Academic journal article Journal of Accountancy
Deduction for Religious Education Disallowed
Taxpayers who itemize are allowed a deduction for donations to qualifying religious organizations. Often the organization uses part of the money for religious education and indoctrination of its members. When a tax-exempt school offers both religious and secular education, one might assume that a portion of the tuition qualifies as a charitable contribution. But the law clearly states that tuition payments are a personal expense, are considered quid pro quo and are not deductible. In a recent case, the Tax Court held that no portion of the tuition payments to a religious school was deductible.
In Sklar v. Commissioner (TC Memo 2000-118), the taxpayers lived in California where four of their children attended orthodox Jewish day schools. They deducted the tuition paid to Emek Hebrew Academy and Yeshiva Rav Isacsohn Torath Emeth Academy, both tax-exempt organizations under IRC section 501 (c)(3). A letter from the schools stated that an estimated 55% of their tuition was for religious education and 45% for secular education. The taxpayers accordingly deducted $13,240 on their 1994 income tax return.
The IRS sent a notice of deficiency disallowing the deduction. The taxpayers claimed their First Amendment rights were being violated and cited Hernandez, a 1989 case that discussed charitable contributions comparable to the tuition payments in question.
In Hernandez v. Commissioner (490 U.S. 680) the U.S. Supreme Court examined the deduction of fees paid to the Church of Scientology for "auditing"--a type of individualized spiritual counseling and training. These payments--the primary source of income for the Church of Scientology--are required of those being trained and, are, therefore, similar to tuition. The Court held the payments were nondeductible because they represented an exchange of money for an economic benefit. The Sklars argued that the dissenting opinion of Justice O'Connor allowed for the deductibility of payments similar to those made for auditing in Hernandez. …