining to nonprofit finance, I’m here to help! You can book a strategic consult with me here!