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mately held that the government could not enter the area of religious education for this type of labor management regulation. In Walz v. Tax Commission, 397 U.S. 664 (1970), in sustaining tax exemptions for religious (along with other charitable) property, the Court noted that such exemptions result in less entanglement with religion than would the taxing of church property: such as giving "rise to tax valuation of church property, tax liens, tax foreclosures, and the direct confrontations and conflicts that follow in the train of those legal processes." Id. at 674. The Court was particularly concerned with avoiding (a) substantive "governmental evaluation" of religious practices, id., and the entanglement of "government and difficult classifications of what is or is not religious." Id. at 698 (Harlan, J. concurring). As noted above, the revenue procedure in section 3.03(c)(6) will directly involve the government in the evaluation of religious practices and difficult classifications of what is or is not religious. In deciding to favor religions with long established religious schools the government is in effect deciding that the more recent establishment of schools by particular denominations is not motivated by religious belief. These decisions will have the direct effect of entangling the government in religious affairs. The surveillance necessary to enforce the revised revenue procedure also can lead to entanglement difficulties.

As noted throughout this testimony, the Service has entered an extremely sensitive area. Few can dispute our nation's goal of eliminating racial discrimination, embodied in the Fourteenth Amendment. It is disputable, however, whether the Service has fully considered and protected the vital religious interests of those religious educational institutions which it has included in its revenue procedure. If the Service's procedure is made effective these institutions be opened up to further governmental regulation in areas other than race. The Service does not appear to be the proper governmental body to engage in the required analysis and the balancing between the Fourteenth and First Amendments. The Congress is better equipped to identify any overwhelming public policy outweighing legitimate First Amendment



"[T]he federal income tax is a tax on net income, not a sanction against wrongdoing. That principle has been firmly imbedded in the tax statute from the beginning." Commissioner v. Tellier, 383 U.S. 687, 691 (1966).

With the revised revenue procedure the Service is seeking to enforce its recent policy decision that despite the express provisions of section 501(c)(3) and the regulations found at 26 C.F.R. section 1.501(c)(3)-1, religious and educational institutions will not be exempt from taxation if they violate any clearly declared federal public policy. The dangers of this open ended assertion of authority by the Service, without explicit congressional authorization, were recently identified in Bob Jones University v. United States of America, Civil Action No. 76–775 (D.S.C., December 26, 1978), slip op. at 25,

"In these administrative pronouncements the IRS, in effect, announced that it will implement section 501(c)(3) on the basis of whether the taxpayer has abided by federal law or public policy. The section is to become the IRS's mechanism for disciplining wrongdoers or promoting social change. The Supreme Court ruled in Tellier that use of the tax laws for the former purpose is improper and it follows that the same rule would apply to the latter. In addition, 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 a federal public policy? Who decides? With a change of federal public policy, the law would change without congressional action-a dilemma of constitutional proportions. Citizens could no longer rely on the law of section 501(c)(3) as it is written, but would then rely on the IRS to tell them what it had decided the law to be for that particular day. Our laws would change at the whim of some non-elected IRS personnel producing bureaucratic tyrrany.'

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This, of course, is the danger inherent when a revenue producing agency enters the area of promoting social change. This danger is multiplied many fold when the agency also enters the area of First Amendment religious freedom. Because of the lack of explicit Congressional authority for its revised procedure and the dangers the procedure poses to the First Amendment freedoms of legitimate religious educational institutions, the Congress should consider either banning the revised revenue procedure entirely or specifically exempting the church-related and church-operated schools found in section 2.01.


In support of its revenue procedure the Service throughout has been relying upon three cases. Green v. Connally, 330 F.Supp. 1150 (D.D.C. 1971), aff'd. per curiam sub. nom. Coit v. Green, 404 U.S. 997 (1971); Norwood v. Harrison, 382 F.Supp. 921 (N.D. Miss. 1974); Brumfield v. Dodd, 405 F.Supp. 338 (E.D. La. 1975). These cases are inappropriate for the following reasons.

The Green court explicitly stated that it considered no questions involving First Amendment religious freedoms or religious schools. It made no reference to schools which select students only on the basis of religious belief. 330 F.Supp. at 1169. The schools involved therein, moreover, were admittedly segregationist. They were similar to the de jure educational institutions which were integrated pursuant to court orders subsequent to Brown v. Board of Education, 347 U.S. 483 (1954). Such cases of admitted intentional discrimination are easily proven. Green does not, however, analyze the situation where a school has no admitted segregationist policies but has a low minority enrollment. In this category of case intentional discrimination must always be proven. Finally, Green was, in its outcome, a collusive suit because during the course of its litigation the Treasury Department adopted plaintiff's position. The Supreme Court has noted that its affirmance in Green lacks the precedential weight which normally is attached to a truly adversarial controversy because of this change in the Treasury Department's position. Bob Jones University v. Simon, 416 U.S. 725, 740 n.11 (1974).

Norwood suffers from the fact that it was decided prior to Washington v. Davis, supra, and the flood of discrimination cases decided by the Supreme Court subsequent to Washington v. Davis. The Bakke decision discussed above is contrary to the affirmative steps Norwood required. Moreover, Norwood states that a challenged school must meet a "clear and convincing" burden in rebutting a prima facie case. 382 F.Supp. at 96. This is an incorrect statement of the law. The ultimate burden of proof never shifts from a plaintiff to a defendant in proving intentional discrimination. Nor did any school involved in Norwood follow an admission policy which limited its applicants solely to adherents of a particular religious belief. The hypothetical fact situations set out above, and the religious freedom considerations they raise, were not present nor addressed in Norwood.

Finally, the Brumfield decision is another case dealing with admitted segregation. It involves the easy burden of proving "intentional" discrimination which arises when discrimination is admitted. Brumfield considers none of the First Amendment issues raised by religious educational institutions objecting to the revised revenue procedure. Finally, it does not consider any governmental authority to revoke any previously granted tax exempt status.

The authorities relied upon by the Service in support of its regulations either improperly analyze the body of Fourteenth Amendment law, do not address valid religious freedom concerns or deal with fact situations far different from those with which the Center for Law and Religious Freedom is concerned. These authorities are simply inappropriate to support the breadth of the Service's proposed revenue procedure.


The Center For Law and Religious Freedom has sought to identify and explain serious issues of constitutional significance which the proposed revised procedure implicates. The procedure improperly identifies, analyzes and allocates the burdens and methods of proof and proceeding necessary to prove racial discrimination. Governmental neutrality towards religion, the free exercise of religion and the prohibition on the governmental establishment of religion will also be endangered by the procedure as written. Finally, the procedure raises serious questions concerning Congressional authorization for this entry into the First Amendment area. It is hoped that the legal analysis contained herein will be of assistance to this Subcommittee in its deliberation on S. 103 and S. 449.

WARTHEN, GA., April 18, 1979.


Staff Director, Committee on Finance,

Dirksen Senate Office Building, Washington, D.C.

DEAR SIR: Your support of Senate Bill 103. . . "To provide that the IRS may not implement certain proposed rules relating to the determination of whether private schools have discriminatory policies" and your support of Senate Bill 449 "To amend the Internal Revenue Code of 1954 to provide that tax exemption of certain charitable organizations and the allowance of a deduction for contributions to such organi

zations shall not be contrued as the provisions of Federal assistance" would be greatly appreciated.

As tax payers and citizens of the United States of America, we feel that private schools provide remaining opportunity for sound and fundamental education in this country and do not understand why any government agency would want to discourage such efforts.

Again let us solicit your support.

Mr. and Mrs. J. E. MCCONNELL.

APRIL 20, 1979.

DEAR MR. STERN: I am writing in behalf of a private school that my children attend. I believe private schools provide remaining opportunity for sound and fundamental education in this country and do not understand why any government agency would want to discourage such efforts.

Would you please support Bill 103 and Bill 449 in the Senate Hearing on April 27.
Thank you for any efforts that you might make on our behalf.


Staff Director, Committee on Finance,

Dirksen Senate Office Building, Washington, D.C.


SANDERSVILLE, GA., April 23, 1979.

DEAR MR. STERN: I have written my Congressman asking for their support for Senate Bill 103 and Senate Bill 449. As Staff Director of the Finance Committee, I ask you to please give these two bills your every consideration and support.

Those private schools who are compliance with the 1975 guidelines for tax exempt school should not be considered as a reviewable school. The public schools are already confused from continued mandates and interference from the Federal Government. I feel that most private school are providing the last remainding opportunity for a good, fundamental education.



APRIL 17, 1979.


Staff Director, Committee on Finance,

Dirksen Senate Office Building, Washington D.C.

DEAR SIR: As parents we are concerned about the IRS proposal concerning regulations for tax exempt status for private schools.

Please support Senate Bill 103 "To provide that the IRS may not implement certain proposed rules relating to the determination of whether private schools have discriminatory policies."

Also, please support Senate Bill 449 "To amend the Internal Revenue Code of 1954 to provide that tax exemption of certain charitable organizations and the allowance of a deduction for contributions to such organizations shall not be construed as the provisions of Federal assistance."

We would greatly appreciate your support of the above mentioned bills.
Yours very truly,

Mr. and Mrs. VAN C. PRINCE.


DEPARTMENT OF JUSTICE, Washington, D.C., May 14, 1979.

Chairman, Subcommittee on Taxation and Debt,
Senate Finance Committee, U.S. Senate, Washington, D.C.

DEAR SENATOR BYRD: On April 27, 1979 I requested the opportunity to submit written materials to the Subcommittee on Taxation and Debt conveying the views of the Department of Justice concerning the proposed revenue procedure on private tax-exempt schools. Enclosed are five copies of my written statement and additional materials submitted for the record. I have also included five copies of this letter and

respectfully request that this letter and accompanying materials be made a part of the record of the hearings held by the Subcommittee on April 27, 1979.

As I understand it, the purpose of the hearings was to receive testimony on S. 103 and S. 449, two bills which would affect implementation of the proposed revenue procedure on private tax-exempt schools published for comment on February 9, 1979. My written statement and accompanying additional materials provide historical background on the development of the proposed revenue procedure, information and data showing the need for the procedure, and an analysis of the standards of the proposed procedure which demonstrates that those standards are consistent with the standards used by the federal courts in similar circumstances. We believe the proposed procedure is a necessary and appropriate measure to insure that the federal government does not provide financial support to private racial discrimination through any arrangement.

The necessity of denying federal aid in any form to private racial discrimination has not only legislative but also constitutional and moral underpinnings. Therefore, any legislation which has the purpose or effect of continuing such aid raises substantial constitutional problems. The written statement submitted with this letter and my previous testimony before the Subcommittee on Oversight of the House Committee on Ways and Means on the same subject make it clear that we believe the Commissioner has proposed a balanced and responsible approach to accommodating legitimate concerns of religious and other organizations while defining an objective and understandable procedure for enforcing the nondiscrimination principle. While problems will no doubt arise in the implementation and administration of the proposed procedure, including, perhaps, some of the issues of concern to members of the Subcommittee, we believe such problems can be solved by the sensible and sensitive administrative approaches which Commissioner Kurtz has described, without recrimination, in a spirit of understanding and not one of confrontation. We believe that it is time to get on with the job, and the Department of Justice stands ready to consult with and advise the Internal Revenue Service on any legal and policy issues that may arise.

I appreciate this opportunity to present the views of the Department to the Subcommittee. If the Subcommittee has specific questions concerning this subject or the pending bills, we will be happy to respond to any inquiries.


Deputy Assistant Attorney General,
Civil Rights Division.


I appreciate the opportunity to submit this statement concerning the IRS's proposed revenue procedures for private, tax-exempt schools. The Department of Justice has, for a number of years, urged the need for effective procedures that would deny federal tax-exempt status to "segregation academies" established in the wake of public school desegregation. We and the federal courts have been dealing with the phenomenon of "segregation academies" for more than a decade. To my knowledge, this is the first occasion this Subcommittee has had to directly consider the issue. Therefore, I believe that it is appropriate to preface my comments on the revenue procedures under consideration with a brief historical background on both the private schools in question and the development of the revenue procedures themselves.

First, it should be plain from the outset that the procedure under consideration does not attempt to deal with all racially discriminatory, private, tax-exempt schools. Earlier rulings (e.g., Rev. Rul. 71-447 and Rev. Rul. 75-231) or procedures (e.g., Rev. Proc. 75-50) have dealt with racial discrimination by private schools in general. The current, proposed procedure focuses specifically on private schools which have been adjudged racially discriminatory or which are all-white or virtually all-white and were formed at or about the time of public school desegregation. The previous general revenue rulings and procedures have established the principle that private schools which are racially discriminatory as to students are not entitled to federal, tax-exempt status and that contributors to such schools are not entitled to a tax deduction for such contributions. If one agrees with that principle, the only questions concerning the current proposed revenue procedure and (1) whether it is appropriate to focus on the two categories of schools described and (2) whether the standards adopted in the procedure are appropriate and adequate to separate the discriminatory from the nondiscriminatory.


A brief review of the historical background of the formation of "segregation academies" and of the development of the standards for determining the federal tax-exempt status of private schools will demonstrate that the currently proposed revenue procedure is both necessary and adequate to deal with the problem. While the formation of "segregation academies" and the development of standards for federal tax-exemption followed a somewhat parallel course, a separate discussion of the history of each would promote a clearer understanding of the issues relevant to consideration of the proposed revenue procedure which is the subject of review by this Subcommittee.

A. The formation of segregation academies

Close upon the decision in Brown v. Board of Education, 347 U.S. 483 (1954), there were suggestions for the planning of private school systems to take the place of the public school systems, which some states had threatened to abolish if desegregation was required, including the suggestion of the use of church schools in the private system. See, e.g., McLeod, A Program for Private Schools, 21 Ala. Lawyer 73 (1959).1 Major efforts to establish “private” schools in opposition to public school desegregation did not, however, occur until the early and mid-1960's, and those efforts were an integral part of the "massive resistance" legislation enacted by some states. The close parallel between the formation of private segregation academies and the passage of state tuition grant or tuition loan legislation is described clearly in numerous decisions voiding such state legislation. For example, a federal court order to desegregate the Macon County, Alabama, schools resulted in the following sequence of events in Tuskegee:

"By September 12 every white pupil had withdrawn from the [desegregated public] school. Of the original 250 [white students] registered to attend Tuskegee High School, approximately [140-150 transferred to other all-white public schools]

The remainder of the students went to a "private" institution that has been set up in Tuskegee and named Macon Academy; this school has been limited to white pupils. Governor Wallace announced publicly that the State Legislature had provided for grants-in-aid to private schools and assured the organizers of the Macon Academy that the Macon County Board of Education would cooperate in making grants-in-aid available through the use of its statutory authority to provide such aid to students in lieu of operating a particular public school." Lee v. Macon County Board of Education, 231 F. Supp. 743, 747 (M.D. Ala., 1964) (3-judge court).

Similar actions by state or local officials are chronicled in other decisions. For example, the actions of the Prince Edward County and Surry County, Virginia, school officials in support of the respective "private" schools formed in those counties are described in Griffin v. Board of Supervisors of Prince Edward County, 339 F.2d 486, 489 and 491 (4th Cir., 1964). In Prince Edward County, the court noted that when ordered by a federal court to open the public schools, the officials: "appropriated $189,000 to reopen and maintain the public schools expected to accommodate approximately 1600 Negro children. At the same meeting, the Supervisors allotted $375,000 for 1964-65 tuition grants for an approximately equal number of white students expected to attend "private" schools." 339 F.2d at 489.

As to the Surry County case, the court noted that the Commonwealth Attorney prepared the articles of incorporation for the Surry County Educational Foundation and that the Treasurer of the county was also the treasurer of the Foundation. Upon the assignment of "seven infant Negro plaintiffs" to the white public school: "All of the white students applied for admission to the Foundation school, and all were accepted. Several Negroes likewise sought admission to the Foundation school, but their applications were all rejected. All white public school teachers resigned, and all were immediately hired by the Foundation." 339 F.2d at 491.

An almost identical sequence of events occurred in Louisiana as described in Poindexter and United States v. Louisiana Financial Assistance Commission, 275 F. Supp. 833, 836-44 (E.D. La., 1967) (3-judge court) aff'd per curiam 389 U.S. 571 (1968), and other earlier cases in that State,' and also in Mississippi as described in Coffey and United States v. State Educational Finance Commission, 296 F. Supp. 1389, 1391-92 (S.D. Miss., 1969). See also, Brown v. South Carolina State Board of Education, 296 F. Supp. 199 (D. S.C. 1968) aff'd per curiam, 393 U.S. 222 (1968).

The efforts to provide state support to such "segregation academies" has continued until recent years, and the United States Department of Justice has been

A description of the differing early reactions of long-established private schools or private school systems to the school desegregation decisions is contained in, Miller, Racial Discrimination and Private Schools, 41 Minn. L. Rev. 145 and 245 (1957).

See, e.g., Hall v. St. Helena Parish School Board, 197 F. Supp. 649 (E.D. La. 1961) aff'd 368 U.S. 515 (1962).

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