Looking for huge tax benefits? Many taking advantage of Msgr. Lafferty Tuition Foundation

By RENEE WEBB, Globe editor
Nov. 23, 2006

Progress continues toward the goal of raising $692,607 for the Msgr. Lafferty Tuition Foundation, a scholarship tuition organization established in the Diocese of Sioux City.

This tuition foundation was established as a result of legislation signed by Iowa Governor Tom Vilsack last June. The legislation, which is called the Educational Opportunities Act, allows Catholic schools to establish a scholarship tuition organization that provides huge tax advantages to donors. It allows Iowa residents with an Iowa tax liability to receive a 65 percent tax credit.

According to Diane Donnelly of the diocesan finance department, almost $480,000 had been contributed to the Msgr. Lafferty Tuition Foundation as of Nov. 22. Two weeks earlier, the fund had just surpassed the $300,000 mark so momentum is picking up.

Each Catholic school in the diocese has been given the opportunity to raise a specific amount of funds based on their school enrollment. Money that is designated for their school will be used for assistance at that particular school as long as they have students who meet the specified tuition assistance guidelines of this program.

"Progress is going well for the Msgr. Lafferty Tuition Foundation," stated Steve Elbert, diocesan director of development. "We have had several significant gifts over the last week that have put several schools at 100 percent of their designation level or near that number."

Seven schools have achieved their goals - Bishop Garrigan Catholic Schools of Algona, Sacred Heart in Boone, Emmetsburg Catholic School, Spalding Catholic Schools in Granville, Pocahontas Catholic, Sacred Heart in Spencer and St. Mary's in Storm Lake. Several other schools are approaching their goals.

"We have been fortunate that our contributors, administrators and development directors in the field have taken the opportunity the State of Iowa has given us and put their best foot forward," said Elbert. "We are grateful for that."

Donnelly anticipated that within the next week several contributions will arrive as on Dec. 1, the designation caps are removed from the schools.

In addition to the strong tax advantages associated with the new legislation relating to the scholarship tuition foundation, they pointed out that there was also new legislation associated with making contributions from IRAs through the Pension Protection Act of 2006.

David Schmit, CPA and partner at King, Reinsch, Prosser & Co. in Sioux City, explained that with this new legislation persons who are 70 and one half years old and above may elect to take up to $100,000 from an IRA to a trustee rollover directly to a charitable organization. This is available for tax returns on 2006 and 2007.

"If you do the direct rollover, the money never hits your bank account. It goes right to the organization. You don't get the deduction on the federal return and you don't get the deduction on the state return, but at the same time you don't pick up the income. In addition to that, with the Msgr. Lafferty Fund you can get 65 percent credit on your state income tax return if you are an Iowa resident - up to the amount of your Iowa income tax," he said.

Schmit said that for the upper income taxpayer, they can get end up with more dollars in their pocket by doing the trustee direct rollover than if they never made the gift in the first place.

"For upper income taxpayers they would save the 35 percent federal tax, 9 percent Iowa tax and they will get a 65 percent tax credit," said the CPA. "The sum total of those is 109 percent. They would actually make a small amount of money by giving to the Msgr. Lafferty Tuition Fund. They would actually be money ahead. This is pretty intriguing."

Retired farmers and other senior citizens above the age of 70-and-one-half who use the standard deduction because they no longer qualify to itemize may also benefit from this legislation.

Donnelly said that coupled together, she believed these two legislations would strongly benefit senior citizens who have a tax liability.

"I would like to encourage the professional tax planners and attorneys in our diocese to look into this because it is a great opportunity for their clients," noted Elbert.

As always, the diocesan offices strongly urge persons interested in contributing to this and other charities to consult their own tax advisor or accountant.

For more information about the IRA rollover, he recommended the Web site - www.crescendointerative.com/ira_rollover_article.jsp.

Elbert also pointed out that they are entering the time when they will be asking the people to give to the undesignated portion of the Msgr. Lafferty Tuition Fund. The foundation board allocated 25 percent of the overall fund to be undesignated so that it may help the families with the greatest need.

"I would encourage people, even if they are not directly affiliated with a Catholic school right now, to give to this fund," he said. "Maybe they had attended a Catholic school as a child or had children attend Catholic schools. Here is an opportunity for you to go into a win-win situation as far as making a gift and trading dollars when you have your taxes done in the first few months of 2007."

For more information about this fund contact your local Catholic school's development office or the Diocese of Sioux City at (712) 255-7933.