You're just an average Joe with an old Honda sitting in the garage that you'd like to donate to charity.

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Or you're an affluent couple with some pristine oceanfront property in Maine you'd like to protect from development.

Or you're an eccentric multimillionaire who collects Stradivarius violins, which, you believe, would be the perfect addition to your favorite, financially struggling symphony orchestra.

Hoping to get a nice tax deduction from any of these donations? Be careful, because Sen. Charles Grassley, R-Iowa, powerful head of the Senate Finance Committee, is watching you.

In the wake of questionable "in-kind" gifts of inflated value by donors looking for tax breaks in recent years, Grassley has some questions of his own. And at least one may focus on last year's $17 million purchase of 38 rare 17th- and 18th-century musical instruments by the New Jersey Symphony Orchestra from a benefactor who valued -- or overvalued -- them at $50 million.

The orchestra's head at that time was Lawrence Tamburri, who is now president and CEO of the Pittsburgh Symphony Orchestra.

Beginning today, Grassley's committee will be holding hearings on a wide range of problems facing nonprofit, tax-exempt organizations, from governance and best practices to tax shelters to the overvaluing of donor gifts of "tangible and intangible property."

Grassley has vowed to crack down on what he told The New York Times are "problems of wildly inflated in-kind donations across the board: cars, land, intellectual property and now, possibly, donations of musical instruments."

It's not clear exactly how Grassley plans to curb these abuses, but the Senate Finance Committee chairman is said to be considering a wide range of options:

Allowing tax deductions for in-kind donations at only 5 percent of their assessed value.

Requiring all donations of more than $20,000 to be automatically referred to an IRS panel for independent appraisal.

Requiring museums, universities and other nonprofits to appraise the value of gifts they receive instead of leaving it up to the donor.

The Senate already has passed a corporate tax bill with a provision aimed at one particular kind of gift: the estimated 1.2 million annual car donations to charities, which often resell them at auction for much-needed cash. A 2003 General Accounting Office report found that many donors claimed deductions -- often based on Blue Book value -- that were higher than what the cars were worth. Now, if the charity sells the donated vehicle without making improvements, donors will be able to take a tax deduction based only on the sale proceeds.

Grassley and his colleagues on the tax writing committee are said to be determined to raise more badly needed revenue in the wake of Bush administration tax cuts, and the generous -- and largely unmonitored -- tax deductions from gifts to nonprofits are seen as a juicy target. In turn, representatives of universities, museums and other arts, cultural and educational nonprofits are on red alert, urging their members to fax or call legislators to lobby for weaker provisions.

The local picture

Much is at stake. An informal survey of numerous Pittsburgh organizations found that many rely on these kinds of tangible gifts for income or to relieve chronically tight budgets. Moreover, Grassley's claim of abuses in in-kind donations "is blown way out of proportion," said Dee Jay Oshry, a top official at the Pittsburgh Opera.

"There are no widespread problems but rather an isolated problem or two, and it generally comes in areas where there's something of high value but it's difficult to determine what that value is."

Not all in-kind donations are alike, local officials take pains to point out. For some institutions, there's no guesswork about how much such gifts are worth, unlike the Stradivarius donation. The Pittsburgh Ballet Theatre, for example, receives substantial in-kind donations of all types, from legal work to health care to massages for dancers, whose value is clear. Ditto for the Pittsburgh Opera, which often receives donated hotel rooms or airline tickets for out-of-town artists.

On the other hand, at the Carnegie Library, rare books, manuscripts and archival material have been donated to the William R. Oliver Special Collections over the years, "but it's very hard to pin down the value of such items," said Greg Priori, the collection's director. While the overall collection is worth millions, Priori cautions that its contents can be valued two ways: based on their worth in the commercial marketplace or to researchers.

"An item may be priceless from a historic standpoint. The value of something to collectors is often very different than the value to historians," Priori added.

It's not known who will be on the Finance Committee's witness list -- repeated calls to the Iowa Republican's office were not returned -- but Grassley is expected to zero in on the much-ballyhooed case of Herbert Axelrod, a wealthy New Jersey businessman who made a fortune publishing pet-care books. In 1998, Axelrod donated four antique Stradivarius instruments to the Smithsonian Institution and, last year, sold several dozen more to the New Jersey Symphony Orchestra at what he claimed was a greatly reduced price -- and in both cases, insisted the instruments were worth $50 million.

Axelrod will not be testifying, however. At least not initially. After being indicted earlier this year for tax evasion in an unrelated matter -- for allegedly trying to help a former employee hide money in a Swiss bank account -- he fled in April to Havana, then was arrested last Tuesday in Berlin after taking a flight from Zurich. He now faces extradition.

Axelrod's actions prompted the FBI to begin an investigation into his other business dealings, including the sale of the instruments to the Smithsonian and the New Jersey Symphony Orchestra.

The symphony is not a target of the probe, according to NJSO officials. Nonetheless, it has had to defend itself about questions surrounding the sale and whether it should have taken Axelrod's $50 million valuation seriously.

Tamburri, the New Jersey symphony's former president and CEO, declined to be interviewed for this story, but in a statement, he said the New Jersey symphony was "extremely careful" about the purchasing process, which was completed in February 2003 after a year of negotiations.

He noted that 25 legal experts became involved after Axelrod approached the symphony about selling his instruments at what he claimed was less than half their value.

"Because of the financing involved, the process was scrutinized very carefully by all of the lawyers on the project," Tamburri said in his statement. "We did our due diligence."

Tamburri's successor, Simon Woods, echoed that assessment, calling the acquisition a good financial deal as well as something that took the orchestra "to a whole new level."

Jack McAuliffe, a spokesman for the American Symphony Orchestra League agreed, and suggested that the real value, in fact, may have been incalculable.

"It was just a leap-forward opportunity for that orchestra. The addition of those instruments changed the entire sound of that orchestra. It's just a world apart from what it was."

Still, in some published reports, critics say the orchestra's board should have questioned the claimed $50 million value, as well as the fact that one of the people hired by the NJSO to appraise the instruments' value was Dietmar Machold -- a world-renowned expert who also happens to be Axelrod's business partner.

But Woods says the symphony has no regrets about how it handled the process.

"Machold is one of the world's most prestigious and important violin dealers. It's all very well to second guess him," but his valuation was comparable to those of several insurance companies also hired to perform assessments, Woods said.

Reform movement

If anything, the flap over Axelrod's Stradivarius donation highlights the need for reform in the appraisal industry, nonprofit officials say. Usually, experts and consultants have a financial stake in an instrument's worth, since the higher the value, the higher their fee. That system should be corrected, they say, rather than placing the onus on the nonprofits, which don't have the means or time to conduct lengthy, expensive evaluations of an object's worth.

Ironically, museums -- which rely to a great degree on in-kind donations in the form of art and other objects -- were not considered a major focus of Grassley's committee until the Axelrod donations to the Smithsonian and the New Jersey symphony came to light. The Smithsonian recently became a target of the senator's ire, however, especially after it failed to provide what he considered to be adequate documentation about the Axelrod transaction and other in-kind donations.

In response to the senator's queries, Smithsonian Institution Secretary Lawrence Small wrote to Grassley on May 18 that the institution had been unable to locate an appraisal in its files for Axelrod's Stradivarius donation -- but also pointed out that, under IRS regulations, it was the donor's responsibility to provide it, not the Smithsonian's.

Moreover, "the collections of the Smithsonian are selected for the scientific, artistic and historical significance, not their monetary value," he wrote.

However, Small added, it has been a long-standing policy at the Smithsonian for curators to be on the alert for appraisals of gifts that appear "beyond reasonable limits."

But fixing the system by having the museums and orchestras and ballet companies do the appraisals is unworkable, Small argued. Instead, the IRS should crack down on fraudulent donors.

"To deputize the nonprofit community with the responsibility for these inquiries would assign the highly technical and complicated work of determining an appraisal's accuracy to individuals who are not qualified nor authorized to deal in these matters."

Grassley called the Smithsonian's response "troubling" and repeated his determination to get to the bottom of the matter in this week's hearings.

"It's important for Congress to understand when and how much taxpayers are footing the bill for overvalued deductions for in-kind donations," he said.