THESE COURT RULINGS LED TO DELIBERATIONS BY THE SERVICE, THE TREASURY DEPARTMENT, AND THE DEPARTMENT OF JUSTICE AS TO WHETHER PRIVATE SEGREGATED SCHOOLS WOULD BE ENTITLED TO TAX EXEMPTION AND WHETHER CONTRIBUTIONS TO THESE SCHOOLS WOULD BE DEDUCTIBLE. AS AN INTERIM MEASURE WHILE ASSESSING THE EFFECT OF COURT DECISIONS, THE SERVICE IN 1965 SUSPENDED ISSUING RULINGS TO THE INCREASING NUMBER OF PRIVATE SCHOOLS SEEKING EXEMPTION FROM
FEDERAL INCOME TAX. AFTER CONSIDERABLE REVIEW, THE SERVICE ANNOUNCED IN 1967 THAT TAX EXEMPTION WOULD BE DENIED AND CONTRIBUTIONS WOULD NOT BE DEDUCTIBLE TO RACIALLY SEGREGATED PRIVATE SCHOOLS WHOSE OPERATION WITH STATE AND LOCAL GOVERNMENT AID WAS UNCONSTITUTIONAL OR IN VIOLATION OF THE LAWS OF THE UNITED STATES." HOWEVER, RACIALLY DISCRIMINATORY SCHOOLS THAT OPERATED WITHOUT STATE SUPPORT OR AID WOULD CONTINUE TO BE EXEMPT FROM FEDERAL INCOME TAX.
IN 1969, THE SERVICE WAS SUED BY THE PARENTS OF BLACK CHILDREN IN THE STATE OF MISSISSIPPI. THEIR ARGUMENT WAS THAT THE AVAILABILITY
OF TAX EXEMPTION AND DEDUCTIBLE CONTRIBUTIONS TO A PRIVATE RACIALLY DISCRIMINATORY SCHOOL AMOUNTED TO UNCONSTITUTIONAL GOVERNMENT ACTION. THEY ASSERTED THAT THESE SCHOOLS FAILED TO QUALIFY FOR EXEMPTION BECAUSE THEIR PRACTICES VIOLATED CLEAR FEDERAL PUBLIC
IRS NEWS RELEASE DATED AUGUST 2, 1967
POLICY AGAINST RACIAL DISCRIMINATION.
A THREE-JUDGE FEDERAL COURT
IN THE DISTRICT OF COLUMBIA ON JANUARY 12, 1970, ORDERED THE SERVICE IN A PRELIMINARY INJUNCTION NOT TO RECOGNIZE TAX EXEMPT
STATUS OR ALLOW CHARITABLE CONTRIBUTIONS TO RACIALLY DISCRIMINATORY
PRIVATE SCHOOLS IN MISSISSIPPI.4 ON JUNE 26, 1970, THE COURT ENTERED
A SUPPLEMENTAL ORDER REQUIRING THE SERVICE TO SUSPEND ADVANCE ASSURANCE OF DEDUCTIBILITY OF CONTRIBUTIONS TO SEGREGATED SCHOOLS
IN JULY 1970, THE SERVICE ANNOUNCED THAT IT COULD NO LONGER LEGALLY JUSTIFY ALLOWING TAX EXEMPTIONS TO PRIVATE SCHOOLS THAT RACIALLY DISCRIMINATE NOR TREAT CONTRIBUTIONS TO SUCH SCHOOLS AS 6 TAX DEDUCTIBLE. TO QUALIFY FOR SUCH BENEFITS, ALL PRIVATE SCHOOLS WERE REQUIRED TO ADOPT AND PUBLICLY ANNOUNCE A POLICY
THE THEN COMMISSIONER OF THE
OF RACIAL NON-DISCRIMINATION. INTERNAL REVENUE SERVICE INDICATED THAT THE LEGAL ASPECTS OF THIS ISSUE HAD BEEN DISCUSSED AND STUDIED IN GREAT DEPTH WITHIN BOTH THE TREASURY DEPARTMENT AND THE DEPARTMENT OF JUSTICE AND THAT BOTH DEPARTMENTS WERE IN ACCORD WITH THE POSITION.' 7 THE WHITE HOUSE
ALSO ISSUED A PRESS RELEASE ENDORSING THIS POSITION.
GREEN V. KENNEDY, 300 F. SUPP. 1127 (D.D.C. 1970) [PRELIMINARY INJUNCTION, APPEAL DISMISSED SUB NOM. CANNON V. GREEN, 398 U.S. 956 (1970), APPEAL FROM SUBSEQUENT ORDERS DISMISSED SUB NOM. COIT V. GREEN, 400 H.S. 986 (1971).
GREEN V. KENNEDY, 26 AFTR 2D 70-5416 (N.N.C.) [REVISED PRELIMINARY INJUNCTION]; GREEN V. CONNALLY, 330 F. Supp. 1150 (D.n.C.) [PERMANENT INJUNCTION, AFF D SUB NOM. COIT V. GREEN, 404 .S. 907 (1971).
IRS NEWS RELEASES JULY 10 AND 19, 1970
TESTIMONY REFORE THE SELECT COMMITTEE FOR FOUAL EDUCATIONAL OPPORTUNITY ON AUGUST 12, 1970
CONCLUDING THAT RACIALLY DISCRIMINATORY PRIVATE SCHOOLS WERE
NOT ELIGIBLE FOR TAX BENEFITS AVAILABLE TO CHARITIES, THE THREE-JUDGE COURT IN GREEN ENTERED THE PERMANENT INJUNCTION IN JUNE OF 1971. A CHALLENGE ON THE MERITS OF THE ORDER WAS MADE BY PARENTS SUPPORTING SCHOOLS WITH EXCLUSIVELY WHITE ENROLLMENTS. ON AN APPEAL BY THE WHITE PARENTS, THE INITED STATES SUPREME COURT AFFIRMED PER
IN 1970, THE SERVICE EXAMINED PRIVATE SCHOOLS IN MISSISSIPPI AND, APPLYING SIMILAR PROCEDURES SURVEYED 15,000 SCHOOLS NATIONWIDE. THESE ACTIONS RESULTED IN REVOCATION OF THE TAX EXEMPT STATUS OF OVER 100 SCHOOLS THAT WOULD NOT ADOPT AND PUBLICIZE A RACIALLY NONDISCRIMINATORY ADMISSIONS POLICY. INCLUDED AMONG THE SCHOOLS THAT REFUSED TO ADOPT SUCH A POLICY WAS ROB JONES UNIVERSITY. IT SHOULD BE NOTED THAT THE SERVICE GAVE EVERY PRIVATE SCHOOL WITH A RACIALLY DISCRIMINATORY POLICY AN OPPORTUNITY TO CHANGE THAT POLICY BEFORE IT TOOK ACTION.
SINCE 1970, THE SERVICE HAS TAKEN A NUMBER OF ADDITIONAL STEPS TO IMPLEMENT THE RACIAL NONDISCRIMINATION REQUIREMENT. 1971, IRS PUBLISHED A RULING EXPLAINING THE NONDISCRIMINATORY
REQUIREMENT, AND, IN 1972, THE SERVICE PUBLISHED A PROCEDURE THAT ESTABLISHED GUIDELINES FOR PUBLICIZING A SCHOOL'S RACIALLY NON-
COIT V. GREEN, 404 11.S. 007 (1971).
ROB JONES UNIVERSITY V. SIMON, 416 U.S. 725, 740, FN. 11, STATED
THAT THE GREEN AFFIRMANCE
CASE INVOLVING A TRULY ADVERSARY CONTROVERSY.
LACKS THE PRECEDENTIAL WEIGHT OF A
REV. Pu. 71-447, 1971-2 C.B. 230
REV. PROC. 72-54, 1072-C.R. 834
FOLLOWING ITS INITIAL NATIONWIDE SURVEY OF TAX EXEMPT SCHOOLS, THE SERVICE DURING 1973 THROUGH 1975 HAD AN EXAMINATION COVERAGE WHICH RANGED FROM 2% TO 4%. DURING THIS PERIOD, AN EXAMINATION OF GOLDSBORO CHRISTIAN SCHOOLS WAS CONDUCTED BECAUSE OF ITS CLAIM FOR REFUND OF CERTAIN EMPLOYMENT TAXES. THIS EXAMINATION RESULTED IN THE LITIGATION WHICH BECAME THE COMPANION CASE TO BOB JONES.
EXPERIENCE WITH THESE EXAMINATIONS INDICATED TO THE SERVICE
THAT SPECIFIC GUIDELINES WERE NEEDED TO ENSURE UNIFORM ENFORCEMENT NATIONWIDE AND THE SERVICE PROCEEDED TO DEVELOP THESE. THE UNITED STATES COMMISSION ON CIVIL RIGHTS, THE CIVIL RIGHTS DIVISION OF THE JUSTICE DEPARTMENT, AND SEVERAL MEMBERS OF CONGRESS ALSO EXPRESSED THE NEED FOR SPECIFIC EXAMINATION GUIDELINES.
IN DECEMBER 1975, REVENUE PROCEDURE 75-50 WAS PUBLISHED11
CLARIFYING IRS GUIDELINES FOR TAX EXEMPT SCHOOLS AND ESTABLISHING RECORDKEEPING REQUIREMENTS. RECOGNIZING THE SENSITIVITY ASSOCIATED WITH THIS PARTICULAR ISSUE, THE SERVICE TOOK THE UNUSUAL STEP OF PUBLISHING THE PROCEDURE IN PROPOSED FORM TO AFFORD THE PUBLIC, EDUCATIONAL INSTITUTIONS, AND OTHER INTERESTED PARTIES THE OPPORTUNITY TO COMMENT. THE FINAL VERSION OF THE PROCEDURE REQUIRED ALL TAX EXEMPT PRIVATE SCHOOLS TO ADOPT FORMALLY A RACIALLY NONDISCRIMINATORY POLICY, TO REFER TO THE POLICY IN ALL BROCHURES AND CATALOGUES, AND GENERALLY TO PUBLISH NOTICE OF THIS POLICY ANNUALLY IN A NEWSPAPER OR BY USE OF THE BROADCAST MEDIA.
11 REV. PROC. 75-50, 1975-2 C.B. 587
EXAMINATION GUIDELINES WERE ALSO ISSUED DURING THIS PERIOD.
ALSO IN 1975, THE SERVICE PUBLISHED A REVENUE RULING CLARIFYING AND EXPLAINING ITS POSITION THAT ORGANIZATIONS, INCLUDING CHURCHES, WHICH ESTABLISH PRIVATE SCHOOLS WITH A POLICY OF REFUSING TO ACCEPT CERTAIN RACIAL AND ETHNIC GROUPS WILL NOT BE RECOGNIZED
AS TAX-EXEMPT CHARITIES UNDER SECTION 501(c)(3) OF THE CODE. 12 REVENUE PROCEDURE 75-50, HOWEVER, MADE IT CLEAR THAT A SCHOOL WHICH ENROLLS STUDENTS BASED ON RELIGIOUS AFFILIATION WILL NOT BE DEEMED TO HAVE A DISCRIMINATORY POLICY IF THE RELIGION IS OPEN TO ALL ON A RACIALLY NONDISCRIMINATORY BASIS.
IN 1976, THE PLAINTIFFS IN THE GREEN CASE REOPENED THAT SUIT, ASSERTING THAT THE SERVICE WAS NOT COMPLYING WITH THE COURT'S CONTINUING INJUNCTION THAT RACIALLY DISCRIMINATORY MISSISIPPI PRIVATE SCHOOLS BE DENIED TAX EXEMPTION AND REQUESTING FURTHER 13 INJUNCTIVE RELIEF. IN ADDITION, A COMPANION SUIT WAS FILED, NOW ENTITLED WRIGHT V. REGAN, ASSERTING THAT THE SERVICE'S ENFORCEMENT OF THE NONDISCRIMINATION REQUIREMENT ON A NATIONWIDE BASIS WAS INEFFECTIVE.
REV. RUL. 75-231, 1975-1 C.B. 158. SEE ALSO TIR 1379 (5/27/75) STATING THAT THE DE MINIMIS RULE WILL BE FOLLOWED IN ADMINISTERING REV. Rul. 75-231.
GREEN V. SIMON, CIV. NO. 1355-69(N.P.C)
WRIGHT V. SIMON, CIV. NO. 76-1426 (D.D.C.). IN WRIGHT V. BLUMENTHAL, 480 F. SUPP. 790 (D.D.C. 1979), THE COURT DISMISSED PLAINTIFFS COMPLAINT PRIMARILY FOR LACK OF STANDING.
WAS REVERSED IN WRIGHT V. REGAN, 81-2 .S.T.C. #9504 (n.C. CIR. 1980). THE SOLICITOR GENERAL HAS FILED A PETITION FOR CERTIORARI WITH THE SUPREME COURT TO REVIEW THIS DECISION.
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