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Code authorize, indeed require the IRS to deny tax-exempt status to private schools which discriminate on the basis of race. The courts have already interpreted Federal law in this manner.

For this reason, I have introduced Senate Concurrent Resolution 59, with Senator Durenburger, Senator Moynihan and 26 other cosponsors. This resolution will put the Congress firmly on record against tax-exempt status for private schools that practice racial discrimination. The concurrent resolution states the sense of the Congress that current Federal law clearly authorizes and requires the Internal Revenue Service to deny tax-exempt status and deductibility of contributions to private schools that discriminate on the basis of race.

Mr. Chairman, I hope the House of Representatives will consider a similar resolution as an alternative to the Administration's legislation. The point which this resolution makes about the adequacy of current Federal law reflects the view of the U.S. Commission on Civil Rights and a number of civil rights organizations. By adopting this resolution Congress would make a strong statement that current Federal law is, and has been, clear on mandating the tax-exempt status be denied to private schools that discriminate on the basis of race.

Again, I appreciate the Chairman providing me the opportunity to submit this statement, and I ask that a copy of Senate Concurrent Resolution 59 be included in the hearing record.



Mr. Chairman and Members of the Committee, thank you for the opportunity to present testimony before you today on the reversal of the Internal Revenue Service tax-exempt school ruling. It is very evident that President Reagan's recent actions on allowing-and then seemingly disallowing-tax exemptions for private schools which discriminate on the basis of race have galvanized the nation's moral conscience. It is heartening that the public has voiced its outrage and concern about this matter. Hopefully, our vehement response to the President's actions will result in the clarification of the IRS Revenue Ruling, and the Service's continuing and unaltered authority to withhold tax-exempt status from private schools which discriminate against minority students. Today's hearings will set us on the appropriate path to this goal.

I do not intend to take up much time this morning, for I am anxious to hear from the legal experts and the Administration on the cause for the policy reversal and the subsequent "remedying" legislation submitted by the President. However, I must add my voice to those who concur that the IRS Revenue Ruling, issued in 1971, correctly interpreted all federal court findings and the intent of Congress in prohibiting tax exemptions for racially discriminatory schools.

The definition of what constitutes a charitable organization can in no way encompass practices of racial bias. Title VI of the Civil Rights Act prohibits racial discrimination in federally assisted programs. The federal court system, including the Supreme Court, has determined repeatedly that the Constitution and the Civil Rights Act support a national policy of desegregated education. Three previous Administrations have observed this policy. All the facts add up to ample authority of the IRS to consider ineligible for tax exemptions private schools which discriminate on the basis of race. With such ample authority, legislation to codify the clear meaning of the law is duplicative and simply unwarranted.

We have heard the Administration pledge itself with respect to civil rights, but its actions demonstrate indifference and often hostility to concrete civil rights initiatives. When President Reagan transmitted his "remedying" legislation on taxexempt schools, he wrote:

"I share with you and your colleagues an unalterable opposition to racial discrimination in any form. Such practices are repugnant to all that our Nation and its citizens hold dear, and I believe this repugnance should be plainly reflected in our laws."

Colorblindness must have prevented him from seeing that this repugnance to discrimination is already reflected in our laws, which is why we have affirmative action programs, busing efforts, and voting rights legislation.

Codification legislation is not necessary to cure the problem of the IRS policy reversal. The President must admit the painfully obvious. He has made a mistake. Now he must undo that mistake, before equal opportunity in America becomes a victim to it, by embracing the original Revenue Ruling.

Let me close with one thought. After having participated actively in the Civil Rights Movement; after watching, with great pain and sadness, dogs unleashed on civil rights demonstrators in the South; after struggling for progressive, anti-discrimination legislation in the Congress, and seeing it enacted into law; and after having seen progress toward racial unity and understanding, it was almost incomprehensible to me that the Administration would permit backsliding on this fundamental issue. Regardless of what approach to today's problem this Committee chooses to pursue, let one thing remain clear: the Congress of the United States must never, ever permit racial discrimination to be practiced as the official policy of our government again.


[This statement is signed by the following:]


MAC ASBILL, Jr., Washington, D.C.
HUGH CALKINS, Cleveland, Ohio

MORTIMER M. CAPLIN, Washington, D.C.
M. CARR FERGUSON, Jr., New York, N. Y.
MARTIN D. GINsburg, Washington, D.C.
ERWIN N. GRISWOLD, Washington, D.C.
JOHN JONES, Washington, D.Č.
JEROME KURTZ, Washington, DC.
JAMES B. LEWIS, New York, N.Y.
JOHN S. NOLAN, Washington, D.C.
JOHN S. PENNELL, Chicago, Ill.
LIPMAN REDMAN, Washington, D.C.
JOHN E. SCHEIFLY, Los Angeles, Calif.
WILLIAM H. SMITH, Washington, D.C.
ROBERT D. TAICHERT, Albuquerque, N. Mex.
THOMAS D. TERRY, San Francisco, Calif.
IRWIN L. TREIGER, Seattle, Wash.

BERNARD WOLFMAN, Cambridge, Mass.

On January 8, 1982 the Treasury Department announced that organizations which otherwise qualify as exempt for federal income tax purposes will not lose or be denied their exempt status on the grounds that they "don't conform with certain fundamental public policies". Accordingly, the announcement stated, the Department of Justice had filed a Memorandum in the United States Supreme Court on that date "to vacate" the pending case involving Goldsboro Christian Schools and Bob Jones University (Nos. 81-1 and 81-3) because of mootness, since the Internal Revenue Service proposed to restore the tax exempt status to those two schools. The announcement stated also that that action was based on "the advice of the Department of Justice that the authority which the IRS previously had been asserting as its basis for revoking the tax exemptions in question is not supported by the language of the Internal Revenue Code or its legislative history.'

We disagree strongly with that advice. We believe that the law is clear that the Commissioner of Internal Revenue has the right, and indeed the duty, to deny tax exemptions to private schools which practice racial discrimination. We believe also that current circumstances require our public declaration to this effect and to the further effect that the Internal Revenue Service has the obligation to continue to enforce that rule without interruption.

Section 501(c)(3) defines those organizations of a charitable nature which are exempt from tax on their income; deductibility of contributions to such organizations is determined under Section 170(c)(2). There is nothing new about the Commissioner's obligation to monitor the activities of all (c)(3) organizations to determine their qualification for receipt and retention of the relevant tax benefits. Nor is there anything new about the Commissioner's frequent activity in this general area and more particularly with regard to tax exempt schools.

1 Although subsequent announcements (on Jan. 18, 1982) by the White House and the Treasury Department deal with this subject, they do not question the soundness of this advice or its critical role in the current discussion.

In terms of recent years, the Commissioner's effort took the form of IRS News Releases of July 10 and 19, 1970, which were followed by Revenue Rulings 71-447 and 72-54. The purpose of all of these pronouncements was to articulate the basic requirement that tax exemption required private schools to operate in all respects in a manner which did not discriminate on the basis of race, color, or other elements of ethnic origin.

These rulings were issued in the context of judicially ordered desegregation of public schools through the country and the related attempt to satisfy the educational requirements of some segments of the population by the establishment of private schools. It was in that context that various court decisions confirmed the long-standing principle that an organization which operates illegally or in a manner contrary to public policy is not "charitable" and therefore not entitled to Federal income tax exemption. Ould v. Washington Hospital for Foundlings, 95 U.S. 303 (1877); Girard Trust Co. v. Commissioner, 122 F.2d 108 (C.A. 3 1941). In view of the well defined public policy against racial discrimination reflected in the Civil Rights Act of 1964 and cases such as Brown v. Board of Education, 347 U.S. 483 (1954), and Swann v. Charlotte-Mecklenberg Board of Education, 402 U.S. 1 (1971), courts have applied the above described principle over the past several years to deny tax exemption to private schools which practice racial discrimination.

The leading case is the decision of the three-judge court in Green v. Connally, 330 F. Supp. 1150 (D.D.C. 1971), aff'd. per curiam, 404 U.S. 997 (1971). Since that time, the Supreme Court has decided that schools which discriminate on basis of race are not entitled to certain governmental, non-tax benefits 2 and two Courts of Appeals have denied tax exemption to schools which engage in racial discrimination.3

The significance of the Supreme Court affirmance in the Green case has been questioned by some on the basis of a footnote in a 1974 Supreme Court decision where the Court noted that the Green v. Connally decision "lacks the precedential weight of a case involving a truly adversary controversy." Although that comment was truly dictum to the issue before the Court, considerable stress is placed on the footnote by those who contend that the Supreme Court has not "really" decided the basic question-all the more reason therefore not to attempt to moot the issue now pending before that Court in the Bob Jones University and Goldsboro Christian Schools cases.

In addition subsequent developments clearly establish the understanding of other courts and the Congress that the law requires that private schools that discriminate are not entitled to tax exemption.

1. As noted above (footnote 3), these have been three appellate court decisions since the Green case affirmance by the Supreme Court, and all of them have stated that clear rule.

2. On two relatively recent occasions, Congress itself has indicated its understanding that the law requires denial of tax exemption to schools which discriminate. a. The first appears in connection with P.L. 94-568 which was enacted October 29, 1976, to add Section 501(i) to the Code, denying tax exemption under Section 501(c)(7) to social clubs which practice racial discrimination. In making that change, the Finance Committee (Senate Report No. 94-1318, 1976-2 C.B. 601) made clear the congressional intention to overrule the Federal District Court decision in McGlotten v. Connally, 388 F. Supp. 448 (D.D.C. 1972) which allowed tax exemption to social clubs even though they discriminate. In explaining that purpose the Committee report made equally clear the congressional intent to treat the Supreme Court decision in Green v. Connally as the law applicable to private schools, i.e., that tax ex

2 Runyon v. McCrary, 427 U.S. 160 (1976) (the 1866 Civil Rights Act (42 U.S.C. § 1981) prohibits racial discrimination in nonpublic school admission policies); Norwood v. Harrison, 413 U.S. 455 (1973) (a Mississippi law which provided for text books and transportation to students attending private schools which practiced racial discrimination was invalid); United States v. Mississippi, 499 F. 2d 425 (C.A. 5, 1974); Graham and United States v. Evangeline Parish School Board, 484 F. 2d 649 (C.A. 5, 1973); United States v. Tunica County School District, 323 F. Supp. 1019 (N.D. Miss.) aff'd 440 F. 2d 377 (C.A. 5, 1971). See also Brumfield and United States v. Dodd, 425 F. Supp. 528 (E.D. La. 1976), enjoining a state program for text books and transportation aid similar to the one considered in Norwood.

3 Bob Jones University v. U.S., 639 F. 2d 147 (C.A. 4 1980), rehearing and rehearing en banc denied Apr. 18, 9181), cert. granted-- U.S. (Oct. 13, 1981); Goldsboro Christian Schools, Inc. v. U.S., 436 F. Supp. (E.D.N.C. 1977), aff'd in an unpublished opinion (C.A. 4, Feb. 24, 1981), cert. granted-- U.S. -(Oct. 13, 1981). As noted, these are the cases in which the Department of Justice filed its Jan. 8, 1982 Memorandum. See also Prince Edward's School Foundation v. U.S., 478 F. Supp. 107 (D.D.C. 1979) aff'd by unpublished order No. 79-1622 (D.C. Cir. June 30, 1980), cert. denied 450 U.S. 944 (1981).

4 In Bob Jones University v. Simon, 416 U.S. 725 (1974), the Court held that the Anti-Injunction Act barred the use of an injunction to contest the revocation of tax exemption.

emption is not available to such schools which practice racial discrimination. The Committee report goes on to say that the purpose of the new provision regarding social clubs was to bring them into line with "national policy" against racial discrimination. Since Congress understood Green v. Connally to establish the rule that private schools which practice racial discrimination are not entitled to tax exemption, there was no need to make any change in the Code with respect to Section 501(c)(3) organizations.

b. In connection with recent appropriations bills for the Treasury Department, Congress has again stated its clear understanding that current law requires denial of tax exemption to schools which discriminate. In enacting appropriations for fiscal year 1980,5 (Public Law 96-74, 93 Stat. 559) Congress specifically (Sections 103 and 615) barred the use by the Internal Revenue Service of any funds to implement certain guidelines regarding the tax exempt status of private schools proposed by the Commissioner of Internal Revenue in August, 1978 and February, 1979. But in so doing, the sponsors of the limitation made clear that there was no doubt about the power of the Commissioner under pre-1978 pronouncements to deny tax exempt status to schools which discriminate and that their concern was limited to the way the Commissioner proposed to exercise the power."

Against this background, it is difficult for us to believe there is any doubt about the power-and again, the duty-under the law as it exists today, of the Commissioner of Internal Revenue to deny tax exemption to schools which discriminate.

It is equally difficult to understand the assertion that one important reason for the current legislative proposal is to eliminate "administrative fiat"? in the administration of the tax laws. We suggest that no provision of the Internal Revenue Code can-or indeed should be so detailed as to eliminate the need for discretion and judgment in the administration of the Internal Revenue Code. The January 18, 1982 proposal may well prove to be desirable, even if enacted in its present form, it will not significantly narrow the area of the Commissioner's (and revenue agents') discretion. Furthermore the pendency of the January 18 proposal should have no effect on the uninterrupted actions of the Commissioner in continuing to deny tax exemption to all schools which discriminate-including Bob Jones University and Goldsboro Christian Schools.

The litigation instituted by those schools demonstrates that the Commissioner's enforcement activities will inevitably produce conflict since there will of course be disputes in particular situations involving specific facts and circumstances. It is for example not unreasonable to express concern about certain Constitutional questions as to schools whose discriminatory practices stem from religious beliefs. We believe that the answer to those questions is best left to the courts, 8 and for that reason, we are particularly distressed over the effort to moot the Bob Jones University and Goldsboro Christain Schools cases pending in the Supreme Court-especially after the Solicitor General of the United States advised the Court (pages 15 through 17, Brief For the United States) that the petitions for certiorari by the two schools were

5 Similar limitations were enacted by continuing resolutions as to fiscal years 1981 and 1982. Public Law 96-536, 94 Stat. 3166; Public Law 97-51, 95 Stat. 958; Public Law 97-85 (November 1981) and Public Law 97-82 (December 1981). Many of us objected strenuously to this legislative technique as "a form of legislation by negative veto" in our July 23, 1979 letter to Senator Warren G. Magnuson.

6 In presenting his amendment (which became Section 615 of Public Law 96-74), Representative Dornan stated (125 Cong. Rec. H5982, July 16, 1979, daily ed.): "Let me emphasize that my amendment will not affect existing IRS rules which IRS has used to revoke tax exemptions of white segregated academies under Revenue Ruling 71-447 and Revenue Procedure 75-50.”

In submitting the amendment which became Section 103, Representative Ashbrook stated (125 Cong. Rec. H5879, 5882, July 13, 1979, daily ed.): "My amendment very clearly indicates on its face that all the regulations in existence as of Aug. 22, 1978, would not be touched." "My colleagues surely know that existing revenue procedure 7550 [sic] would be in effect."

The Ashbrook amendment was later introduced in the Senate by Senator Helms who stated (125 Cong. Rec. S11979, Sept. 6, 1979, daily ed): "Under my amendment, the IRS may still move to withdraw the tax exemption status of a school which has failed to meet the standards of Revenue Procedure 75-50" and "In fact, IRS has denied the tax-exempt status of over 100 schools which it, or a court has found to be discriminatory. My amendment today does not change the existing law contained in Revenue Procedure 75-50, and thus it preserves the ability of IRS to act against offending schools in a case-by-case basis."

7 Statement of Edward C. Schmults, Deputy Attorney General, p. 7, and Statement of R. T. McNamar, Deputy Secretary of the Treasury, p. 6, both before the Senate Finance Committee, Feb. 1, 1982.

Indeed the need for and the form of legislation may well be significantly affected by the Court's decision in those cases. Accordingly it is clearly desirable to defer legislation pending that decision.

not being opposed because of "the substantial public importance to both the [Internal Revenue] Service and the institutions involved."

It appears to us as extemely unwise to attempt to abort the Supreme Court's consideration of such an important issue on the basis of a contention-uncertainty in existing law-which we believe to be wholly unsupportable. Perhaps most difficult of all to understand is the justification of this effort, at this stage of those cases; even if current law were uncertain, that is precisely the situation in which the Supreme Court should be allowed to proceed with its normal review.



1. Current law is clear that private schools which discriminate are not entitled to federal income tax exemption.

2. Regardless of the merits of the January 18, 1982 legislative proposal, that proposal's pendency should have no effect on the uninterrupted enforcement of the law by the Internal Revenue Service.

3. Unless the Supreme Court reverses the current decisions of the Court of Appeals for the Fourth Circuit, Bob Jones University and Goldsboro Christian Schools are not entitled to tax exemption. Accordingly, the Department of Justice should withdraw its January 8, 1982 Memorandum in the Supreme Court in the cases involving those schools and permit the court to consider the merits of the question. 4. There should be no consideration of any legislative proposal pending the Supreme Court's decision in those cases. Respectfully submitted.


The American Association of University Professors, an organization of some 70,000 members, has since 1915 been the principal spokesman on matters of concern to college and university faculty throughout the United States.

For many years, the Association has formally decried race discrimination in American institutions of higher education. At its Forty-Second Annual Meeting in 1956, the Association called upon privately supported colleges and universitites to adhere to the principles announced in court decisions outlawing racial segregation in the public sector. It declared that "free access to every kind of educational opportunity, measured only by the aptitude and achievement of the individual teacher or student, must be safeguarded to all Amerians, of whatever race. Any interference with such access imperils the right of the teacher to teach, as well as the right of the student to learn."

An institution that discriminates against racial minorities in faculty or student recruitment undermines the conditions of academic freedom. It also violated civil rights statutes as construed by the United States Supreme Court. It has been authoritatively determined, moreover, that existing provisions of the Internal Revenue Code give to the federal government not only the power but also the obligation to deny tax-exempt status to institutions that engage in racial discrimination.

The American Association of University Professors condemns any action by the Administration which retreats from this commitment to the full enforcement of the controlling civil rights and taxation laws. The failure to press vigorously the pending Supreme Court cases against Bob Jones University and Goldsboro Christian School, and the suggestion that new legislation is necessary to authorize the Internal Revenue Service to deny tax-exempt status to these and similar institutions, are unwarranted and untenable.

The laws that strip from racially discriminatory schools the claim to "charitable" status are already on the books. By enforcing those laws, and by pursuing the two cases now pending before the Supreme Court, the Administration can reaffirm a principle which is both essential to the integrity and quality of American higher education and a cornerstone of our legal and ethical heritage.

9 This difficulty is compounded by the obvious conflict between (a) the effort in the Jan. 18, 1982 legislative proposal to deny tax exemption to such schools as Bob Jones University and Goldsboro Christian Schools and to do so on a retroactive basis, and (b) the representations to the Supreme Court that tax exemption was being restored to those two public schools and that the Revenue Service was rescinding its published rulings which provide the basis for revoking those exemptions in the first place. Many of us have serious concerns about retroactive tax legislation, from both the policy and constitutional points of view.

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