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28/

Page Eleven

schools, and the post-Civil War Amendments to the Constitution, the Green court found there is a federal policy against government support for racial segregation of public or private schools. Noting the "well established principle that the Congressional intent in providing tax deductions and exemptions is not construed to be applicable to activities that are either illegal or contrary 29/

to public policy and noting further its obligation to construe "the Internal Revenue Code in consonance with the Federal public policy against support for racial segregation of schools, public 30/ or private," the court held that Section 501(c)(3) does not allow tax exempt status for racially discriminatory private schools.

It's important to note that while the court did rest its holding on statutory ground, it also pointed out in clear dicta that if it had not found such a holding required by the statute, it very likely would have ruled that the holding was required by provisions of the 31/ Constitution. As dicta, this statement does not have the authority of judicial precedent.

Nonetheless, it does represent

a significant indication of what the Green court would have held were it confronted solely with the Constitutional question.

32/

It has been suggested, however, that the 1971 affirmance of
Green by the Supreme Court was later qualified or even disapproved
by that court in its decision of Bob Jones University v. Simon.
In Bob Jones University, the Supreme Court stated:

The question of whether a segregative private
school qualifies under Section 501 (c) (3) has
not received plenary review in this Court, and
we do not reach that question today. Such
schools have been held not to qualify under

28/ Particularly, Brown v. Board of Education, 347 U.S. 482 (1954); Swann v. Charlotte Mecklenburg Board of Education, 402 U.S. 1 (1971). In Bolling v. Sharpe, 347 U.S. 497 (1954), the companion case to Brown, the Supreme Court applied the prohibition against state school desegregation to the Federal Government through the Fifth Amendment.

29/330 F.Supp. at 1161.

30/330 F.Supp. at 1163.

31/The court said: "Clearly the Federal Government could not under the Constitution give direct aid to schools practicing racial discrimination. But tax exemption and deductions certainly constitute a Federal Government benefit and support." 330 F.Supp. at 1164.

32/416 U.S. 725 (1974).

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Page Twelve

Section 501 (c) (3) in Green v. Connally
As a defendant in Green, the Service initially
took the position that segregative private
schools were entitled to tax-exempt status
under Section 501 (c) (3), but it reversed its
position while the case was on appeal to this
Court. Thus, the Court's affirmance in Green
lacks the precedential weight of a case

involving a truly adversary controversy. 33/

In light of the above-quoted language, what is the precedential value of the Green decision? The Supreme Court in Hicks v. Miranda has given guidance concerning the effect of per curiam affirmances when the Court stated:

Thus, after its summary affirmance by the Supreme Court, the

Green decision represented a limited precedent vis-a-vis the Supreme Court, but one that lower federal courts were fully obligated to follow in like cases. In addition, a year and a half after affirming Green, the Supreme Court decided the landmark case of Norwood v. Harrison which, as discussed in the following section, was decided along lines similar to those in the Green case. Further, in Runyon 35/ v. McCrary, a decision handed down two years after Bob Jones University v. Simon, the Court ruled that 42 U.S.C. Section 1981 does provide individuals a private right of action when private schools discriminate against them. The private schools involved in Runyon were generally open to the public, but received no government support. The court held that Section 1981 made even purely private discrimination by such schools illegal and granted injunctive

33, Id. at 740, footnote 11.

34/ 422 U.S. 332, 344 (1975). However, a lower court needs to take some care in interpreting the meaning of a summary affirmance. "The precedential significance of a summary action is to be assessed in the light of all of the facts in the case, " and the summary affirmance should not control when the facts in the summary affirmance are "very different from the facts of the /instant case. Mandel v. Bradley, 432 U.S. 173, 177 (1977). The court in Mandel also cautioned that a summary affirmance should not necessarily be interpreted as an adoption of "the reasoning as well as the jdugement of the lower court." Id. at 176.

"

35/427 U.S. 160 (1976).

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Page Thirteen

relief. The Supreme Court's willingness to extend the prohibition against discrimination in education to schools that receive no government aid would seem to leave little room for question as to whether the court will tolerate federal tax benefits to discriminatory schools.

2. Norwood v. Harrison

Perhaps the most significant case in this area, in addi

schools.

36/

tion to Green, is Norwood v. Harrison. In Norwood, the court
was called on to determine if certain private schools were in-
eligible, because of racially discriminatory policies, to receive
aid under a state program that provided textbooks to private
In determining eligibility, the court noted that it was
well settled in cases involving racial desegregation that the
parties alleging discrimination need only make a prima facie case
of racial discrimination and, thereafter, "the burden shifts to
the school's officials or representatives to rebut an inference
of racial disparity."

In discrimination cases the law with respect to
burden of proof is well settled. The Plaintiff
is required only to make out a prima facie case
of unlawful discrimination at which point the
burden shifts to the defendants to justify the
existence of any disparities.

Applying this principle, the Norwood decision specifically set forth facts that would be sufficient to constitute a prima facie case of racial discrimination. The court held that a prima facie case of discrimination arises from proof:

(a) that the school's existence began close upon
the heels of the massive desegregation of public
schools within its locale, and (b) that no blacks
are or have been in attendance as students and
none is or has ever been employed as teacher or
administrator at the private school. 38/

367 382 F. Supp. 921 (D. Miss. 1974), on remand from 413 U.S. 455 (1973). Norwood originally, 340 F. Supp. 1003, sustained the validity of a Missippi program under which textbooks were purchased by the state and lent to students in both public and private schools without reference to whether any participating private school had racially discriminatory admissions policies. The Supreme Court vacated the decision and remanded for futher proceedings to establish a state certification procedure, subject to federal court review, to determine eligibility of private schools to receive state owned textbooks. Schools with racially discriminatory policies were held by the Supreme Court to be ineligible for such governmental aid. The ultimate district court decision was precipitated when plaintiffs challenged the determinations of the state certification procedure.

37/ 382 F. Supp. at 925.

38/ 382 F. Supp. at 924-5.

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Thus, Norwood provides general support for the concept contained in the revised proposed Revenue Procedure whereby the burden of proof is placed on certain schools to overcome an initial inference of racial discrimination. This same approach has been sustained in at least one other United States District Court

decision dealing with governmental aid to private schools, 39/

Brumfield v. Dodd. The Brumfield court quoted extensively from the Norwood decision, including the passages quoted above, and applied precisely the Norwood test.

The Norwood formulation of the essentials for a prima facie case of discrimination differs from that contained in the proposed Procedure in one important respect. The Norwood court requires there to be a total absence of minority students or faculty in order for the inference to attach. The IRS, of course, applies the inference, if all other requisite factors are present, when a school "does not have significant minority enrollment." the IRS may argue that this different standard is entirely necessary to prevent a racially discriminatory school from hiding behind a facade of "tokenism", it is appropriate to point out that the IRS has to this extent gone beyond those criteria that have clear support in the relevant judicial decisions.

While

Several other items in the original version of the proposed Revenue Procedure that might have run afoul of the legal precedents have been changed in the revised version so that the problems are eliminated. Specifically, the inclusion in the revised version

of the proposed Revenue Procedure of the requirement that a school's creation or formation be "related in fact to public school desegregation," serves to adequately reflect considerations cited. Further, in Norwood it is significant that the court appears to consider whether religious schools might not have certain special qualities that as a factual matter require special consideration as part of the process of determining whether the school has a racially discriminatory policy. Indeed, this is precisely what the revised

.

39/425 F.Supp. 528 (D. La. 1976).

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53

333

Page Fifteen

proposed Revenue Procedure appears to do when it provides that the Service must consider special factors that limit a school's ability to attract minority students when making the determination of whether a school's minority enrollment is significant or not.

Finally, a review of the specific determinations made by Norwood on the seven private schools in question in that case seems to suggest that the Norwood court did not demand a fixed amount of rebuttal evidence from those schools who had a prima facie case of discrimination made out against them. Rather, the court seems to require varying amounts of refutation, depending on the force of the original prima facie case. Consistent with this rule, the revised version of the Procedure specifically states: "The level of actions that are adequate may vary from school to school and depend upon the circumstances of the school This more flexible standard for what is required to rebut a prima facie case of racial discrimination seems entirely in accord with the spirit of the Norwood decision.

Thus, the approach of the revised Procedure, i.e., applying a flexible standard of proof, but also looking for objective indices of non-discrimination (and many of the examples listed in the Procedure are virtually identical to the examples given in Norwood), is well supported by the opinion of the court in Norwood v. Harrison.

3. Bob Jones University v. United States

Before closing this section, it is necessary to note the recent decision of Judge Chapman of the United States District Court for

the District of South Carolina in the case of Bob Jones University 40/ v. United States. Judge Chapman "with all due deference to the 41/ Courts in Green and Goldsboro disagreed with the holding in both cases. Specifically, Judge Chapman ruled that the benefits conferred on Bob Jones University through tax exemption and deductions

40/ Civil Action No. 76-775 (December 26, 1978).

41/ Goldsboro Christian Schools v. United States, 436 F.

Supp. 1314 (N.Car. D. 1977).