The Internal Revenue Service sets the standard deduction for business driving based on an annual cost study — but it takes an act of Congress to change the mileage deduction for volunteers.
The business mileage rate is 58.5 cents a mile. The volunteer mileage rate is 14 cents a mile. After a decade-long freeze Congress is puttering toward a change, increasing the break for volunteers who deliver meals, take people to medical appointments and do other charitable driving.
The IRS has adjusted the business mileage rate twice in less than a year. It went from 48.5 cents to 50.5 cents a mile on Nov. 27, and then to 58.5 cents a mile on June 23. Since 1997, the rate has increased more than 85 percent.
The last congressional hike for the volunteer mileage rate came in the Taxpayer Relief Act of 1997, when it went from 12 cents a mile to 14 cents, according to Independent Sector, a coalition of nonprofits.
H.R. 2020 (introduced in April 2007) and its companion bill S 3421 (introduced Aug. 1) would peg the volunteer mileage rate to the business rate. That way, advocates wouldn’t have to fight every year for an inflation hike. U.S. Rep. Betty McCollum, D-Minn., is one of 26 co-sponsors.
“Cost of living increases, especially skyrocketing gas prices, have significantly impacted nonprofit groups, like Meals on Wheels in Minnesota, that rely on volunteers with their own vehicles,” McCollum said in a written statement to MinnPost.
Steve Francisco, federal policy director for the Minnesota Council of Nonprofits, said a bipartisan bill (S. 3429) introduced Aug. 1 would tie the volunteer mileage rate to 70 percent of the business mileage rate, (or nearly 41 cents a mile). U.S. Sens. Charles Schumer, D-N.Y., and John Ensign, R-Nev., are leading the effort.
The National Council of Nonprofit Associations is organizing support, and MCN has signed on.
“We would want to be supportive of any legislation that makes a long overdue adjustment to the [volunteer] mileage rate,” Francisco said. “I think a lot of people never claimed this mileage deduction. They consider it part of their donation. With gas prices going the way they are, it would make it more affordable for people to be able to volunteer.”
Costs and benefits
Even if Congress adjusts the rates, volunteers will not get reimbursed 41 cents a mile (or whatever rate is chosen). If volunteers don’t itemize their deductions, this change doesn’t help. Even if volunteers do itemize, the net tax savings depends on their tax bracket.
For example, let’s look at someone filing jointly in 2008 with taxable income of $70,000. Let’s say that person drives 15 miles a week for Meals on Wheels and logs 780 miles for the year. (Yes, the volunteer gets to count the commute from home.) At 41 cents a mile, that adds up to a $319.80 itemized charitable deduction. Since the volunteer would be In the 25 percent tax bracket, that translates into a $79.95 tax savings, enough for maybe two tanks of gas.
The government’s cost for such deductions is a mystery. The IRS does not have an estimate for H.R. 2020. A spokesperson suggested checking with the nonpartisan Joint Committee on Taxation. Committee staff said in an email there is no public revenue estimate.
One big variable is the number of people who would take the deduction. With the rate at 14 cents, few people probably bother. Increase that number significantly and more people would track their miles.
Byron Laher, a former Greater Twin Cities United Way lobbyist, says he thinks the cost of increasing the volunteer mileage rate to the business mileage rate would “scare the heck out of Congress.”
Laher had a 30-year career with United Way and worked on the effort to raise the volunteer mileage rate from 12 cents to 14 cents a mile. At that time, he recalls, the IRS argued the volunteer mileage rate wasn’t supposed to cover all auto-related costs, just the extra out-of-pocket costs.
“It took almost eight years … and that was hard work,” said Laher, expressing doubt about efforts to raise the volunteer rate to 58.5 cents. “I would still like to inch it up — or maybe foot it up.”
Still, even if the rate was just to cover out-of-pocket costs, it ought to be up around 35 or 40 cents a mile, he said.
An IRS spokeswoman said the agency does not comment on pending legislation.
Laher has more than a historical interest in the debate. Last November he became president of Community Emergency Assistance Program, which runs Meals on Wheels in Brooklyn Park, Brooklyn Center and northern Camden in Minneapolis, delivering approximately 35,000 meals a year.
The program’s recruiting efforts are spinning their wheels. It hasn’t lost volunteers because of high gas prices, Laher said. But over time, the agency has attrition. Volunteers drop out, move out of the area or age-out. “We need a constant influx of new drivers,” Laher said. “We have not been able to get new drivers.”
And he attributes that to the price of gas. He thinks increasing the volunteer mileage rate would help recruiting. For now, he and Patrick Rowan, executive director of Metro Meals on Wheels, are trying to raise money for gas cards for volunteers.
Laher again is anticipating the arguments people will make against an increase. Some will say that when people self-report their volunteer miles, it opens the door to abuse.
His solution: Require agency documentation.
His Meals on Wheels program already calculates each route’s distance, he said. Nonprofit organizations could document the number of volunteer miles driven, similar to other donation receipts.