School stated that the case was clear precedent, although Professor Van Alstyne of Duke Law School believed that the case was "not a precedent of commanding force." Mr. William Ball argued that Green was not a valid precedent and, in any event, that it reserved the question of whether the Freedom of Religion principle would require a different rule for religious schools. This view was echoed by several groups representing religious schools (for example, James Wood, Baptist Joint Committee on Public Affairs, and William Lehrfeld, American Association of Christian Schools), as well as several Congressman (for example, Honorable Robert Dornan and Newt Gingrich from Georgia).

Several witnesses who accepted IRS's authority to promul

gate the Procedure stressed the undesirability of prohibiting the IRS from going forward. They argued that Congress would have great difficulty formulating precise guidelines and that, with delay, IRS agents in the field would lack necessary guidance, (i.e., Martin Ginsburg of the Committee on Taxation, New York Bar Association, and Lipman Redman of the American Bar Association). These views were

contradicted by those that considered existing IRS guidelines to be adequate anti-discrimination standards. (for example, Martin National Jewish Commission on Law and Public Affairs).

Cowan,

E.

The First Amendment And Religious Freedom

cally.

Perhaps the most emotionally charged and difficult legal issue discussed during the hearings was whether or not the revised Procedure should apply to religious private schools. The concern over the constitutional freedoms of schools that practice racial discrimination as a tenet of their religion arose only hypothetiThe Subcommittee was not presented with an actual case of such a school. For most of the opponents, therefore, the primary First Amendment objections related to the danger of government regulation as an inhibition to full religious liberty for churchrelated schools. Some of these witnesses cited the pervasively religious nature of their church-related schools as the reason for their very broad objection to the Procedure (for example, Dr. Paul Cates, International Association for Religious Education; Paul Kienel, Association of Christian Schools International;

Dr. Carl McIntire, International Council of Christian Churches;
Donald McKnight, American Council of Christian Churches).
As was
clearly expressed by William Lehrfeld of the American Association
of Christian Schools, these witnesses held that their church
schools are a religious activity, just as their churches are.

Two witnesses stated that the Procedure unconstitutionally conditions the receipt of government benefits on the relinquishment of a constitutional right of free religious exercise (Ball, Cowan). Some found a constitutional violation because the Procedure would inevitably result in excessive entanglement between government and religion (Wood, Ball). Some argued that the revised Procedure violated the First Amendment prohibition on establishing religion, because it favors existing religions and religions that organize their affiliated schools into systems (Ball, Wood, Thomas Stephen Neuberger, Center for Law and Religious Freedom of the Christian Legal Society). Other representatives of religious schools thought the First Amendment problems could at least be reduced if the IRS included part of existing Revenue Procedure 75-50 in the proposed Procedure, i.e., the rule that a church school which restricts its admissions to members of its affiliated church is considered non-discriminatory if the church is open to all races. (Robert Lamborn, Council for American Private Education; Nathan Dershowitz, American Jewish Congress and the National Jewish Community Relations Advisory Council).

On the other side, Professors Wolfman and Tribe and the Justice Department argued that the Procedure would not contravene the First Amendment. Mr. Turner of the Justice Department believed there was no conflict because tax-exempt status is not a right. Professor Tribe stated that religious freedoms yield to substantial government interests, such as the government's interest in cutting off public aid to discriminatory schools. Commissioner Kurtz argued that religious freedoms do not include illegal acts, such as racial discrimination. Finally, Redman and Van Alstyne concluded that the First Amendment issue was a difficult one, although Redman saw nothing wrong with the IRS promulgating the Procedure subject to alteration by subsequent court decisions.

A great many opponents of the Procedure claimed that it was

unfair because it required the school to prove it was not discriminatory, rather than forcing the IRS to make its case (for one example, Congressman Bill Chappell from Florida).

The Service

disagreed saying that in the ordinary examination process all tax-exempt entities are

required to cooperate with the Service and show, by providing necessary information, why they are entitled to tax-exempt status. Mr. Thomas Neuberger, an opponent, carefully analyzed in his written statement how the burden of producing evidence shifts back and forth during typical discrimination litigation and concluded the final burden should be on the Service if the school can submit evidence that refutes a prima facie case. Supporters disagreed, saying the revised Procedure put too much of a burden on the IRS (Regina O'Leary, League of Women Voters of the United States; Bill Lann Lee, National Association for the Advancement of Colored People, Legal Defense and Educational Fund).

G. Affirmative Action

Opponents also urged that the Procedure required illegal affirmative action by private schools. Some said the Procedure's 20 percent "safe harbor" constituted a racial quota in violation of Bakke, and one witness, Mark Klein, of the American Jewish Congress, Northern California District, spoke of the general but pervasive dangers of any racial enrollment goal. The Service responded that its standard was flexible and that 20 percent was only a threshold test to identify where more specific fact gathering was necessary. However, Professor Van Alstyne thought the "safe harbor" would exert pressure on schools to pursue affirmative action, and that it was more appropriate for Congress to do this. Mr. Ball, George Reed, U.S. Catholic Conference, and Robert Dugan, National Association of Evangelicals, focused on the acts and programs an adjudiciated or reviewable school could undertake to show its non-discriminatory policy. They argued that some of these could not be required without abrogation of religious schools' First Amendment rights, particularly the example of a minorityoriented curriculum. The Service maintained that no specific act

was required and the failure to do a particular act would not prejudice a school.

While some witnesses decried the facts and circumstances

emphasis of the revised version of the Procedure as being too subjective (such as Robert Dugan, Rev. Carlson, and Dr. McIntire), most agreed that the revised Procedure was a very substantial improvement and addressed most of their initial concerns (for example, Dr. Charles Bergstrom, Lutheran Council in the U.S.A.). Several private school groups who acknowledged that the revised version of the proposed Revenue Procedure was an improvement over its predecessor raised objections to particular aspects of the revised version. Criticism was directed at the provision stating that the formation or expansion of a school at the time of local desegregation will generally be regarded as related in fact to It was suggested that the IRS should not be allowed to make such a relatedness determination without some actual evidence (Lamborn; John Esty, National Association of Independent Schools). The IRS responded that it expected that it would usually develop such evidence. Christian school representatives emphasized that such schools are being formed at a tremendous rate and that while some of these formations are near in time to desegregation they are religiously motivated, not white flight motivated.

such desegregation.

The Procedure's definition of community was also criticized by these groups. It was suggested that schools that do not enroll many students from the school district in which they are located might be judged by a unfair standard, since the Procedure always treates the home school district as part of a school's community (Esty). Because of this, it was suggested that certain schools might be wrongly regarded as having insignificant minority enrollment. As noted above, religious schools argued that a religious school's community can only be the religious group that sponsors the church. The IRS maintained that the revised Procedure contained adequate flexibility to fairly determine whether religious schools could really not enroll minorities.

The Oversight Subcommittee heard a very extensive array of testimony. The foregoing outline merely touches on the most significant issues covered in that testimony. The general and thoroughgoing lack of agreement amongst the witnesses and the uncertainties that such disagreement produced provided the impetus for additional staff research and analysis. This research and analysis, as well as that done prior to the hearing, are transmitted with this report and the major findings and conclusions are summarized in the following sections of this report.