MSGR. LAFFERTY FUND: Progress continues toward $1.3 million goal for tuition foundation

By RENEE WEBB, Globe editor
Nov. 8, 2007

As the days tick off the 2007 calendar year, donations to the Msgr. Lafferty Tuition Foundation are stepping up. Progress continues toward reaching the goal of almost $1.3 million by Dec. 31.

Diane Donnelly, director of parish accounting who also provides accounting services for this tuition foundation, said 44.2 percent - $574,234 - has been raised as of Nov. 5. Last year the tuition organizations in the state were allowed to raise $2.5 million. The diocesan share was $692,607.

This tuition foundation was established as a result of legislation signed in June of 2006 by the former Governor Tom Vilsack. That legislation, which is called the Educational Opportunities Act, allowed Catholic schools to establish a scholarship tuition organization that provides huge tax advantages to donors. When the scholarship tuition organization was established in the Diocese of Sioux City, it was named the Msgr. Lafferty Tuition Foundation.

According to Kevin Vickery, superintendent of schools, it allows Iowa residents with an Iowa tax liability to receive a 65 percent tax credit on contributions made to the scholarship tuition organizations.

"If a donor makes a gift of $1,000, they will get a tax credit certificate for $650," said Vickery, who added that additional savings can be realized because the donation is deductible on the federal taxes.

To benefit from this, Vickery said the donors must have a tax liability for Iowa state taxes.

"If a donor's tax credit exceeds their tax liability, the tax credit can be carried over for five years," noted Vickery.

To ensure that as many people as possible could take advantage of such great tax savings, until Nov. 1 there was a limit of $1,000 per person or $2,000 per couple. Now, donations of any size are being accepted.

As with last year, each school is allowed to raise a certain designated amount of money based on their school enrollment. Money designated to a particular school will be used for assistance there as long as they have students who meet specified tuition assistance guidelines - income not exceeding 300 percent of poverty.

There are a few diocesan Catholic schools who have either reached or are close to their goal: Garrigan Catholic Schools in Algona, Sacred Heart School in Boone, Pocahontas Catholic School and Sacred Heart School in Spencer. Another three schools have surpassed 75 percent of their goal: Kuemper Catholic Schools in Carroll, Emmetsburg Catholic School and St. Edmond Catholic School in Fort Dodge.

Vickery said schools will have until Dec. 1 to raise their designated goals and after that date, other schools will be able to secure more donations.

In addition to school designations, 25 percent of the funds are unrestricted to be distributed to students where there are the greatest needs.

With a change last spring, there is another gifting option.

"After the Education Opportunities Act was amended last May, the Msgr. Lafferty Tuition Foundation is now accepting both cash and stock donations," said Donnelly. "This is a great opportunity for donors who have held appreciated stock for more than one year. Taxpayers who itemize their deductions can deduct the fair market value of the donated shares of stock on the federal tax return as a charitable contribution."

She said donors receive an Iowa tax credit for 65 percent of their contribution but are not allowed to take the itemized deduction on their Iowa tax return.

"As always, we advise our donors to consult their tax professional for guidance specific to their tax situation," said Donnelly.

Another charitable gifting opportunity is a Charitable IRA Rollover. IRA owners, age 70 1/2 or older, can make a tax-free transfer of up to $100,000 directly to the foundation from their ROTH or traditional IRA accounts. This transfer is tax free from both federal and Iowa income taxation.

"The contribution is eligible for the 65 percent Iowa tax credit but cannot be taken as a charitable contribution on either the federal or Iowa return," noted Donnelly. "The Charitable IRA Rollover is only available for transfers made on or before Dec. 31, 2007." This rollover option was part of the Pension Protection Act and it will expire at the year's end after being available for a limited two-year timeframe.

The Charitable IRA Rollover can be especially beneficial to donors who use the standard deduction. Many seniors do not have a mortgage and find that they do not have a sufficient level of deductions to itemize, she said. Hence, they would not receive the tax benefit at the federal level for a charitable deduction.

The charitable transfers count in determining whether the owner has met the IRA's required minimum distribution rules.

"Donors should consult their tax advisors if they are considering this gifting opportunity," said Donnelly.

For the 2008 tax year, the Msgr. Lafferty Foundation will be able to raise almost $2 million.