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Wednesday, May 23, 2012

Sounds Like Tax Evasion: “The rest of the money will be channeled to the family that raised it.”

The Orthodox Union, the Agudah, and other groups groups/religious denominations that are lobbying for state tax credits need to read this!  (Hat tip:  an anonymous reader).  The New York Times published an article yesterday that has already garnered 424 comments:  Public Money Finds Back Door to Private Schools.  The actual part that most interests me is the story, within the story, within the story.  Between the complaints from coaches about high school athletic recruiting and the complaints of state money going to support religion, is a story that sure looks like open, blatent tax evasion which could be prosecuted by the IRS.  The Internal Revenue Code most certainly prohibits itemizing donations that aren't such.  I can't speak for the state law of any state featured in the story.  


Here are some quotes that are sure to anger taxpayers and should anger of anyone who is supportive of vouchers/tax credits/greater choice in education/private education:


The program would be supported by donations to nonprofit scholarship groups, and Georgians who contributed would receive dollar-for-dollar tax credits, up to $2,500 a couple. The intent was that money otherwise due to the Georgia treasury — about $50 million a year — would be used instead to help needy students escape struggling public schools.
That was the idea, at least. But parents meeting at Gwinnett Christian Academy got a completely different story last year.
“A very small percentage of that money will be set aside for a needs-based scholarship fund,” Wyatt Bozeman, an administrator at the school near Atlanta, said during an informational session. “The rest of the money will be channeled to the family that raised it.”
A handout circulated at the meeting instructed families to donate, qualify for a tax credit and then apply for a scholarship for their own children, many of whom were already attending the school.
“If a student has friends, relatives or even corporations that pay Georgia income tax, all of those people can make a donation to that child’s school,” added an official with a scholarship group working with the school.
The exchange at Gwinnett Christian Academy, a recording of which was obtained by The New York Times, is just one example of how scholarship programs have been twisted to benefit private schools at the expense of the neediest children. 

[later] Hanaiya Hassan, whose daughter attends Hamzah Academy in Alpharetta, Ga., said she had saved $5,000 by asking four friends to donate to a scholarship organization with money earmarked for her daughter’s school. “If you collect four people for $2,500, then one of your children is free,” she said.

The friends were awarded a tax credit. Depending on their tax bracket, some donors could actually come out ahead by filing for a federal charitable deduction as well as the state credit.
The Christian Heritage School in Dalton, Ga., circulated a flier for the 2011-12 school year titled “TUITION BREAKS FOR CURRENT FAMILIES!” It stated, “The scholarship tax credit is so vital to CHS that the school is encouraging all parents to participate in the program and enlist at least two others to do the same.” Participating families would get a 10 percent tuition rebate and a $250 bonus. The rebates would be doubled or tripled depending on overall participation.
Similar deals, some nicknamed “swaps,” in which parents donated for each other’s children, have cropped up in Arizona as well, according to Mr. Thomas, the school board association general counsel there.
[A breathe of fresh air]  Johnathan Arnold, headmaster of Covenant Christian Academy in Cumming, Ga., said he viewed using the program to discount tuition for existing students as unethical.
“We, as a Christian school, felt that wasn’t the right approach,” he said. “You’re giving money out of the goodness of your heart with the intent to receive nothing in return. When you give it for the purpose of getting it back or actually make money on that, to me that doesn’t qualify for the spirit of the law.”  [Nor the letter of federal law from what I know].


Oy vey!  Discuss.   

45 comments:

Mark SoFla said...
This comment has been removed by the author.
Mark SoFla said...

As far as I am aware, any donation in which there is some personal benefit received, the value of the personal benefit must be subtracted from the deduction.

For example, when I paid $500 for the shul dinner, the 2 meals plus entertainment was valued at $120, and thus my deduction (on the annual statement the shul sends me every February) amounted to $380.

parent said...

My company has a matching program to any 501c3 inclusign yeshivas. We all agreed that using it and then telling the school that they should subtract tuition due is a violation of what the company wanted, and may be a violation of the law.

Orthonomics said...

parent,
Not just maybe!

JoelC said...

I worked on a brief detailing the limitations of similar donations (I am an attorney). There are subtleties to federal law on this point. It is possible to structure a donation in such a way that there is no commitment or requirement that the school direct the donation to a specific student. While in this case the administrator seems to have made a commitment, if a school is more careful, they could have a strong argument that a donation should be tax deductible.

Miami Al said...

I believe it was Arizona that started this approach, they allowed families to donate up to $500 or $1000 to a private educational facility and receive a dollar for dollar reduction in state taxes. Since the money bypassed state coffers, it stood up to judicial scrutiny of not being a state transfer to religious institutions.

Vouchers definitely appeal more to statist NY Jews, but the Conservative Christian world is finding end arounds to the legal precedents that make vouchers more difficult.

The NY Jewish establishment is focused on bussing and other silly levels of contribution. The Conservative Christian world discovered that you could give "vouchers" to the parents and therefore be religiously neutral. The judiciary is increasingly open to parent choice, but the legal precedents are what they are, creativity is the key to it.

This is ALSO an area where the MO and RW world can't really work together. Tax credits would help MO parents, not so much the RW world with it's drastically lower incomes and dependency on negative tax rates.

Again, none of this will matter much at the school level if they aren't prepared to adopt realistic budgeting and stop spending $1.05 for every dollar they take in.

WannaBeChossid said...

Hello,

I have a legal question that i am currently researching.

I am a parent with a child in Arie Crown Hebrew Day School in Skokie IL.

Our tution just increased from 10,900 to 12,900. With all the fees added in, i will have to pay out close to 15k. I will attach the letter to this post.

According to them the TRUE cost per child is "calculated cost was $9,557"

now, i also found out that this number does NOT include a 1M grant to school, kehillah fund ( http://www.guidestar.org/organizations/26-3948613/kehillah-jewish-education-fund.aspx btw they also don't file a thing ) and other various state grants. so TRUE cost per child to the school is around 8k.

Which essentially means that i am paying for 2 children to attend that school.

As you can imagine, this really pissed me off. So i started looking for their financials. What i found out is that as Religious Organization they are not REQUIRED to file anything at all. as you can see here: http://www.guidestar.org/organizations/36-2129620/arie-crown-hebrew-day-school.aspx

I don't want to cheat on my taxes. Thank G-d that I have the money at this point to pay this insanity.

However, this makes me feel like a CHUMP.

I found that Arie Crown has a non profit foundation: Category: Philanthropy, Voluntarism, and Public Benefit
ARIE CROWN HEBREW DAY SCHOOL ENDOWMENT FOUNDATION
http://www.guidestar.org/organizations/36-4421022/arie-crown-hebrew-day-school-endowment-foundation.aspx


so what i was thinking of approaching the school and offering to donate 8k to the foundation, thus fulfilling my obligation to the school and getting a tax break as well.

this seems a lot more legal then what they are doing in george,but i am not a tax person, so any help would be appreciated.

thoughts?

Anonymous said...

Why take time to praise christians? Are there no positive models in our own community? The tone of this posting could confuse readers and perhaps, unintentionally, turn them off to Judaism.

Orthonomics said...

Who is praising Christians? The title of the post is "sounds like tax evasion." Is that a compliment?

Anonymous said...

It sounds legal, unfortunately, if these measures are adopted by state legislatures.

http://www.nytimes.com/2012/05/29/opinion/tuition-tax-credits.html?_r=1&ref=letters

Mr. Cohen said...

I strongly suspect that IRS employees do frequent google searches on phrases like “Tax Evasion” and I would be surprised if they do not find this blog.

Anonymous said...

Mr. Cohen, the article about tuition tax credits was on the front page of the Times. No Googling necessary.

Anonymous said...

You credit this Jonathan Arnold as being "a breath of fresh air." why not feature a Rosh Yeshiva who made the right call about something similar. Such comments could cause some vulnerable members of the community to go off the derech, or G-d forbid, become christian.This is just meant to be constructive criticism, most of your postings are informative.

Anonymous said...

Anon, only a person brainwashed to believe that all non-Jews are murderers and thieves would leave Judaism when they see a non-Jew do a good deed. Unfortunately, the brainwashing routine is all too common in the Orthodox world today. It would almost be enjoyable to see it backfire in such a way.

Orthonomics said...

Anonymous--Anyone who believes in vouchers/educational choice/integrity/vouchers/educational tax credits will find it a breathe of fresh air. .. .even if a ganef said it. Abuse of educational choice does not good for any group interested in choice.

Orthonomics said...

P.S. I've pointed out examples where Rabbonim provide us with wonderful moral and ethical direction. If a good comment by a Chrisitian person drives people off the derech then there is a larger issue to deal with.

Miami Al said...

Find 5 people on the planet that grew up Orthodox or Orthodox affiliated and educated that are now practicing Christians.

People don't switch faiths.

People that aren't a part of a faith but ethnically affiliated with a religious group may switch via marriage, but people actually a part of a faith don't switch, they remain or abandon.

I'm not Jay Wagner said...

Another reason my wife & I took our children out of Yeshiva, "creative accounting." I have seen too many instances where tuition has caused Yidden to steal & tuition is the big one. I don't care if I pay a couple of more $'s to the IRS, it's better than an audit. I've said it here (and other Jewish blogs too!) and I'll say it again. I'd rather raise ethical non-frum Jews than thieves. There is no heter for stealing even if it's to pay for tuition.

WannaBeChossid said...

To Miami Al:

your comment: "Find 5 people on the planet that grew up Orthodox or Orthodox affiliated and educated that are now practicing Christians.

People don't switch faiths"

is that meant now or from beginning of Christianity? "

A lot of jews converted into Islam / Christianity WILLINGLY in the last 2 thousand years.

some of the more famous examples are: Gershom ben Judah's Son, one of the Founders of Chabbad's sons, Karl Marxx's parents.

Towards the end of 1800s Russian jews converted a lot to get upward mobility.

A lot of jews just left Orthodox life style starting in late 1700s.

In fact Haskallah gave people an option of identifying with Jewish culture without converting into host religion and without practicing judaism.

There was a lot of "our religion or die" going on and that definitively pushed a lot of people to convert (Spain, France, Germany, Russia ) but a lot of people converted because they wanted to.

BTW before you come back with well conversion by sword is not a real conversion, we as jews take the same approach towards the Canaanite nations. I.e. Joshua gave them a choice ( even to amalakites ) convert or die

BTW what does this have anything to do with my original question?

Miami Al said...

WannaBeChossid,

Picking and choosing. There is no breakdown of people that were actually Jewish by faith vs. by culture until enlightenment.

Since that division, primarily in modern America, you simply don't see educated Jews converting to becoming practicing Christians.

WannaBeChossid said...

Miami Al,

Until Enlightment hit Europe there was no such thing as Jewish Culture, Christian Culture, Muslim culture; your "culture"= "religion".

Are you talking about Secular jews becoming Christians ( b/c there is plenty of that ) or Orthodox jews becoming christians?

one the reasons is why Orthodox jews no longer convert enmasse, is because there is no more Theological pressure from outside religion. I am not sure how many orthodox jews that live in these cult like enclaves in williamsburg, lakewood and so on, would continue practicing judaism if all the government subsidies would be taken away. And it was either die or go to church ....

Miami Al said...

WannaBeChossid,

Part of the reason is that people that don't want religion aren't going to pick a new one. Either you want it in your life or you don't.

There are a small number of secular Jews that become Christians. There is a decent number of secular Jews that become secular Christians, which is really just becoming a non-religious American... Just like secular Russian immigrants to Israel over time become secular Israeli "Jews" - people NOT interested in a subculture join the surrounding culture.

Historically, you have your nationality (with it's culture, customs, and any belief structure that held it together) and your government (whoever ruled you) and those weren't always linked.

A Jew in the Russian Pale of Settlement was a Jew by nationality and a subject of the Tzar, that didn't make him Russian, just that he owed fealty/taxes/service to the Tzar.

My point is, at this point, there is a total delinking between citizenship, nationality, and religion. People that are actually active in their religion tend to stay within it OR leave religion for nothing, not switch one.

The "threats of missionaries" is simply fighting fake demons. Do Christian missionaries recruit people? Absolutely, they recruit people that have no religion, even if they are nominally a part of one.

One doesn't go from a believing Jew to a believing Christian, one goes from a non-religious Jew to a non-religious Christian via marriage, OR to a religion Christian via missionary-type work.

If Jews are succumbing to missionaries, it's not because evil missionaries are recruiting Jews, it's because we have totally failed to impart Judaism into those Jews.

Anyone involved in missionary work will tell you they've NEVER recruited an Orthodox Jew.

You're taking people that weren't Orthodox, they were simply Jews/Yidden, and deciding they were Orthodox retroactively. That's BS. And the "threat from missionaries" is also BS. They recruit down and out people with the "healing power of Christ" or whatever their individual shtick is, not recruiting Orthodox Jews with clever biblical tricks.

Anonymous said...

In my own family 7 people did go from being Conservative Jews to Christian. They call themselves Messianic Jews, however, and not Christian. I am actually going to one of their weddings in August. Their level of religious observance is actually higher than mine. They all have day school educations and seem sincere in their beliefs. There is a sizable number like minded people in their community who came from families that are active in the larger Jewish community.

Anonymous said...

My cousin was raised in a MO home and became Unitarian as an adult. His family was not down and out by any means. He just couldn't follow a lifestyle that didn't make sense. I think that conversion is not as rare among Orthodox Jews as some might believe. By the way he seems very normal and is in mo way down and out/
Sam

Mr. Cohen said...

If you personally know any Jewish relatives or friends who converted to any kind of Christianity, then I recommend that you contact help as soon as possible:

http://www.outreachjudaism.org/
http://www.shomreiemet.org/
http://www.torahatlanta.com/
http://www.jewsforjudaism.org/
http://JewsForJudaismBaltimore.org/
http://www.yadlachimusa.org.il/

Anonymous said...

Mr. Cohen, I'm assuming you're a baal tshuva from your heavy posting on BeyondBT. If a relative or friend had contacted an "organization" to try to "help" you or "stop" you from following your chosen spiritual path, HOW WOULD YOU HAVE RESPONDED?

Miami Al said...

Anonymous,

You know an actual believing, "practicing" Unitarian? Cool! I know a few Jewish/Catholic and Jewish/Christian couples that joined a Unitarian "church" to have the culture of religion without seemingly any belief structures.

I didn't even think that their "leaders" were anything but secular... Guess you'll eventually find one of everything...

I mean, one of the local Mormon leaders was born a Jew, but a totally secular one. I've seen ethnic Jews join other religions, but generally only nominally.

I guess it exists somewhere.

OffTopic said...

Sorry for being off topic, but I assume you've seen the Ami student loan article? Seems up this blog's alley...

Mark said...

The AMI article is definitely appropriate to discuss here. Wow!

Anonymous said...

I am a Conservative Jew who worked for 5 years at a MO Yeshiva. The kids behavior was horrible and the parents and administration could have cared less. Some of the kids were caught breaking the windows of some "Shvartzahs" and nothing was done because their parents were on the board. There were also a couple of scandals that affected the schools finances and inability to pay teachers what they were owed. I now work part time as a consultant at a Christian school where the kids behave like model citizens, the teachers are treated fairly, and there has never been a hint of any kind of financial wrong doing. From reading this blog and my experience, I've started to wonder what use is a Torah based lifestyle if those who claim to practice it, with a few exceptions, maintain such a dysfunctional lifestyle?

OffTopic said...

I believe Unitarianism is a somewhat common destination for intermarried Jewish/Christian couples as a sort of "compromise" that doesn't require belief in Jesus as messiah but doesn't forbid it either.

Anonymous said...

What is the URL to the AMI article?

OffTopic said...

I don't know how the host feels about posting copyrighted materials or direct links. By the logic of kli sheni, here's a link to a page that contains a link to the article: http://torahmusings.com/2012/05/news-links-98/comment-page-1/#comments

Comment at 10:14pm has the link.

Dave said...

There aren't many of them left, but we should distinguish between the old-line Universalists (who were absolutely Christian, although of a heretical stripe) and the Unitarians (who are more deistic than anything else, at least in my experience) when talking about the Universalist-Unitarians.

Anonymous said...

Hi,

this is the Internet, you can paste the URLs to the article, but should not copy the content without giving credit.

that page is too long, can you please paste the article.

OffTopic said...

The article has not been shared by the magazine. Instead someone posted it as a pdf, probably scanned in. Publishing a full work without permission that way is problematic.

If you ctrl+f "satire" you will get to the comment with the link.

Mr. Cohen said...

Two quick Torah quotes about tax evasion:

Sefer Chasidim, chapter 278:
If a just tax is decreed, those who pay the tax take the portions of Gan Eden of the people who do not pay the tax, and these [who do not pay] take the Gehinom portion of their friend [who paid].

Those who underpay their taxes are stealing from their friends [who pay correctly].
The good people who pay more than their share will inherit portions of Gan Eden [of the people who underpaid] and the wicked will inherit the portions of Gehinom from the good people.

Leaders who fail to protest when they are able to, even if they paid, will also inherit Gehinom.

Kaf HaChaim comment on Orach Chaim, Siman 110, Sif Katan 33:
[When traveling] be exceedingly careful to pay any taxes or tolls or duties or customs fees (מֶכֶס), lest you endanger your life.

Charlie Hall said...

Adequate funding for Jewish schools will require significantly higher taxes even assuming that the other legal issues can be dealt with. Given today's zeitgeist, that is unlikely.

Anonymous said...

I for one am happy that this blog is starting to reference educational models that apply to other faith communities. You can learn a lot for both positive and negative occurrences that affect others. I live near a Catholic school and have often wondered how they are able to offer a k-12 education for less than half what a basic day school education would cost. I have a relative, who is Jewish but not religious, who to sends her daughter to a different Catholic school and she just raves about the education she receives. I asked her about the religion issue, and she said that several of the other kids are not Catholic and that they do not require students to follow their religious teachings.

Anonymous said...

Interesting. Have any other readers had positive experiences with Catholic schools?
Jacob

tobey said...

Wannabechossid, i would hoof it over to your local accountant as soon as possible and find out whether that set up is legal. Since you are paying your actual burden of tuition and the rest is actually scholarship for other students, I would hope it would work. I have heard of several schools who tried to use that system for all parents - tuition + donation, and they did not meet their prior year's tuition revenues and had to switch back. however, to do it privately, perhaps they would allow it. good research.

tobey said...

Hi,

Have you covered Coverdell ESAs (Education IRAs) as a way to save / small tax benefits for tuition-paying parents?

http://piggington.com/pretax_savings_accounts_for_precollege_private_schools

The Maryland Education Tax Credit has still not passed after 6 years of trying. It is jerks like these mentioned in the article that screw things up for folks everywhere - and that is one of the biggies: oversight - how will we ensure it actually benefits the low-income student. I say get these guys' benefit shut down asap and disqualify any school that has any such dealings for x amount of time until they clean up their act.

Orthonomics said...

tobey,
529's and Coverdells were covered way back when here:

http://orthonomics.blogspot.com/search?q=529

But I'm a bit loathe to recommend Coverdells right now because there is so much talk of the limit going to $500 and that the funds would only be able to be used for college, making the 529 a more obvious choice.

Charlie Hall said...

"I live near a Catholic school and have often wondered how they are able to offer a k-12 education for less than half what a basic day school education would cost."

Great question. I can think of several reasons:

1) Catholic schools are much larger. There are significant economies of scale in education -- fewer administrators spread over a larger number of students, along with less expensive benefit packages. (This despite the fact that in much of the US, Catholic schools are unionized.) Most Catholic dioceses simply close small schools. Try telling a rabbi to close his small yeshiva. (But note that Chasidic schools tend to be larger and less expensive than other Jewish schools.) Catholic schools also have a lot more Catholic students to draw from -- there are almost as many students in Catholic schools in the Archdiocese of New York as there are in Orthodox Jewish schools in the entire US.

2) Celibate priests and members of religious orders don't need to make that much money to live a comfortable life, and they typically live in dorm-style accommodations. Why don't we insist on dorm-style apartments for kollel families?

3) Most Catholic schools are old and have long have their building costs paid off.

4) The Catholic Church massively subsidizes its schools. Try getting synagogues of the local Jewish Federation to contribute financially to the local Jewish Day Schools.

Nevertheless, the Catholic Church still struggles. In Washington DC it actually gave up and allowed numerous Catholic schools to be turned into public charter schools.

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