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For example, a person has the absolute freedom to believe in transubstantiation, but his freedom to express this belief through participation in the Mass could be readily curtailed if the government somehow concluded it was contrary to a compelling public interest.

Since its hearings on the first proposed guidelines I believe the IRS recognizes the complications in finding Amish Blacks or Hispanics, or Hebrew Blacks, to fill even minimum quotas. The question is who will be the final arbiter in determining what is possible or not possible?

In the new guidelines, the definition of "community" leaves much to be desired insofar as church schools are concerned. The "community" or constituency supporting a church school could be one or more churches, or a whole conference of churches. Some church constituencies, in spite of an open membership policy, are all black or all white depending on the geographical locations. Therefore, for a church school, the public school district is not at all relevant! Also, the section on a "system of schools" needs further clarification and explanation.

In conclusion, the Seventh-day Adventist Church is sympathetic with the goals of the IRS to encourage nondiscrimination. This is part and parcel of our belief. We must, however, express strongest reservations and a deep concern over the future implications of such guidelines. Without question fundamental liberties affecting our religious beliefs would be endangered. In addition, the financial burdens which would be imposed could bankrupt many of these church schools, where strong moral and religious values are taught in preparation for good citizenship.

Senator BYRD. The next panel will be a 10-minute panel, 5 minutes each. Mr. Lipman Redmen, chairman, section on taxation, American Bar Association and Mr. Philip J. Murren, attorney, Harrisburg, Pa.

Welcome, gentlemen, and you can decide who would like to proceed first.

STATEMENT OF PHILIP J. MURREN, PRESENTING THE TESTIMONY OF WILLIAM BALL, ATTORNEY, HARRISBURG, PA. Mr. MURREN. I am Philip J. Murren. I am here to deliver the testimony of William B. Ball. Mr. Ball was detained elsewhere on litigation matters. Mr. Ball is my partner in the firm of Ball & Skelly, Harrisburg, Pa. He is a member of the bars of New York and Pennsylvania, as well as the Supreme Court of the United States and various other Federal courts. He is past National Chairman of the Committee on Constitutional Law of the Federal Bar Association and has long been active in the field of constitutional litigation, both in the area of racial civil rights and in the field of religious liberty.

He has served as the attorney for the National Committee for Amish Religious Freedom since its founding and, in that role, has defended the Amish in Wisconsin v. Yoder. My appearance here today is as an individual attorney.

It is the fact that the Proposed Revenue Procedure brings together both of these areas-race and religion-which especially interests me in these hearings. Two kinds of minorities are involved here not one: racial minorities and religious minorities. I am deeply concerned, as a citizen and as a lawyer, that IRS has proceeded upon the totally false assumption that regulation to combat racial discrimination necessarily nullifies the exercise of First Amendment rights including parental rights and religious libertyand that while racial minorities are to be aided by our tax laws, religious minorities are to be placed in a suspect class in the administration of those laws.

I am concerned, too, over IRS's assumption that the Congress has given IRS the indefinitely broad powers which it expresses in this proposal.

I am concerned about a third thing. Only a very small percentage of all school children in the nation are enrolled in private schools, and most of these schools are religious schools. While the great number of religious schools with which I am familiar reject, on religious grounds, the immorality of hurting, depriving or diminishing of anyone on account of the race with which God has clothed him, I cannot but wonder over the intensive zeal with which IRS is pushing its effort here today. And when I reflect that all religious schools-Catholic, Missouri Synod, Orthodox Jewish, Quaker, fundamentalist Christian, Amish, and others-will suffer a major imposition upon their religious freedom if the proposal is adopted-I cannot but wonder if we are not faced with an essential hostility, upon the part of some public servants, to non-state education, a reappearance of official horror of pluralism, privacy, and real religious freedom to which Pierce v. Society of Sisters was so great a response.

As I have reviewed the proposed revenue procedure, I have found only two conclusions possible: one, it is unlawful in that it is without statutory authority; two, it is unlawful in that it violates constitutionally guaranteed liberties.

A revenue procedure is intended as law for a nation of 220 million people. All would agree that the proposal before your subcommittee today is one of extreme importance. The IRS claims it is that. Certainly it pertains to such weighty matters as racial discrimination, the ongoing life of churches, liberties of parents, revenues for our Government, tax liabilities of citizens, and the operating of thousands of schools.

It would be astonishing to imagine that any such measure would be put forward unless it were clearly authorized by the Congress. It would be more astonishing if the proposal were founded on a flotsam of inferences from Supreme Court decisions, predictions as to how the court will "surely" act, IRS's own precedents, official gossip about the fundamentalist schools, and the subjective social views of brother citizens who happen to be public servants. Yet that, unhappily, is the case.

Chief among the reasons advanced in support of the IRS assertion that it possesses the necessary authority to adopt the Procedure is the claim that the affirmance, by the United States Supreme Court, of the decision of the Federal District Court for the District of Columbia in the case of Green v. Connally, acts as an unassailable stamp of approval upon IRS's present interpretation of section 501. Yet the Supreme Court, in 1974, noted that IRS had reversed its position during the course of the Green litigation, and because of that reversal, its affirmance in Green lacked "the precedential weight of a case involving a truly adversary controversy.' 416 U.S. 725, 740 (fn. 11) (1974). The Court flatly stated that "The question of whether a segregative private school qualifies under 501(c)(3) has not received plenary review in this court."

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IRS has misread the plain language of Section 501(c)(3) in urging that all religious organizations also exhibit all of the elements of a common law charitable organization, including conformity to the

public policy of the day, in order to be considered exempt under that section. Section 501(c)(3) exempts organizations organized for religious or charitable purposes, not organizations organized for religious and charitable purposes. There is thus no basis whatever in the language of the section for importing the common law of charities into the section's requirements. Yet this IRS has admittedly done.

Apart from the threshold problem of lack of statutory authority for the proposed revenue procedure is a series of features of the proposal which render it inescapably unconstitutional.

Many-perhaps most-religious schools are not part of any system of commonly supervised schools. They exist instead as integral parts of the religious teaching mission of independent churches. Yet IRS, in its proposal, accords a degree of latitude to those church schools which are part of a system which it does not similarly accord to independent church schools.

The question is thus presented: May the religious liberty of any church be made to depend upon its being part of a system? It is plain, however, that Government may not condition religious liberty upon conformance to a scheme of ecclesiastical organization favored by Government.

I would conclude, Senator, by simply saying that loss of exemption from Federal taxes is a serious burden to a church school. Avoidance of that loss may not be made to depend upon conformity by a church to a favored Government policy, or upon abandonment of a constitutional right without a clearly expressed congressional mandate which, itself, represents the least restrictive means of achievement of, not just a legitimate Government interest, but of a compelling state interest.

The IRS proposal is neither clearly mandated by statute nor preservative of rights of religious minorities.

Thank you, Senator.

Senator BYRD. Thank you very much.

You mentioned the Amish. Are there many black Amish?
Mr. MURREN. None that I know of. Senator.

Senator BYRD. None. You would have difficulty meeting the 20percent quota, I suppose.

Mr. MURREN. Yes, sir, they would.

Senator BYRD. The Amish are a very fine people. They are a little stricter, my impression is, than many Americans. In my own State, near where I live, we have many Mennonites, which are similar to the Amish, I believe. They, too, I understand, have their own schools and their own curricula. They, like the Amish, would have difficulty in complying with many of these proposed regulations.

The next witness will be Mr. Lipman Redman, chairman of the section on taxation, American Bar Association.

STATEMENT OF LIPMAN REDMAN, CHAIRMAN, SECTION ON TAXATION, AMERICAN BAR ASSOCIATION, ACCOMPANIED BY MICHAEL I. SANDERS

Mr. REDMAN. Thank you, Mr. Chairman.

I should explain at the outset that, although I am chairman of the tax section, that I am not here today in that capacity. I am

here, rather in a legal capacity as a tax lawyer and I am accompanied by Michael Sanders who is also active in the Tax Section and is likewise here only in his individual capacity.

I take it that for the purpose of this hearing this morning and the hearings outside and elsewhere that Mr. Sanders and I play a unique role in our presence here today in the fact that we are primarily here as tax lawyers. I am not sure that the chairman and the committee are as aware of the views of the tax lawyers as they are the civil rights lawyers and the different religious and other groups. We are here because we are concerned over the large amount of response submitted to the Commissioner and to the Congress in regard to a fundamental fact.

That is, the right of the Commissioner to take the action at all. Putting aside, for the moment, how the Commissioner proposes to exercise this power, we do submit, for your consideration, our sound belief that the Commissioner does, indeed, have the power to take action in this regard, to administer this section of the Internal Revenue Code, just as he has the power and the obligation to administer, as best he can, the other provisions of the Internal Revenue Code.

Many tax lawyers active in the field have always understood that the decision of the Supreme Court in 1971 in Green v. Connally did, indeed, stand for the proposition that a school which engaged in racial discrimination was not entitled to a U.S. tax exemption. Admittedly, the Supreme Court acted upon this proposition by a footnote in the 1974 decision in the Bob Jones University case. I suggest, however, that that footnote, which is indicative of the case before the court at that time, does not really cast any serious doubt on the proposition that the court did announce in Green v. Connally.

I suggest that there are two answers to that point. One is the only Federal court decision directly on points since that decision makes that point, namely that a school practicing racial discrimination is not entitled to a tax exemption. That is the Goldsboro Christian School v. United States, 1977.

In that connection, the Bob Jones University case, that court distinguishes the decision in the Goldsboro Christian School case by saying it involves a different issue. It does not involve the issue of the right of the school to practice discrimination with a tax exemption, but a subsidiary issue, namely interracial dating.

I do not share that decision. I think that decision is wrong. Nevertheless, it was the only hope by any Federal court since the footnote in the Bob Jones University case by the Supreme Court.

An equally persuasive answer comes from the Congress itself. In 1976, Congress enacted 501(i) of the Internal Revenue Code to specify that social clubs which engaged in racial discrimination were not entitled to tax exemptions. In so doing, the Senate Finance Committee report made very clear that the purpose of that provision was to overrule a Federal District Court decision in the McGlotten case.

In so doing, the committee report made very clear that Congress understood, as far as private schools were concerned, that Green v. Connally did, indeed, require that schools not engage in racial discrimination as a condition of its tax exempt status.

There we have Congress stating its understanding in a committee report that they understood, as I have stated, and felt no need to put anything in the Internal Revenue Code.

I think my time is about to expire. I would like to point out, however, that in terms of action by the Congress, that if Congress wants to change a law, Congress has the right to do it. But against the background of the action of the committee that the rules be given a chance to work, they are infinitely better in the present form than they were originally and Congress should refrain from action until we see how the rules actually work in practice.

Thank you.

Senator PACKWOOD. A very fine job. I was reading your statement as you were going, your point being that you are in sympathy with the regulations and that the Commissioner has the power to issue it?

Mr. REDMAN. Yes, sir. I know there are those who would quarrel with that power. At this particular time, it is whether these regulations are the right way to go.

[The prepared statements of the preceding panel follow:]

TESTIMONY OF WILLIAM B. BALL, ESQ.

I am William B. Ball, partner in the firm of Ball & Skelly, Harrisburg, Pennsylvania. I am a member of the bars of New York and Pennsylvania, as well as the Supreme Court of the United States and various other federal courts. I served as national chairman of the Committee on Constitutional Law of the Federal Bar Association for a number of years and I have long been active in the field of constitutional litigation. Some of my activity has been in the area of racial civil rights, in which role I was volunteer counsel during the 1960's to the Pennsylvania Equal Rights Council and counsel to pro-civil rights amici curiae in the U.S. Supreme Court miscegenation and open housing cases. I have also handled much litigation in the field of religious liberty, in which role I have served, for example, as attorney for the National Committee For Amish Religious Freedom since its founding-in that role having defended the Amish in Wisconsin v. Yoder. I appear here today as an individual attorney.

It is the fact that the Proposed Revenue Procedure brings together both of these areas-race and religion-which especially interests me in these hearings. Two kinds of minorities are involved here not one: racial minorities and religious minorities. I am deeply concerned, as a citizen and as a lawyer, that IRS has proceeded upon the totally false assumption that regulation to combat racial discrimination necessarily nullifies the exercise of First Amendment rights including parental rights and religious liberty-and that while racial minorities are to be aided by our tax laws, religious minorities are to be placed in a suspect class in the administration of those laws.

I am concerned, too, over IRS's assumption that the Congress has given IRS the indefinitely broad powers which it expresses in this Proposal.

I am concerned about a third thing. Only a very small percent of all school children in the nation are enrolled in private schools, and most of these schools are religious schools. While the great number of religious schools with which I am familiar reject, on religious grounds, the immorality of hurting, depriving or diminishing of anyone on account of the race with which God has clothed him, I cannot but wonder over the intensive zeal with which IRS in pushing its effort here today. And when I reflect that all religious schools-Catholic, Missouri Synod, Orthodox Jewish, Quaker, fundamentalist Christian, Amish and others-will suffer a major imposition upon their religious freedom if the Proposal is adopted-I cannot but wonder if we are not faced with an essential hostility, upon the part of some public servants, to non-state education, a reappearance of official horror of pluralism, privacy and real religious freedom to which Pierce v. Society of Sisters was so great a response.

As I have reviewed the Proposed Revenue Procedure, I have found only two conclusions possible: (1) it is unlawful in that it is without statutory authority, (2) it is unlawful in that it violates constitutionally guaranteed liberties.

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