BARDSTOWN, KY (WAVE) – Donations to your church are tax deductible. Tuition payments to a church school are not. The Archdiocese of Louisville says they have rules in place to keep them separate, but some hidden camera video one parent brought me shows a school where those lines appear to be getting blurred.
Red flags went up for accounting analyst Donna Molyneaux when she started attending informational meetings on St. Joseph Catholic School in Bardstown. So she recorded the pitches to parents last year and the year before, including one parent who said, "One of the reasons they asked me to talk, from an accounting standpoint, is, there are very few ways that you can still rip the IRS off."
"I know that sounds funny. No one here is an IRS agent right?" said the parent asked to speak.
"They get up there and said we're ripping off the IRS and laughing about it," said Molyneaux.
At St. Joseph Catholic School, non-parishioners pay a set of rates per child in what's called "tuition." Parishioners were quoted rates per child, for what is called "stewardship."
Same school. Same education. Roughly the same rates, but one big difference.
"Since we are stewardship model, you know we receive a tax advantage at the end of the year," said a parent speaker at a meeting.
"The school charges tuition for non-parishioners, but for parishioners they call it stewardship, which, at the end of the year, 100 percent of what they pay in tuition they get a letter from the church that they donated is a charitable contribution," said Molyneaux.
And much of the emphasis at these meetings was the savings parents can realize under the stewardship model, because it's tax deductible.
"When you look at that you can really see the true effect and savings that stewardship brings to it," said a parent speaker at a meeting.
Parents were shown charts of the tax savings under the stewardship plan, which can total thousands of dollars depending on their income and number of children.
"It never hurts to be reinforced about what the real reason is we're participating in stewardship," said a parent speaker at a meeting.
"It's wrong. I don't believe in cheating the IRS, defrauding the government," said Molyneaux.
When I asked Basilica of St. Joseph Father Bill Hammer if it's his position these payments are a charitable contribution. He said, "It's a free will offering. Yes, because we don't tell them what to give. They tell us what to give."
Father Hammer said it's all legal and approved by the Archdiocese. He was at both the stewardship meetings and did not refute anything the parents said.
"When you do have someone stand up and say 'there are very few ways you can still rip the IRS off," I began.
"I don't agree with that statement," Father Hammer said.
"Why wouldn't you get up and say I don't agree with that statement?" I asked.
"Well, I can't answer that question at this point. I don't know how to answer that question," he said.
The IRS code says you can't deduct "tuition, or the amounts you pay instead of tuition." And the U.S. Conference of Catholic Bishops weighed in on the subject of "School Tuition vs. Donation," and ruled "a payment is NOT a charitable contribution" if there is "a plan allowing taxpayers either to pay tuition or make contributions in exchange for schooling."
"That's what you're saying you do?" I asked Father Hammer.
"No it's not. That's incorrect the way you say it," he said.
U.S. Conference of Catholic Bishops also determined it's not a donation if "contributions appeals are made as part of the admissions process."
"It's not part of the admissions process," Father Hammer said. "Well, I preach about it on Sunday to the congregation."
The U.S. Conference of Catholic Bishops also ruled it is not a charitable donation if the "contribution policy is created as a means of avoiding characterization of payments as tuition."
"That's not what we're characterizing ourselves. We're telling everybody it's a free will offering," said Father Hammer.
And U.S. Conference of Catholic Bishops ruled it's not a charitable contribution if "substantial or unusual pressure is applied to parents."
Molyneaux said that's exactly what happened at the meetings parents were told they "needed" to attend. "They really pressure the parents to tell them you need to pay this," she said.
A letter sent to parents of students at the school read the "School Board is very concerned about the dedication our families show to their stewardship/tuition pledges. The budget is running a deficit that is very concerning."
I asked Father Hammer, "You don't think that sounds like pressuring people to give at least your suggested level of stewardship?"
"I personally don't because I think it's giving the information to make their decision from," he said.
In the video recorded from one of the meetings the speaker said, "this year the school board has recommended that we will need to increase your stewardship payment by 2 and a half percent."
"We need to do a 2 1/2 percent increase this year on stewardship and tuition. That doesn't sound like 'just do the best you can' the way it was passed off," I said to Father Hammer.
"The information we shared is the way we form our budget. You have to have a budget if you have a school," Father Hammer said, "People choose to follow these suggestions or not. There's no sanction to it. Not a case where if you don't, the child's not in our school. It's a free will offering."
Despite efforts to talk to the IRS about this situation, they would not comment, even in broad terms.
A spokeswoman for the Archdiocese sat in on the interview and later sent a letter saying, "There are parishioners with children in the school who give nothing. No one is penalized or tracked or called out for what they give or do not give."
"The theology of stewardship is never intended to be a scheme to avoid taxes. The church teaches as Christ did that we should always pay our share of taxes."