CHART 4 Total Enrollment in Desegregated Public School Districts As a Percent of Total Enrollment in All Districts * With Five Percent or More and Twenty Percent or More Black Students in the Southern. Border. and Northern and Western States. 1979 Appendix Source: Prepared by the Ways and Means Oversight Subcommittee, US House of Representatives, with the assistance of the Departments of Justice and Health, Education and Welfare, April 23, 1979. *As described in the text, the term "desegregated districts" is used here to refer only to district: that are under a formal desegregation order or plan. Page Fifty-Six TABLE I NATIONAL AND AREA SUMMARIES OF DISTRIBUTION OF BLACK STUDENTS BY BLACK COMPOSITION OF DISTRICTS, FOR THOSE DISTRICTS HAVING DESEGREGATION PLANS 6/79 Appendix Page Fifty-Seven * OCR 1976 list of Voluntary Plan and Court Order Districts supplemented by list of OCR desegregation efforts in the North and West 9/75-1/79 not already included, by 4/6/79 and 4/26/79 DOJ lists of actions taken since 12/76, and corrections to OCR 1976 list and actions in progress (Total 246 Districts) TABLE II NATIONAL AND AREA SUMMARIES OF DISTRIBUTION OF BLACK STUDENTS BY BLACK COMPOSITION OF DISTRICTS, FOR THOSE DISTRICTS HAVING DESEGREGATION PLANS AND FOR ALL OTHER DISTRICTS, AND FOR THOSE DISTRICTS HAVING ONE SCHOOL OR 6/79 Appendix OCR list of Voluntary Plan and Court Order Districts supplemented by list of OCR desegregation efforts in the North West 9/75-1/79 rot already included, and by 4/6/79 and 4/26/79 DOJ lists of actions taken since 12/76, corrections to OCR 1976 list and actions in progress (Total 246 Districts) Page Fifty-Eight Appendix Page Fifty-Nine F. WHAT WOULD BE THE EFFECT OF RESTRICTING IRS REVOCATION BE RACIALLY DISCRIMINATORY? Several witnesses at the hearings suggested that the IRS not be allowed to revoke the tax exempt status of a private school unless the school had been adjudicated to be racially discriminatory by a court. Those witnesses felt that the judicial branch of our government should be the one to determine whether a particular entity discriminates on the basis of race and that the adverse impact of revocation of tax exempt status should not be occasioned on a private school until a court had determined racial discrimination. Several Members of the Subcommittee also expressed concern with the concept of a tax administration agency making these sorts of non-tax related determinations. Under present law, the IRS cannot litigate the issue of racial discrimination unless: (1) a private school initiates a declaratory judgement action by virtue of Section 7428 of the Internal Revenue Code in either the Tax Court, the U.S. Court of Claims, or the U.S. District Court for the District of Columbia; or (2) the IRS actually revokes the exemption, assesses either income, FICA, or FUTA taxes, and the school pays the income tax (or a portion of the FICA or FUTA taxes) and seeks a refund by initiating refund suit in a U.S. District Court or the U.S. Court of Claims in accordance with 28 Appendix Page Sixty U.S.C. Section 1346 and Section 7422 of the Code; or (3) the IRS revokes the exemption, gives notice of a deficiency of income tax, and the school petitions the Tax Court for a redetermination of the deficiency in accordance with Section 6213 of the Code; or (4) the IRS revokes the exemption, assesses either income, FICA, or FUTA taxes, and the Service initiates a collection action under Section 6502 of the Code. It is important to note that in each of the four situations a dispute concerning racial discrimination cannot develop unless the IRS possesses the power of revocation. If the Service is statutorily restricted from revoking tax exempt status without any other change in present law, a dispute between the IRS and a private school could not evolve unless a third person litigated the ques23/ tion of racial discrimination with the private school. Similarly important to this discussion is the fact that under present procedures, private schools do have a right of action to obtain review by a court and the deductible status of charitable contributions are protected. Under Section 7428 of the Internal Revenue Code, a private school has the right to petition either the Tax Court, the U.S. Court of Claims or the U.S. District Court for the District of Columbia for a declaratory judgement on its tax exempt status. The right arises whenever the IRS revokes an exemption, or when it fails to grant one within a certain period. In the case of a revocation, by timely filing a Section 7428 action a school can protect a large portion of its charitable contributions while the suit is pending. Under Section 7428 (c), even if the school should ultimately lose the suit, contributors are nonetheless allowed deductions for up to $1,000 in contributions made 24/ 23/Private citizens (e.g., parents of minority children) can litigate this question by virtue 42 U.S.C. §1981 which creates a cause of action, coupled with 28 U.S.C. §1331 which grants jurisdiction to federal courts. Federal government agencies can litigate this question (if the private school receives direct federal aid) by virtue of 42 U.S.c. $2000d, coupled with 28 U.S.C. $1343 (4) which grants jurisdiction to federal courts. Moreover, state law in some or all states may allow a comparable cause of action in state courts. Finally, in the event that a state provides assistance, private citizens can litigate the question of racial discrimination in federal courts under 28 U.S.C. §2281. 24/Parties may initiate a proceeding under Section 7428 at any time during the 90 day period that begins when the IRS sends a notice of revocation by certified mail. Section 7428 (b) (3). |