PETER J. McNIFF, Bankruptcy Judge.
The court has twice denied confirmation of the debtors' proposed chapter 13 plan. Confirmation of the debtors' first chapter 13 plan was denied January 16, 2001 because the debtors were not committing all disposable income to the plan as required by 11 U.S.C. § 1325(b)(1)(B). The debtors amended the plan, and the court denied confirmation of the first amended plan on February 26, 2001 because the amount the debtors proposed to tithe was not reasonably necessary to their maintenance and support and exceeded their historical tithing contributions. The debtors again amended their plan, and the court held a hearing on June 28, 2001. The court concludes confirmation of the debtors second amended chapter 13 plan must be denied.
At issue in this case is the interpretation of § 1325(b)(2) as amended by The Religious Liberty and Charitable Donations Protection Act of 1998, Pub.L. No. 105-183, 112 Stat. 517 (1998) (1998 Act). As amended, § 1325(b) now provides in relevant part (the underlined language was added by the 1998 Act):
(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan . . .
(B) the plan provides that all of the debtor's projected disposable income to be received in the three year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan.
(2) For purposes of this subsection, "disposable income" means income which is received by the debtor and which is not reasonably necessary to be expended —
(A) for the maintenance or support of the debtor or a dependent of the debtor, including charitable contributions (that meet the definition of "charitable contribution" under section 548(d)(3)) to a qualified religious or charitable entity or organization (as that term is defined in section 548(d)(4)) in an amount not to exceed 15 percent of the gross income of the debtor for the year in which the contributions are made[.]
Budgeted in the debtors' second amended plan is a tithe of $390 per month. This constitutes approximately 9% of their Adjusted Gross Income ("AGI"), or $14,040 over a term of 36 months. The plan proposes a return to unsecured creditors of 31.4%, or $14,500 over the term of the plan.
The debtors contend the tithe proposed is reasonable because it is below the 15% charitable contribution limit of § 1325(b)(2)(A). The debtors argue that by the amendment, Congress provided that a charitable contribution of up to 15% of a debtor's income is per se reasonable. See, In re Kirschner, 259 B.R. 416 (Bankr.M.D.Fla. 2001). The Kirschner court found that the purpose of the 1998 Act was to overrule those bankruptcy courts finding that charitable contributions were per se not reasonably necessary for the debtor's support or maintenance. Id. at 421. However, that court ultimately adopted the Cavanagh rule that contributions up to 15% may not be scrutinized as "reasonably necessary." In re Cavanagh, 250 B.R. 107 (9th Cir. BAP 2000).
In this court's view, however, the amended charitable contribution provision of § 1325(b)(2)(A) was not meant to function as a rigid rule qualifying an automatic 15% allowance for charitable contributions. Rather, because the amended statutory language is qualified by the reasonably necessary requirement also in the statute, 15% is the maximum amount that can be considered reasonable. The court's interpretation is supported by the decision of In re Buxton, 228 B.R. 606 (Bankr.W.D.La. 1999), with which this court agrees. As the Buxton court reasoned, "[t]he definition of "disposable income" still contains the reasonably necessary restriction." Id. at 610. The construction of the Buxton court is persuasive and consistent with this court's previous interpretations of the statute.
The language of the statute itself also supports such an interpretation. Congress did not place the charitable contribution provision in a stand-alone subsection of § 1325, but instead placed the amendment in subsection (b)(2)(A), which remains qualified by the phrase "reasonably necessary to be expended." Congress also provided that charitable contributions be allowed "in an amount not to exceed 15 percent of the gross income of the debtor for the year in which the contributions are made" (emphasis added), rather than providing for an absolute right to contribute 15% of a debtor's income.
Since the statute was amended, charitable contributions are proper expenses by a chapter 13 debtor, qualified by two factors: (1) the amount of the contribution cannot exceed 15% of the debtor's gross income; and (2) court review is required to determine the amount of the charitable contribution that is reasonable in each case. With this interpretation of the law in mind, the court has reviewed the second amended chapter 13 plan of the debtors and scrutinized the proposed monthly tithing amount in their budget.
Under the debtors' second amended plan, the return on unsecured claims will be 31.4%, or $14,500. Over the same time period, the debtors' charitable contributions will be at least $14,000.
The debtors have argued that the tithing amount of 10% is
particularly important to them as such an amount is necessary to achieve "Temple Recommend" status in their church. However, the proposed budget includes monthly charitable contributions in an amount less than 10% of their estimated AGI, leading the court to believe the debtors intend to contribute more to their church than budgeted. The evidence also shows the debtors may not adhere to the tithe of $390 per month allowed by their proposed budget and their schedules may not be accurate. If the debtors were to give 10% of their adjusted gross income ("AGI"), as stated they would have to budget approximately $520 per month.
A debtor's prior history is another relevant factor used to determine what is reasonably necessary for a debtor's maintenance and support in each particular case. Since the filing of this case, the debtors have not tithed the 10% which they contend is necessary, but testified they had given approximately $500 to their church over the first six months of this year. Nor did the debtors meet the 10% limit in 2000. According to their 2000 tax returns, the debtors gave $1585 to charity, out of an AGI of $62,824. That contribution totaled approximately 2.5% of their income.
In examining several previous year charitable contributions, the court finds the charitable contributions in the year 2000 most persuasive. During that year the debtors were in financial difficulty and had unpaid creditors, as they do in this chapter 13 case. Prior to filing, the debtors were striking a reasonable self-imposed balance while dealing with their financial difficulties. The debtors have illustrated, through their year 2000 charitable contributions, what they felt was a reasonable and necessary contribution to their church under the circumstances. In other words the amount given by the debtor to charitable contributions in the year 2000, $1,585 in total, or $132 per month, is the self-determined amount reasonably necessary to their maintenance and support. Thus even if the 15% contribution were deemed reasonable and subsumed these debtors' proposal, the debtors have not and are not meeting that level of tithing.
The court is also concerned about the debtors' actions during this case, such as the sale of one of their motor vehicles and the surrender of a camper without notice to the trustee. Nor did they amend their schedules to reflect the changes in their assets.
The debtors' second amended plan appears to be filed in good faith, as evidenced by the voluntary decrease in expenses in order to allow for a charitable donation of 10% of their income. Nevertheless the proposed plan does not satisfy the "reasonably necessary" test for disposable income under § 1325(b)(2). Any amended plan should reflect the sale or surrender of their vehicle and camper, and, if applicable, the anticipated change in income after the planned retirement of Mr. Davis in April 2001.
For the foregoing reasons, IT IS, THEREFORE, ORDERED that confirmation of the debtors' second amended chapter 13 plan is denied.