Bankruptcy law forbids tithing, charitable donations
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A couple of months after the Diagostinos filed bankruptcy, the bankruptcy trustee, who is appointed by the court to distribute the estate, raised an argument. The trustee, Andrea Celli, pointed out that since the debtors' income was above the state's median income the debtors must apply the standards in the Internal Revenue Service's "National Standards for Allowable Living Expenses."

Lawmakers made the IRS's set of allowed expenses a part of the means test as a way to establish reasonable standards. The information has typically been used for consumers who owe delinquent taxes and need to enter into a payment plan with the IRS.

Celli claimed that under the IRS's category of "other necessary expenses," the debtors did not qualify for a charitable contribution deduction.

IRS spokeswoman Nancy Mathis explains, "necessary expenses are those that provide for the health and welfare of the taxpayer and family or for the production of income. A charitable contribution can be an allowable expense if it is part of a job requirement or a condition of employment. Otherwise it is disallowed."

Leek argued that the Religious Liberty and Charitable Donations Protection Act of 1998 made clear that Congress intended to allow people to make charitable deductions.

The law was enacted to protect tithing and charitable giving under the bankruptcy code. It addressed the right of debtors to tithe after declaring bankruptcy under Chapter 13. The measure was authored by Sen. Grassley, Hatch and Sen. Sessions.

However, the New York bankruptcy court judge, Judge Robert E. Littlefield Jr., ultimately sided with the Chapter 13 trustee. He noted that according to the statute, if a person's income is less than the state's median income the IRS standards don't apply. That means if their income is more than the state's median income the IRS standards do apply.

'Reasonably necessary' expenses
The judge determined that "charitable contributions" is not listed as a "reasonably necessary" expense allowed within a subsection of the bankruptcy law, the IRS doesn't say anything indicating that the debtors' charitable contributions provide for the health and welfare of the debtors or are for the production of their income, and the Diagostinos don't make charitable contributions in the context of their employment since neither is a minister.

"The court does not agree with this awkward, bifurcated congressional framework, which makes charitable giving easier for some debtors and not others." Littlefield says. "Whether tithing is or is not reasonable for a debtor in bankruptcy is for Washington to decide. However, consistency and logic would demand the same treatment of all debtors under Title 11."

Leek says the couple is unhappy that they can't participate in tithing.

"They have to be noncharitable and nonreligious," he says.

Still, he says he's going to recommend that the Diagostinos not appeal the ruling.

"It would cost them $10,000 to appeal a $6,000 dollar issue."