Tax code

How a saint became part of the tax code, forever changing American philanthropy

This tax season, Americans have an unexpected number to thank for one of their most used deductions. She was not an accountant, a lawyer or even a politician, but a real saint.

St. Katharine Drexel is well known as a pioneering figure of the early 20th century, championing the needs of Native Americans and Black Americans, but few know she could have the most lasting impact on philanthropy of all. Americans in United States History.

Its unexpected role in the US tax code began with the outbreak of World War I in 1913, which spurred the creation of the federal income tax.

But in 1917, the tax became progressive, sending Mother Katharine’s tax bills skyrocketing and potentially endangering the charitable work of her religious order, the Sisters of the Blessed Sacrament. The sisters are based in Bensalem, Pennsylvania.

In 1924, Mother Katharine and her influential family successfully lobbied Congress for what later became known as the “Philadelphia Nuns Provision”. Under this provision, anyone who gave 90% of their income to the charity in the previous 10 years was exempt from income tax.

It was an honor that described only one US citizen at the time – Mother Katharine, said Seth Smith, assistant clinical professor of history at Catholic University of America in Washington.

Phil Brach, vice president of college relations at Belmont Abbey College in North Carolina, said the “Philadelphia nuns’ disposition” is at the heart of what sets Mother Katharine apart from her better-known philanthropic contemporaries such as John D Rockefeller and Andrew Carnegie.

“What makes it unique is the order of magnitude,” said Brach, who has taught philanthropy courses at Catholic University in Washington. “There were years when the amount she gave was almost equal to the combined amount of all the collections and all the parishes in the whole country.”

Drexel’s donations primarily benefited Black Catholics and Native American Catholics at a time when racial prejudice was high and these communities struggled with crippling poverty and a lack of access to quality education. His order built schools and churches in the American South and established what is now Xavier University of Louisiana, the only historically black Catholic college in the country.

Drexel was also a strong supporter of the Josephites throughout her life, purchasing land for the religious order to build many of their parishes and schools.

St. Katharine’s family, the Drexels of Philadelphia, were one of the wealthiest families in America. An heiress to a banking fortune who chose religious life, she dedicated her wealth to the black and Native Americans served by her religious order and others in need. She gave about $20 million in her lifetime.

Brach said few have been able to match the magnitude of Drexel’s donations then or now. For example, he cited the Giving Pledge – a well-received philanthropic campaign spearheaded by billionaires Bill Gates and Warren Buffet.

The Giving Pledge encourages wealthy people to donate at least 50% of their wealth to charitable causes, but that’s a far cry from Mother Drexel’s 90% wealth.

“There’s a reason she’s the patron saint of philanthropy,” Brach told The Josephite Harvest, the Josephite magazine, officially known as the Society of St. Joseph of the Sacred Heart.

According to “Sharing the Bread in Service: Sisters of the Blessed Sacrament 1891-1991 – Volume 1,” the “Philadelphia nuns provision” was essential to the functioning of the order in the years after it entered law.

“The exemption was really important because the sisters were responsible for basically looking after 15,000 dependents a year. They had over 300 employees or teachers,” Smith said. “They have also contributed over $50,000 each year to support Black and Native American children in schools other than their own.”

“Frankly, the church has historically failed, with black Americans to the south, but the greatest legacy of Catholic support is in those schools,” Smith said.

According to ‘Sharing the Bread’, Mother Katharine’s allies have urged her to seek a refund of nearly $800,000 – the equivalent of about $13 million in today’s money – that she had paid to the government before the provision came into effect, but Mother Katharine worriedly refused. that it would exacerbate the anti-Catholic prejudices of the time.

While the provision was enacted without controversy in 1924, Smith said opposition to the exemption grew in 1933 at the height of the Great Depression. It was only after lobbying by influential U.S. bishops that the provision survived the challenge.

The charitable exemption continued to support the work of the Sisters of the Blessed Sacrament until the death of Mother Drexel in 1955.

The “Philadelphia nuns provision” was eventually removed from the tax code in 1969, but Mother Katharine’s influence on American philanthropy cannot be overstated, Branch said.

“The official language may be out of the code, but in general it’s the genesis of the charitable deduction that still exists,” he said.