Curiously, the “Philadelphia Nun Provision” sits at the genesis of today’s charitable tax deduction
You may have heard that saints can change the world . . . but what about the tax code?
Well, it was not a “titan of industry” or a “greedy capitalist” who sat at the genesis of the charitable tax deduction. It was a nun.
St. Katharine Drexel, one of Philadelphia’s finest, had an unexpected influence on the United States tax code.
CatholicPhilly reports that when the federal income tax became graduated after World War I, it sent “Mother Katharine’s tax bills skyrocketing and potentially endangering the charitable work of her religious order, the Sisters of the Blessed Sacrament.”
Mother Katharine was no ordinary nun. The Drexel family of Philadelphia was an extremely wealthy banking family, and St. Katharine was heiress to the fortune. Devoting her life to Christ, Katherine joined—and then bankrolled—the Sisters of the Blessed Sacrament and its many missions (as well as giving millions towards the evangelization and support of African American and Native American communities.) Catholic Philly notes that St. Katharine gave away some $20 million in her lifetime—roughly $331 million in today’s dollars.
But how does this get us the charitable tax deduction?
Well, as her tax bills went up she and her family lobbied congress to change the code. So, congress, famously, created a carve out that at the time only applied to one person in the entire United States: the “Philadelphia Nun Provision.”
The Philadelphia Nun Provision exempted anyone from income tax who had given away 90 percent of their income for the past 10 years. Now, that makes it very easy to see why St. Katharine is the patron saint of philanthropy.
The Philadelphia Nun Provision is no longer in the code, but St. Katharine’s work and her exemplary charitable spirit has had a lasting impact on each of our lives, whether we are donors, nonprofit professionals, or beneficiaries of the work of nonprofits.
So, if you are still waiting to file your taxes and dreading every second, there is at least one thing you can be grateful for this tax season: the generosity of a Philadelphia saint who made it possible for us to pay fewer taxes while supporting worthy charities.