Catholic Worker banking: a question and some answers

posted by Scott Schaeffer-Duffy on June 5th, 2009

The Question

Dear Catholic Workers and friends,

The Saints Francis & Therese Catholic Worker community was founded in 1986. We did not want to be tax exempt and we did not want to receive any interest, so we opened an non-interest bearing checking account under the name “SS. Francis & Therese Catholic Worker.” Our bank called the account a club account and took my name and two other members of our community as signatories. For the past 15 years, my wife Claire and I have filed a tax return listing our personal income (from free-lance writing and public speaking) and have attached a letter on house stationary telling the IRS that our personal income was deposited in our house account and that we live and work in the Saints Francis & Therese Catholic Worker along with our four children, we do not receive salaries, but do have room and board which come out of private donations to our community. We also reported to the IRS how much was income was donated to our community and deposited in that account and how many people were sheltered each year with those donations. The IRS never audited us or even asked us any questions.

Unfortunately, the manager of our bank called today and told me that our checking account was going to be closed in two weeks because it is no longer legal to have an account under a group name unless that account is a business account with a tax number different from my social security number. I called the IRS to ask them about this and a very nice woman listened to me explaining the Catholic Worker philosophy and our desire not to be tax exempt status or to receive interest. She suggested that we file to become a non-profit organization without tax exempt status, and I quoted Peter Maurin that the Catholic Worker is an organism not an organization. She dutifully referred to our community for the rest of the conversation as an organism. She told me that there was a form of nonprofit status that was not tax exempt, but admitted that it required considerably more documentation than we currently keep. She suggested that I talk to an accountant or tax attorney. I know neither.

I spoke to Chris Allen-Doucot at the Hartford Catholic Worker, and his community is in the middle of a similar quandary. Lawyers have told Chris that the Catholic Worker doesn’t fit any of the government’s designations.

What are other communities doing? Does anyone have any helpful suggestions? In two weeks checks we receive in our community’s name will have no place to go. If we change our account to a personal account, we can only accept checks in our own names and all the income will be seen as personal income by the IRS. Our house received about $50,000 in donations last year. The IRS would want taxes on that income. Many donors would be reluctant to give to a personal name instead of a community name.

We want to be creative and faithful to the alternative economics of the Catholic Worker. Do we have to give up banking altogether and take our bills door to door to get strangers to pay them, while we fill a begging bowl to feed our guests? Do we need to ask donors to give only cash or actual food and cleaning products?

The IRS lady appreciated it when I told her that our community shelters people without taking a dime from the government and without asking for a tax exemption from our local taxes. She agreed that it was strange to penalize us. She also suggested that the new banking laws which have restricted a bank’s ability to reap huge profits on credit cards and other loans have prompted them to try to force customers into business accounts which charge for every transaction, including every check deposited. I would hate to see donor’s money diverted into the clutches of greedy banks.

Some Answers

Thank you to the many Catholic Workers in many communities who have already responded to my email. I am impressed with the speed and thoughtfulness of all the replies. They might be helpful to post on this site for new communities to see.

What I have learned since yesterday is good and bad news. The bad news is that credit unions, although better in many ways than regular banks, are still required to get an EIN (Employee Identification Number) for an account that is not in an individual’s name. The good news is that Claire and I can go to our city hall and get a “business certificate” for $25 to designate both of us as “doing business as Saints Francis and Therese Catholic Worker.” We then take this certificate to the Worcester Credit Union and they will create a business account with an EIN. (They will require us to deposit $25 in a savings account which earns 2% interest because all customers are members. The nice woman I spoke to at the Credit Union said that we could not return the interest to the bank at the end of each year, but did allow that we might bake the employees a cake or some bread equal to the small value of the interest.) This would not make us a non profit, either taxpaying or tax exempt. It was suggested to me that Claire and my personal income be kept in a different account, but we want to “hold all things in common” and not separate what happens to come to us in our name from any other gifts. We aren’t sure what this means for income tax purposes. We know that our expenses equal or exceed our donations which would go into this account, so it would not make a profit. We also learned that any personal donation under $10,000 is not taxable and since most of our donations are under $150, we aren’t worried. We like the designation “doing business as” because it doesn’t say we are a business, which we aren’t, but it also doesn’t say what we are. I feel like the Catholic Worker should be a square peg in a round hole which encourages individuals to personally reach out to others without go-betweens or government benefits or scrutiny.

A multi-faceted solution is for us to:

  1. to live more simply, thereby reducing our costs;
  2. to encourage supporters to give material support, like food, laundry soap, postage stamps, and so on;
  3. to expand our cottage industry for which donors give cash;
  4. to consider asking some regular donors to make their checks out to a
    utility bill instead of to our house;
  5. to produce more food from our garden (Peter Maurin loves this one); 6) to stay away from banks as much as possible.

The only problem we have from time to time is that the IRS and colleges, to which our children go, cannot believe that American families can live on less than $50,000 a year. They think we are starving someone to death or going around in loin clothes. (As a prudish Irish Catholic, I take exception to the latter suggestion.)

Many people suggested we talk to an accountant, some suggested that we steer clear of accountants, lawyers, and the IRS. Some told us terrific stories of how they have created unique arrangements and even gotten their cities and courts to create special categories to fit us into.

One thing is clear, I told the IRS and the bank and I will tell all or our readers, not a penny of money that comes to us is being misused (unless you count an occasional trip to the movies as extravagant). None of my concern has anything to do with hiding income for personal use. It has to do with identity, simplicity, non-bureaucracy, anarchism, personalism, and respect for the privacy of our guests.

I will continue to read the posts from other houses and want to thank everyone for your input. We’ll let people know how it turns out.

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