VIII. THE JUDICIAL AUTHORITY RELIED UPON BY THE SERVICE 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. IX. CONCLUSION 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. Mr. MICHAEL STERN, 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. HARRIETT AMERSON. SANDERSVILLE, GA., April 23, 1979. MICHAEL STERN, Staff Director, Committee on Finance, Dirksen Senate Office Building, Washington, D.C. 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. Sincerely, RUTH B. AIRRETT. APRIL 17, 1979. MICHAEL STERN, 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. Mr. and Mrs. VAN C. PRINCE. Hon. HARRY BYRD, Chairman, Subcommittee on Taxation and Debt, DEPARTMENT OF JUSTICE, Washington, D.C., May 14, 1979. 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. Sincerely, JAMES P. TURNER, STATEMENT OF JAMES P. TURNER, DEPUTY ASSISTANT ATTORNEY GENERAL OF THE CIVIL RIGHTS DIVISION, DEPARTMENT OF JUSTICE 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. I. HISTORICAL BACKGROUND 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 1A 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). 2 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). heavily involved in court litigation to enjoin such state support wherever it has been detected and whatever form it might take.3 As late as 1973, the United States Supreme Court found it necessary to strike down a Mississippi law to the extent that it provided for text-books and transportation to students attending private, racially discriminatory schools, Norwood v. Harrison, 413 U.S. 455 (1973). And in 1974, the Court upheld another court order forbidding incidental state aid to private schools in Montgomery, Alabama. Gilmore v. City of Montgomery, 417 U.S. 556 (1974). More recently, on remand in Norwood, the district court imposed a certification process to determine which private schools were racially discriminatory and, therefore, ineligible for state textbooks and transportation aid. Norwood v. Harrison, 382 F. Supp. 921 (N.D. Miss., 1974). Large numbers of the nonsectarian private schools refused to submit themselves to court scrutiny through the certification process; some others which did were found to be racially discriminatory. (See discussion, infra, pp. 13-16). A similar state scheme for textbook and transportation aid in Louisiana was enjoined in Brumfield and United States v. Dodd, 425 F. Supp. 528 (E.D. La., 1976) (3-judge court), and a similar certification process imposed. Again, large numbers of nonsectarian private schools refused to submit certifications; and others which did were found to be racially discriminatory. In other litigation challenging the transfer of school buildings to "private" schools or other schemes of support, the United States has been successful in getting the transactions voided because the "private" school in question was found to be racially discriminatory. (See cases cited in footnote 3, p. 5, supra). Many of the "private" schools involved in the above litigation are still in operation, and at the time of the trial of the above cases many of the private schools claimed to have and did have federal tax-exempt status. B. The standards for Federal tax-exemption The question of whether racially discriminatory private schools are entitled to federal tax-exemption under Section 501(c)(3) of the Code arose at approximately the same time as the state tuition-grant statutes were being contested. Previously, IRS had not considered the racial policies of a school in determining its entitlement to tax-exempt status. When the issue was raised, IRS suspended the granting of advanced assurances of deductibility pending a resolution of the question. On August 3, 1967, the Internal Revenue Service announced that "exemptions will be denied and contributions [to such schools] will not be deductible if the operation of the school is on a segregated basis and its involvement with the state or political subdivision is such as to make the operation unconstitutional or a violation of the laws of the United States." Under this standard, a private school with an overt policy of racial discrimination could, nevertheless, obtain or retain federal taxexempt status so long as the state was not unduly involved in the school's operation. Under the 1967 IRS standard, the findings of the court decisions described above, which found specific "segregation academies" to be racially discriminatory, would not, even if fully accepted by IRS, necessarily have required the denial of federal tax-exemption to those private schools. For the courts, in contrast to the 1967 Service ruling, were not concerned with whether the state was so involved in the operation of the "private" schools that the operation itself amounted to state action subject to the limitations of the Fourteenth Amendment. The question in the above cases was only whether the state was providing assistance to what was conceded to be private discrimination at the "segregation academies." Norwood, supra, 413 U.S. at 464. The above decisions would, therefore, not necessarily contain findings on the "state involvement" essential to a denial of tax-exempt status under the 1967 ruling of IRS. Consequently, a we have noted, many private schools which, in other contexts, had been adjudicated to be racially discriminatory retained their taxexempt status. 3 See, e.g., Graham and United States v. Evangeline Parish School Board, 484 F.2d 649 (C.A. 5, 1973); United States v. Tunica County School District, 323 F. Supp. 1019 (N.D. Miss.) aff'd 440 F.2d 377 (C.A. 5, 1971). United States v. State of Mississippi, 499 F. 2d 425 (C.A. 5, 1974) In rejecting the defendants' claim that textbooks and transportation aid was too insubstantial to invoke a constitutional proscription, the Court said: "The leeway for indirect aid to sectarian schools has no place in defining the permissible scope of state aid to private racially discriminatory schools. "State support of segregated schools through any arrangement, management, funds, or property cannot be squared with the [Fourteenth] Amendment's command that no State shall deny to any person within its jurisdiction the equal protection of the laws." Cooper v. Aaron, 358 U.S. 1, 19 (1958). Thus Mr. Justice White, the author of the Court's opinion in Allen, supra, and a dissenter in Lemon v. Kurtzman, supra, noted there that in his view, legislation providing assistance to any sectarian school which restricted entry on racial or religious grounds would, to that extent, be unconstitutional. Lemon, supra, at 671 n. 2." 413 U.S. at 464. |