People donate their boats to charitable organizations for a lot of reasons. Some want to get out from under the expenses of ownership and score a tax deduction at the same time. Others don’t have the time to sell it. Some have overinvested and know the market will never repay them, so instead of swallowing the bitter pill of a big loss, they choose the altruistic route. And then there are those for whom a donation offers the satisfaction of helping to support a cause they care about.
“Everyone has a different viewpoint, yet for many, the process of donating can be emotional because it’s not always easy to let go of something that’s important to you,” says Brad Avery, the Director of Marine Programs for Orange Coast College School of Sailing and Seamanship in Newport, California, one of the nation’s largest nonprofit public boating education institutions—which has a fleet of power and sailboats comprised of donated vessels and those purchased from proceeds of other gifts. “Every donation is different in terms of what people are looking for, and their wishes often depend on the size of the gift and their objective.”
Boat donations are an excellent means of philanthropic giving, but the process isn’t as simple as some people think. It has to be done right with some planning, research, and the advice of a tax professional. By crossing the t’s, you can turn your old boat into a gift that helps others without giving yourself the headache of a financial disappointment. Do your homework when choosing a charity. In order for you to qualify for a deduction, the charity that gets your donation must be an IRS-approved 501(c)(3) organization. You can check its status through IRS Publication 78.
To maximize the deduction you can take, you’ll want to claim the “fair market value” of your boat, which is best determined by an appraisal from a certified marine surveyor. For boats with a value greater than $5,000, an appraisal is mandatory. However, to claim the fair market value of your boat, the IRS says the vessel will not be sold by the charity prior to “significant intervening use.” Essentially, that means that if the boat isn’t used by the nonprofit on a regular basis and is subsequently sold by the charity in less than three years from the date of donation, the IRS will restrict your deduction to the amount the charity received for the sale. That’s a problem for you if the liquidation price is much lower than the fair market value originally claimed.
This type of situation is not rare and it occurs because many charities aren’t in the business of using boats. They’re more interested in turning the vessel into cash as quickly as possible. The best way to avoid this is to find out what the charity’s intentions are for the boat before you make the donation.
“We turn a lot of boats down,” says Avery, who gets calls from those who want to donate almost every day. “Many donors want us to hold their boats in the program to use, but we can’t always do that and we tell them so upfront. Some boats are not in the right condition; others are not the right fit for our program. Some donors are hoping only for the biggest appraisal they can get with no altruistic motive at all. When that happens, the relationship doesn’t really work. There has to be the motivation of giving at some level. It’s not just about getting a big tax deduction. That does come into play, but the gift has to work for both the charitable institution and the donor. That’s why it’s important for both parties to do their due diligence.”
OCC has an excellent reputation for working with donors and taking their intentions for their boats seriously. That professionalism has drawn some high-profile donors to the school, including the late Roy Disney, who gifted his 86-foot, $7,000,000 boat Pyewacket in 2005. It came with a grant underwritten by the former Walt Disney Co. board member to help cover costs. “To accept a boat like that, you really need to know what you’re getting into in terms of maintenance and operation,” says Avery. “Disney didn’t expect to give it without an endowment, so he asked us to create a program around the boat, which we did. We’ve done that on many of our large gifts.”
That includes Nordic Star, a 92-foot Hargrave and the school’s current flagship. It’s used as a classroom for students in the school’s professional mariner program. Prior to Nordic Star, OCC’s flagship was Alaska Eagle, a Whitbred round-the-world winner gifted to the school in 1979. That boat logged 300,000 sea miles, and carried 3,000 students to destinations like New Zealand, Europe and Antarctica.
OCC has an impressive fleet (40 models from 14 to 92 feet) with prestigious boats, but it accepts mainstream models, too, as there are brands such as Tiara used by its students. And there are other organizations that take production models, as well. But to find them, you have to do your homework.
If the charities you normally support aren’t equipped to accept boat donations, find a reputable one that is. You can research organizations through the BBB Wise Giving Alliance and Charity Navigator. Be sure the charity is normally engaged in activities that include the use of boats, such as boating schools, marine research organizations or Sea Scout troops. Also, be sure the charity will properly log use and make those logs available to the IRS. You should also contact an IRS specialist prior to donating your boat to get clarification on whether the intended use for the boat will be adequate to substantiate a fair market value donation.
When you’ve narrowed your choices down, take the time to learn more about the charity in terms of how your boat will fit in. Says Avery, “Look at where your boat will live and who will maintain it. When choosing a nonprofit, think of it as a relationship.”
If you buy a yacht overseas or in a remote location, you need to figure out how to get it home. Here...