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I am James E. Wood, Jr., Executive Director of the Baptist Joint Committee on Public Affairs.

The Baptist Joint Committee on Public Affairs is composed of representatives from eight national cooperating Baptist conventions and conferences in the United States. They are: American Baptist Churches in the U.S.A.; Baptist General Conference; National Baptist Convention of America; National Baptist Convention, U.S.A., Inc.; North American Baptist Conference; Progressive National Baptist Convention, Inc.; Seventh Day Baptist General Conference; and Southern Baptist Convention. These groups have a current membership of nearly 27 million.

Through a concerted witness in public affairs, the Baptist Joint Committee seeks to give corporate and visible expression to the voluntariness of religious faith, the free exercise of religion, the interdependence of religious liberty with all human rights, and the relevance of Christian concerns to the life of the nation. Because of the congregational autonomy of individual Baptist churches, we do not purport to speak for all Baptists.

On August 22, 1978 the Internal Revenue Service published, at 43 Fed. Reg. 37296, a proposed revenue procedure providing for the loss of tax-exempt § 501(c)(3) status of private elementary and secondary schools which did not enroll a rigid quota of minority students or which were not able to prove the negative that they were not discriminating in admissions or enrollment. This proposed revenue procedure elicited the heaviest response the Internal Revenue Service has ever had to one of its proposals. The overwhelming majority of that response was negative. The Service then decided to hold public hearings, 43 Fed. Reg. 48091 (1978). Because of public demand the hearings were extended from one day to one week. The testimony, for the most part, objected to the proposed revenue procedure. On February 13, 1979 a revised proposed revenue procedure was published at 44 Fed. Reg. 9451.

These two publications have been the catalyst which caused S. 103 and S. 449 to be introduced and caused companion bills to be introduced in the House of Repre


Baptists generally are not aware of specific bill numbers, but the Baptist Joint Committee on Public Affairs has stated its opposition to these two proposed revenue procedures and Baptist churches and agencies have repeatedly voiced opposition to similar types of governmental action and to these two procedures specifically. Our testimony will be directed to our opposition to the proposed revenue procedure and, therefore, indirectly to the support of the thrust of S. 103 and S. 449.

The Baptist Joint Committee has a long-standing commitment to the protection of human rights and to the elimination of discrimination based on race, religion, national origin, sex, or age. Thus the possibility that a church-related or churchoperated school would discriminate in its enrollment policy is patently offensive to the formal position of the Baptist Joint Committee. Yet we were compelled to object to the proposed revenue procedure published in the Federal Register on August 22, 1978 (43 Fed. Reg. 37296) and must also object to the revised proposed revenue procedure published in the Federal Register on February 13, 1979 (44 Fed. Reg. 9451). The bases of our objections to the revised proposed procedure are specified below. Thus we urge that this Subcommittee report out a bill which will unequivocally declare congressional policy in favor of separation of church and state and in opposition to the Internal Revenue Service's interpretation of congressional intent in the revised proposed revenue procedure on "certain private schools" as it applies to church-related, church-operated schools.


The revised proposed revenue procedure states that its purpose is to set forth guidelines for determining whether "certain private schools" have racially discriminatory enrollment policies and, therefore, are not qualified for tax exemption under § 501(c)(3) of the Internal Revenue Code of 1954. Included in the class of "certain private schools" are "church-related and church-operated schools." In these hearings, the Baptist Joint Committee on Public Affairs will limit its statemnent to the questions which the revised proposed revenue procedure raises for churches and church-related and church-operated institutions. This will be done because, in our view, the fundamental issue which is raised by the revised proposed revenue procedure is religious liberty and the separation of church and state rather than the furtherance of an altogether meritorious public policy of abolishing racial discrimination. In taking this approach it is our contention that Congress and the Internal Revenue Service are dealing with a broader issue than tax exemption under § 501(c)(3) of the Internal Revenue Code of 1954. The First Amendment places the § 501(c)(3) religious organizations in a unique position. We believe that the Internal

Revenue Service lacks not only statutory authorization for issuing this proposed procedure but also the legal competence, under the First Amendment, to regulate enrollment policies of either churches or the schools which they operate as an integral part of their religious mission.

There can be no question but that the religion clauses of the First Amendment preclude the state from establishing any criteria for who may be enrolled as a member of a church. It is not foreseeable that a governmental unit would even contemplate saying to a church, "In order to maintain your § 501(c)(3) tax-exempt status you must enroll in your membership a number of blacks equal to 20 percent of the percentage of blacks in the community served by this church." The First Amendment would prohibit such an action. It is almost an identical action for a governmental unit to tell a school which was established as an integral part of a church's religious mission that the state is empowered to set standards for enrollment in that school and that failure to meet those enrollment standards would put its tax-exempt status at risk. This cannot be done under the First Amendment either. Efforts to make such rulings are, in effect, efforts to draw legal distinctions between a church and what it declares is a part of its religious mission. Such distinctions put the state in the position of unconstitutionally involving itself in the religious doctrines of the church [see, United States v. Ballard, 322 U.S. 78 (1944); Presbyterian Church in the United States v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440 (1969)].

The reasons why churches begin and maintain schools are varied. As a result of the Supreme Court's decisions in Engel v. Vitale, 370 U.S. 421 (1962), and Abington School District v. Schempp, 374 U.S. 203 (1963), many people honestly believed that the public schools were being taken over by what they called "secular humanism." Some private schools were begun by churches to make sure that their members' children had a proper religious education. It should be noted that this was the period of time in which the courts were ordering desegregation of the public schools in those regions of the country most concerned over "secular humanism" in the public schools. There are no doubt some church-related, church-operated schools which discriminate on the basis of race in their enrollment practices. Some of these may discriminate as a result of a strongly held religious belief which is directly related to their church membership policy. These schools' admission policies may be reprehensible to many outside these religious communities, but an attempt by government to control those policies by a threat to revoke the § 501(c)(3) status of these schools and/or to police their day-to-day admissions and enrollment practices constitutes a flagrant violation of the guarantees of the religion clauses of the First Amendment.

The independent nonpublic school which claims to be Christian or Black Muslim or Jewish but which is not an integral part of a church, mosque, or synagogue and its religious mission may be an entirely different issue. However, this is not a problem which we need to address.

Over the past two decades the Supreme Court has consistently held that parochial schools are religious-i.e. they were established for religious purposes, their curriculum is permeated with religion, and they are considered a part of the religious mission of the church. We agree completely. The Court, in Lemon v. Kurtzman, 403 U.S. 602 at 612-613 (1971), spoke of the constitutional limitations on statutes-and, obviously, on administrative regulations-which relate to religion:

"First, the statute must have a secular legislative purpose; second, its principal or primary effect must be one that neither advances nor inhibits religion; finally, the statute must not foster "an excessive government entanglement with religion'." (citations omitted).

Granting the secular purpose of this revised proposed revenue procedure, the primary effect test is not met. The threat of losing a statutory grant if a constitutional right is acted upon is manifestly chilling and, therefore, has the effect of substantially inhibiting the churches in carrying out what they conceive to be their religious mission.

Further, if the revised proposed revenue procedure becomes the policy of the Internal Revenue Service, a process would be set in motion which would, unconstitutionally, excessively entangle government with religion. Intricate systems for determining whether or not a church-related, church-operated school is in compliance with the procedure are spelled out. The conditions which are established could not be met on a "one time only" basis. The very nature of the revised proposed revenue procedure would necessitate an ongoing examination of records and activities. Any logical and/or legal definition of "excessive entanglement" would clearly comprehend this kind of oversight and supervision.

In attempting to draw up rules which affect churches as a class, government is caught on the horns of a dilemma. If it issues rules which make discriminations

between organizational forms of churches-e.g. between hierarchical and congregational churches-it runs afoul of the evenhandedness which the establishment clause of the First Amendment requires [see, United States v. Carson, 282 F.Supp. 261 (D.C.Ark. 1968)]. If, on the other hand, the Internal Revenue Service fails to make these discriminations in rules it issues and therein considers all church organizational forms as if they were identical units in a broad class, those rules produce an unconstitutional preferential treatment [see, Everson v. Board of Education, 330 U.S. 1 at 15-16 (1947)] and are further flawed by their failure to secure the equality of the law demanded by the due process of law clause of the Fifth Amendment [see, Truax v. Corrigan, 257 U.S. 312 at 332 (1921); see also, Steward Machine Co. v. Davis, 301 U.S. 548 at 585 (1937) and Hirabayashi v. United States, 320 U.S. 81 at 100 (1943)].

In the revised proposed revenue procedure the Internal Revenue Service has put itself in the constitutionally treacherous position of making discriminations between churches on the basis of organizational forms and thereby making accommodations favorable to one class of religious organizations as opposed to the others. For example, § 3.03(b) and § 3.03(c)(6) essentially exempt schools such as the Hebrew Day Schools, Black Muslim schools, and Amish schools from compliance. Section 3.03(b) also makes accommodation with the Roman Catholic schools when it states: "If a particular school which is part of a system of commonly supervised schools would be treated as not having significant minority student enrollment . . . it may nevertheless be considered to have a significant minority student enrollment if [among other things], taking into account all schools operated by the system within the community, the school system, in the aggregate, has significant minority student enrollment." With very few exceptions only the Roman Catholic Church operates a school system. Most of the other church-related, church-operated schools are simply local church schools and not a part of a system. This provision of § 3.03(b) means that a denomination which operates a system of schools in a community may have some schools which are predominately of the majority race and some which are almost entirely composed of a minority race enrollment without placing their tax-exempt status at risk as long as there is a balance "in the aggregate." There can be no "in the aggregate" for the vast majority of Protestant schools which are owned, operated, and maintained by a local congregation.

The First Amendment very clearly proscribes such invidious distinctions between church organizational forms. It would appear that the only logical response of government would be to cease attempting to regulate bona fide churches and those agencies which they have established as integral to their religious mission.

The Supreme Court in a recent decision held that the Constitution also proscribes the use of racial quotas in determining who will be enrolled in a school-and the Internal Revenue Service is, in effect, forcing such quotas as the price guaranteeing that a school's tax-exempt status will not be reviewed under the revised proposed revenue procedure. In dealing with an attempt to assure a specified percentage of minority students in a public institution the Supreme Court held, "If petitioner's purpose is to assure within its student body some specified percentage of a particular group merely because of its race or ethnic origin, such a preferential purpose must be rejected not as insubstantial but as facially invalid. Preferring members of any one group for no reason other than race or ethnic origin is discrimination for its own sake" [Regents of the University of California v. Bakke, U.S., 98 S.Ct. 2733 at 2757 (1978)]. Thus, the Court declared that a racial quota system in a secular, state-operated school was unconstitutional on the basis of the Fifth and Fourteenth Amendments. The criteria on racial enrollments in church-related, church-operated schools which the Service seeks to establish share the unconstitutional features of Bakke. The religion clauses add an extra dimension of unconstitutionality.


The legislative history of the inclusion of the restraints on political activity of § 501(c)(3) organizations and the judicial interpretations of that section clearly show that Congress intended to limit only the political activities of those groups which are tax-exempt and whose contributors can claim a tax deduction under § 170 of the Code. The use of § 501(c)(3) to curb activities other than political is clearly contrary to the intent of the statute. The Internal Revenue Service, in instituting the revenue procedure under discussion today, clearly entered the lawmaking field and, therefore, unconstitutionally usurped the legislative role of the Congress. As the Supreme Court pointed out in Manhattan General Equipment Company v. Commissioner of Internal Revenue, 297 U.S. 129 at 134 (1936):

"The power of an administrative officer or board to administer a federal statute and to prescribe rules and regulations to that end is not the power to make law, for

no such power can be delegated by Congress, but the power to adopt regulations to carry into effect the will of Congress as expressed by the statute. A regulation which does not do this, but operates to create a rule out of harmony with the statute, is a mere nullity."

Congress, in setting up the qualifications for tax exemption under § 501(c)(3), used plain, unambiguous language. The Internal Revenue Service has seen fit to attempt to legislate public policy rather than remain within the language of the Code. In a December, 1978 decision of a case where the facts are almost identical to those which would be raised in court challenges if the proposed revenue procedure becomes the final procedure, the federal District Court for South Carolina held that the revocation of the tax-exempt status of Bob Jones University was improper. The court, in Bob Jones University v. United States, F.Supp. (D.C.S.C. 1978), Civil Action No. 76-775, stated that, "Although plaintiff [Bob Jones University] satisfies the written requirements of § 501(c)(3), defendant [the Internal Revenue Service] has revoked its exemption. Thus, the IRS in this case and in its policy pronouncements, as exemplified by Rev. Rul. 71-447, has enacted in substance and effect a change in the law." We contend that the Internal Revenue Service is attempting to achieve the identical end in the proposed revenue procedure and that, just as the court held in Bob Jones University, in so doing it is infringing Congress' prerogative and First Amendment religious rights of the churches.

Because we believe that the Constitution requires that churches and their agencies which are integral to their religious mission be excluded from coverage by revenue procedures such as the one dealing with nonpublic schools, we are today supporting the thrust of S. 103 and S. 449.

It is our hope that Congress will pass an act which will clearly spell out congressional intent involved in § 501(c)(3) prior to the expiration of the December 31, 1980 moratorium provided for in S. 103.

S. 449, by declaring that tax exemption and tax deductibility of contributions "shall not be construed as the provision of Federal assistance," fills a decided need. It could stop overzealous federal regulators who want to legislate public policy by removing a basic rationale for regulation.

This nation was built on the principle of a free church within a free state and that principle, explicitly established in the First Amendment, must be perpetuated. I have confidence that this Subcommittee will agree with us on this matter.


The Briarcrest Baptist School System, Inc. ("Briarcrest") of Memphis, Tennessee, objects to the revised, proposed Revenue Procedure as arbitrary, discriminatory and unlawful. The proposal could result in the loss of tax exempt status by a school without any evidence whatsoever of any discriminatory conduct by the school and despite a completely open nondiscriminatory policy on the part of the school.


Is is abundantly clear that a school which is deemed "reviewable" under the proposed Procedure is presumed to be guilty of racial discrimination, unless it successfully carries the burden of proving its innocence.

Under the proposed Procedure, a school will be deemed "reviewable" if it was: 1. "[F]ormed or substantially expanded at the time of public school desegregation in the community served by the school;" and

2. "[D]oes not have significant minority enrollment".

The new proposal purports to add a third criterion-that the creation or expansion is related, in fact, to public school desegregation. (Paragraph 3.03.) However, Subsection (c) makes it clear that this third element is, in fact, meaningless. Subsection (c) states:

"Ordinarily, the formation or substantial expansion of a school at the time of public school desegregation in the community will be considered to be related in fact to public school desegregation." (Emphasis added.)

Therefore, the existence of the first two elements are sufficient, in and of themselves, to establish a presumption of guilt. The third element does not remove the presumption, it merely lists some circumstances which, if proved by the school, might meet the presumption. The burden remains on the school to prove its inno


The Justice Department has cogently and persuasively argued to the United States District Court for the District of Columbia that these very criteria cannot lawfully support the presumption to which the Procedure gives rise. The Justice Department, in Wright v. Blumenthal, Civil Action No. 76-1426 (D.D.C.) states:

given a total absence of allegations of specific discriminatory conduct, the schools' continued insubstantial minority enrollments could plausibly be accounted for on many grounds other than intent to discriminate. For example, it could be accounted for by reason of an absence of minority applications due to the schools' relatively high tuition; the schools' inability to offer specific programs available in public schools; their inconvenient geographic location; local residential patterns; or the schools' being perceived by minorities on subjective grounds as potentially threatening educational environments. In view of these and other plausible grounds for explaining the schools' continued insubstantial minority enrollments, it is extremely doubtful whether plaintiffs' per se presumption that the schools are discriminatory could be sustained as lawful absent proof of specific discriminatory conduct.

"Similarly, plaintiffs' proposed guidelines denying exemptions to "suspect" schools established or expanded at a time of desegregation is also subject to grave legal challenge. For it is apparent that many factors other than an intent to discriminate might account for a given schools' establishment or expansion at a time of desegregation-for example, an already existent general dissatisfaction with the quality of public education; an availability of funds for private school expansion; a need for such expansion because of community growth.'

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Reply of Defendants to Plaintiffs' Opposition to Defendant's Motion to Dismiss, pp. 11-12, 14, Wright v. Blumenthal, Civil Action No. 76–1426 (D.D.C.) (Hereinafter referred to as "Reply").

The definition of nondiscriminatory policy, as set forth in the proposed Procedure, relates exclusively to the policies, programs and actions of the school-not to its history or its acceptability to the minority population of its community. (Sec. 3.01). The proposed presumption of guilt relates exclusively to the latter two elements, and is totally unrelated to the actual present practices, policies and actions of the school. The presumption is, therefore, arbitrary and unlawful.


The only Internal Revenue Code section involved in this case is Section 501(c)(3) which grants tax exemptions to "corporations. organized and operating exclusively for religious . . . or educational purposes. The Code makes no reference

to the social policies of the corporation entitled to the exemption.

The United States District Court for the District of South Carolina in Bob Jones v. United States, Civil Action No. 76-775 (D.S.C. December 26, 1978) pointed out that the Supreme Court in Commissioner v. Tellier, 383 U.S. 687 (1966) admonished the Commissioner of Internal Revenue: "not to use the tax laws as a means of enforcing other laws and public policy if the revenue statute makes no mention of such conduct or if there does not exist a tight nexus between the tax benefit and the alleged unlawful conduct."

Bob Jones, Page 24, Slip Opinion, held that even the existing Revenue Rulings and Procedures 71-447, 72-54, 75-50 and 75-231 "constitute a use by the IRS of the federal tax law as a sanction for what it considers a wrongdoing, or its idea of proper social conduct of persons of different races, uses of the Code prohibited by the Supreme Court." Id.

The Court went on to point out that "the court is concerned by the many dangers inherent in defendant's interpretation that exemptions may be revoked for violations of federal public policy. Federal public policy is constantly changing. When can something be said to become federal public policy? Who decides? With a change of federal public policy, the law would change without congressional action-a dilemma of constitutional proportions. . . . Our laws would change at the whim of some nonelected IRS personnel producing bureaucratic tyranny." Id. at 25.

The above statements of law cast grave doubt upon the soundness of the decision in Green v. Connally, 330 F. Supp. 1150 (D.D.C. 1971), which forms the principal basis for the Internal Revenue Service position. However, the proposed Procedure goes far beyond even the principle of Green v. Connally and includes principles expressly rejected in that case.

În Green v. Connally, the "badge of doubt" status assigned to Mississippi schools was arrived at on the basis of a record which convinced the Court that there was a widespread conspiracy throughout the State to thwart integrated public school education. This factual basis for the "badge of doubt" concept in the Green case is totally lacking in most other areas of the country.

However, even in Green, the court held that: "exemptions and deductions would be denied... on account of acts and practices constituting discrimination against students on account of race . . . if schools sincerely terminate those harmful activities, they may obtain the exemption." Id. at 1166.

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