Is a church member entitled to a tax deduction for contributions to his church if his child attends a parochial school financed solely by all members of the congregation?
No, says the IRS, which has ruled that a Texas Lutheran is not entitled to deductions on his income taxes unless his contributions exceed "the fair market value of the child's education."
Yes, says the Lutheran Church-Missouri Synod, the parent body of the Houston parish involved. Church leaders contend that parish schools educating children of the congregation are as much a part of the church's ministry as baptizing them, or sending missionaries to India. They complain that IRS ruling 79-99, issued in March, is an unconstitutional incursion by the government into church affairs.
The tax troubles of the Houston parent, whose identity was not disclosed, come to light at a time of heightened tensions between church and state, when a broad spectrum of church leaders complain that there is increased medling in church affairs by government agencies.
At the same time, abuses of First Amendment protection, ranging from mail-order ordinations to avoid taxes to the People Temple affair, have high-lighted the need of vigilance.
What is unusual about the Texas Lutheran case is that the parish school charges no tuition. It is financed solely by funds solicited from church members, whether or not they have children in the school.
The IRS concedes, in a statement of facts accompanying its ruling on the Texas case that no student was admitted "by reason of any contribution made, nor was any child denied acceptance by the school for lack of a contribution . . .. Funds are solicited on the basis off what a person could afford to give rather than on a per capita basis."
Dr. Al Senske, secretary of elementary and secondary schools at the Lutherans' St. Louis headquarters, said about half the church's 1,290 elementary schools operate without fixed tuition payments.
LCMS Lutherans maintain the largest Protestant parochial school system in the country.
Senske said the IRS ruling "fits certain tax situations but not ours. Our schools are part of the church and its ministry the same way our missionary program is."
The LCMS is weighing a court challenge to the ruling. In the meantime, it has asked Sen. Thomas F. Eagleton (D-Mo.) to intercede with IRS.
Eagleton earlier this month wrote IRS Commissioner Jerome Kurtz that the ruling "unfairly discriminates against some very worthwhile organizations" and asked him to "immediately review and reconsider this unfortunate ruling."
Russel Shaw, spokesman for the United States Catholic Conference, said the Catholics also are "worried" about the ruling and "the whole question of IRS and the federal government getting involved in church activities."
Most Catholic schools have a fixed tuition schedule, and such payments are clearly not tax-deductible.
However, most Catholic schools charge parish members less than they do outsiders, on the theory that their contributions to the parish - which are deductible - help support the school. The IRS ruling in the Lutheran case raises the question as to whether in the future such contributions might be disallowed for Catholic parents, since they represent a benefit to the contributor when measured against the higher tuition rate charged non-members.
In his letters to Kurtz, Sen. Eagleton noted several hypothetical circumstances that, he said, could be affected by "the logical extension of this ruling:"
Suppose, he suggested, a citizen is fed, clothed and sheltered by the Red Cross after a tornado strikes. Must he subtract the "fair market value" of these services from contributions he subsequently makes to the agency before he can claim them as tax deductions?
A homeowner benefits unmistakably from the services of his local volunteer fire department. What is the "fair market value" of those services in calculating his tax-deductible contribution to the department?
Making the same kind of projection, Senske suggested that a person taking full advantage of the discounts on admissions, books, reproductions and other items offered in connection with contributions to a museum "could end up saving so much that you'd have to list it as income instead of a contribution!"
Mark Abels, Eagleton's press secretary said the question is "an issue of great concern," and said the IRS 79-99 was "clearly a reversal of previous rulings" which, he said, have held that "a contribution to the church is a deductible contribution."
IRS spokesman Larry Botdorf said the ruling in the Lutheran case was "completely consistent with what we have held in the past" and did not, as both Eagleton and the church claimed, go beyond previous rulings.