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Can parents deduct contributions made to a church that pays the tuition of their children at a church-operated school? No, concluded the IRS in a recent private letter ruling. The church had a membership of about 70 families, about one-fourth of whom had children enrolled in a private elementary school operated by another church (affiliated with the same denomination) in a nearby community. In 1987, the church announced that it would pay the tuition of all members' children enrolled in the school, and it requested that families with children in the school increase their tuition by the amount that they would otherwise have paid as tuition. With only a few exceptions, members with children in the school allowed the church to pay their tuition obligation. While only one-fourth of church members had children in the school, these same persons contributed about half of the church's total offerings. The IRS further observed that the contributions of several families "increased or decreased markedly as the number of their children enrolled in the school changed," and "the contributions of parents of students drop off significantly in the summer months when the school is not in session." Under these circumstances, the IRS ruled that "to the extent that a parent's tuition liabilities are paid by the church, the contributions of the parent are not deductible charitable contributions." In explaining its decision, the IRS emphasized that a deductible charitable contribution "is a voluntary transfer of money or property that is made with no expectation of procuring a financial benefit commensurate with the amount of the transfer." In concluding that this test was not satisfied, the IRS noted the following factors: "The parents are entirely relieved of paying tuition out of their own pockets. Parents are aware that [their] church would be unable to continue paying tuition expenses without continued large contributions from parents. Also, one purpose of the plan was to enable parents to have additional contributions deductions approximately equivalent to their previously nondeductible tuition payments." Further, "parent-members contribute approximately three times as much as other members, on a family-by-family basis. Moreover, this enlarged giving falls off in summer months, when no tuition bills are due. This, coupled with the awareness of the members that the free tuition program could not continue unless the parents, as a group, sustain their pattern of increased giving, leads to the conclusion that the contributions of school parents are made with the expectation of receiving back benefits in the form of church-paid tuition for their children." In summary, "contributions" to the church were not deductible to the extent that a parent's tuition liability was paid by the church, since the parent had an expectation of receiving a return benefit in the form of tuition payments. Such an expectation prevents the parents' payments from being characterized as deductible contributions. IRS Private Letter Ruling 9004030.

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  • May 1, 1990

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