TV report questions local school’s stewardship/tuition payment model

BY JIM BROOKS
Nelson County Gazette

Monday, Aug. 26, 2013, 11:50 p.m. (Updated Aug. 27, 2013, 9:40 a.m.) — A Bardstown woman says the parochial school she sent her children to may be violating the spirit — if not the letter — of tax law governing how parents can deduct the cost of a Catholic school education from their taxes.

In a WAVE TV 3 exclusive story broadcast Monday night, Donna Molyneaux of Bardstown says St. Joseph School has been telling the parishioners of the Basilica of St. Joseph Proto-Cathedral their school stewardship — tuition — payments are tax-deductible, a claim she believes may run afoul of not only IRS rules, but the guidelines of the U.S. Conference of Catholic Bishops.

Molyneaux and her husband are St. Joseph parishioners whose children have attended the St. Joseph School.

Molyneaux provided WAVE TV 3 and the Nelson County Gazette with documents that show the school administrators require parents to participate in stewardship meetings so they can pledge the recommended amounts to pay for their child’s education at the school — stewardship pledges the school says are tax-deductible according to IRS guidelines.

The school provides a chart that shows the potential tax savings benefit parishioners will receive by sending one or more children to the school, with the savings broken down by tax bracket.

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Molyneaux, a financial consultant with nearly 30 years of experience,  said she told parish officials of her concerns about the tax deduction information regarding the stewardship/tuition payments, but said her concerns fell on deaf ears.

The Rev. Bill Hammer, pastor of St. Joseph, said during an on-camera interview with WAVE TV reporter John Boel that parishioners do not pay tuition to send their children to the school. The school uses a tuition-free stewardship model, one of five in the Archdiocese of Louisville that do so. Donations to the parish support not just the school, but all of the parish’s ministries, Hammer said.  The school is only one of its ministries.

“We don’t tell them what to give, they tell us what they are going to give,” Hammer told WAVE TV.

In a follow-up email to Boel following the interview, Cecelia Price, the archdiocese’s chief communications officer,  restated the archdiocese’s position that the school and church are within the guidelines set by the IRS and those of the U.S. Conference of Catholic Bishops.

“No one is penalized or tracked or otherwise called out for what they give or do not give,” Price wrote in the e-mail. “There is no ‘contract’ for any parishioner guaranteeing any ministry.”

This Feb. 23, 2013, e-mail from Michael Bickett, principal of St. Joseph School notes a possible deficit due to parents not paying their stewardship. Click to enlarge.

However, Molyneaux told WAVE TV and the Gazette she believes the school’s practices suggest otherwise.

Parents are reminded of and pressured to pay their stewardship pledges at meetings and via e-mail, she said.

In a Feb. 23, 2012, email from school principal Michael Bickett (shown at right) detailed the importance of parents’ attendance at mandatory annual “stewardship/tuition” meetings.

“Stewardship/tuition rates a very important topic,” the email states. “The St. Joseph School Board is very concerned about the dedication that some of our families show to their stewardship/tuition pledges. The 2011-12 school budget is running a deficit that is very concerning. The school and the parish cannot afford a deficit, and any future deficits endanger the stewardship model of funding our school.”

The lower chart on the page is used to illustrate the potential tax savings for parishioners who send their children to St. Joseph. Click to enlarge.

A March 2012 stewardship/tuition document provided to Molyneaux by the school includes a chart of the amount of money the church suggests in donations for up to four children, and the payment method and terms; parents can pay annually, semi-annually or over 10 or 12 months.

According to the 2012-13 chart, parishioners who wish to enroll one child at St. Joe and pay the suggested stewardship/tuition of $5,280 can earn a tax deduction as big as $4,752 depending on their tax bracket. Non-parishioners pay a slightly higher tuition amount which is not tax-deductible.

This PowerPoint slide from the 2011-12 presentation to parents illustrates the tax savings for parishioners who send their children to St. Joseph School. Click to enlarge.

The tax savings chart was first provided to parents in 2009, according to an email provided by Molyneaux. The information on tax deductibility has appeared in a vareity school stewardship/tuition documents since then, including a PowerPoint presentation to parents for the 2011-12 school year.

Molyneaux disagreed with the church’s contention that the school is free to parishioners. She pointed to the Feb. 23, 2012 email from the school principal as proof parents were pressured to pay their pledged stewardship/tuition. It is a claim Hammer vehemently denied in his on-camera interview with Boels.

The distinction — stewardship or tuition — is an important one to both the IRS and the U.S. Conference of Catholic Bishops.

IRS publication 526 states that in order for a donation to be tax deductible, the gift must be a voluntary act with no expectation of a benefit in return. The USCCB website notes that payments made to a parish by parents of a child enrolled in the school may indeed be deductible, but only if they are gifts with no strings attached.

“Enrollment in the school must in no manner be contingent on making the payment; the payment must not be made pursuant to a plan (whether expressed or implied) to convert nondeductible tuition into charitable contributions,” states the USCCB web page titled “School Tuition vs. Donation.”

Hammer contends in the TV interview that the stewardship amounts are suggested and are not necessary for a parishioner to send his or her child to the school. In her follow-up email to Boel, Price notes that there are parishioners who send their children to the school who pay nothing or don’t fulfill their stewardship pledges, adding that all parishioner families support all parish ministries.

But their statements don’t match the reality of being a parishioner with children attending the school, Molyneaux said.

School administrators emphasized parents’ attendance at mandatory stewardship meetings in order to get the stewardship pledges secured, she said. Molyneaux provided copies of school emails that remind parents of the mandatory meetings to sign stewardship/tuition pledges. Video of one of the meetings Molyneaux provided includes a volunteer noting that paying tuition in the form of stewardship was a legal way to “rip the IRS off.”

This receipt shows the amount of the stewardship/tuition payments for the 2010 calendar year Molyneaux and her husband paid for what she contends is a system to skirt IRS rules on deducting Catholic school tuition.

Molyneaux provided the Gazette and WAVE TV with a copy of the 2010 tax deduction receipt letter she received showing her stewardship/tuition payments were a tax-deductible gift.

The tax receipt notes that “St. Joseph Church has not provided, in whole or in part, any goods or services to the above named donor in exchange for this gift.”

During the on-camera interview, Hammer emphasized that the payment of stewardship is a free-will offering, and that members of the parish give freely of their gifts to support any number of the parish’s ministries, he said.

In her email, Price noted that the stewardship model is perfectly legal and proper according to the IRS guidelines.

“The theology and practice of stewardship is never intended to be a scheme to avoid taxes,” she wrote. “In fact, the Church teaches, as Christ did, that we should always pay our share of taxes.”

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