FOLLOWING ITS INITIAL NATIONWIDE SURVEY OF TAX EXEMPT SCHOOLS, THE SERVICE DURING 1973 THROUGH 1975 HAD AN EXAMINATION COVERAGE WHICH RANGED FROM 2% TO 4%. DURING THIS PERIOD, AN EXAMINATION OF GOLDSBORO CHRISTIAN SCHOOLS WAS CONDUCTED BECAUSE OF ITS CLAIM FOR REFUND OF CERTAIN EMPLOYMENT TAXES. THIS EXAMINATION RESULTED IN THE LITIGATION WHICH BECAME THE COMPANION CASE TO BOB JONES.

EXPERIENCE WITH THESE EXAMINATIONS INDICATED TO THE SERVICE THAT SPECIFIC GUIDELINES WERE NEEDED TO ENSURE UNIFORM ENFORCEMENT NATIONWIDE AND THE SERVICE PROCEEDED TO DEVELOP THESE. THE UNITED STATES COMMISSION ON CIVIL RIGHTS, THE CIVIL RIGHTS DIVISION OF THE JUSTICE DEPARTMENT, AND SEVERAL MEMBERS OF CONGRESS ALSO EXPRESSED THE NEED FOR SPECIFIC EXAMINATION GUIDELINES.

11

IN DECEMBER 1975, REVENUE PROCEDURE 75-50 WAS PUBLISHED
CLARIFYING IRS GUIDELINES FOR TAX EXEMPT SCHOOLS AND ESTABLISHING
RECORDKEEPING REQUIREMENTS. RECOGNIZING THE SENSITIVITY ASSOCIATED
WITH THIS PARTICULAR ISSUE, THE SERVICE TOOK THE UNUSUAL STEP OF
PUBLISHING THE PROCEDURE IN PROPOSED FORM TO AFFORD THE PUBLIC,
EDUCATIONAL INSTITUTIONS, AND OTHER INTERESTED PARTIES THE OPPORTUNITY
TO COMMENT. THE FINAL VERSION OF THE PROCEDURE REQUIRED ALL TAX
EXEMPT PRIVATE SCHOOLS TO ADOPT FORMALLY A RACIALLY

NONDISCRIMINATORY POLICY, TO REFER TO THE POLICY IN ALL BROCHURES
AND CATALOGUES, AND GENERALLY TO PUBLISH NOTICE OF THIS POLICY
ANNUALLY IN A NEWSPAPER OR BY USE OF THE BROADCAST MEDIA.

DETAILED

11 REV. PROC. 75-50, 1975-2 C.B. 587

EXAMINATION GUIDELINES WERE ALSO ISSUED DURING THIS PERIOD.

ALSO IN 1975, THE SERVICE PUBLISHED A REVENUE RULING CLARIFYING
AND EXPLAINING ITS POSITION THAT ORGANIZATIONS, INCLUDING CHURCHES,
WHICH ESTABLISH PRIVATE SCHOOLS WITH A POLICY OF REFUSING TO
ACCEPT CERTAIN RACIAL AND ETHNIC GROUPS WILL NOT BE RECOGNIZED

AS TAX-EXEMPT CHARITIES UNDER SECTION 501(c)(3) OF THE CODE.12
REVENUE PROCEDURE 75-50, HOWEVER, MADE IT CLEAR THAT A SCHOOL
WHICH ENROLLS STUDENTS BASED ON RELIGIOUS AFFILIATION WILL NOT
BE DEEMED TO HAVE A DISCRIMINATORY POLICY IF THE RELIGION IS
OPEN TO ALL ON A RACIALLY NONDISCRIMINATORY BASIS.

IN 1976, THE PLAINTIFFS IN THE GREEN CASE REOPENED THAT SUIT,
ASSERTING THAT THE SERVICE WAS NOT COMPLYING WITH THE COURT'S
CONTINUING INJUNCTION THAT RACIALLY DISCRIMINATORY MISSISIPPI
PRIVATE SCHOOLS BE DENIED TAX EXEMPTION AND REQUESTING FURTHER
13
INJUNCTIVE RELIEF. IN ADDITION, A COMPANION SUIT WAS FILED,
NOW ENTITLED WRIGHT V. REGAN, ASSERTING THAT THE SERVICE'S
ENFORCEMENT OF THE NONDISCRIMINATION REQUIREMENT ON A NATIONWIDE
BASIS WAS INEFFECTIVE.

14

12

13

REV. Rul. 75-231, 1975-1 C.B. 158. SEE ALSO TIR 1379 (5/27/75) STATING THAT THE DE MINIMIS RULE WILL BE FOLLOWED IN ADMINISTERING REV. RUL. 75-231.

GREEN V. SIMON, CIV. NO. 1355-69(N.N.C)

14 WRIGHT V. SIMON, CIV. NO. 76-1426 (n.n.c.). IN WRIGHT V.

BLUMENTHAL,

480 F. SUPP. 790 (D.D.C. 1979), THE COURT DISMISSED PLAINTIFFS COMPLAINT PRIMARILY FOR LACK OF STANDING. THE DECISION WAS REVERSED IN WRIGHT V. REGAN, 81-2 U.S.T.C. 19504 (D.C. CIR. 1980). THE SOLICITOR GENERAL HAS FILED A PETITION FOR CERTIORARI WITH

THE SUPREME COURT TO REVIEW THIS DECISION.

ALSO IN 1976 THE SERVICE UNDERTOOK TO EXAMINE 10% OF ALL

SCHOOLS HAVING INDIVIDUAL EXEMPTION LETTERS UNDER SECTION 501(c)(3).
THIS COVERAGE CONTINUED UNTIL JULY 7, 1978, WHEN ELEMENTARY AND
SECONDARY SCHOOL EXAMINATIONS WERE SUSPENDED BECAUSE OF THE
REEXAMINATION OF FACTORS TO BE USED IN DETERMINING WHETHER A
SCHOOL HAS A RACIALLY NONDISCRIMINATORY ADMISSIONS POLICY.

AS THE INTERNAL REVENUE SERVICE THROUGH THE THEN COMMISSIONER TESTIFIED BEFORE CONGRESSIONAL COMMITTEES IN 1979, THE REOPENING OF GREEN AND THE FILING OF WRIGHT HAD CAUSED THE SERVICE TO EXAMINE THE EFFECTIVENESS OF ITS EFFORTS TO ENSURE THAT ONLY RACIALLY 15 NONDISCRIMINATORY SCHOOLS SHOULD BE RECOGNIZED AS TAX EXEMPT. OF SPECIAL CONCERN TO THE SERVICE AT THAT TIME WAS THE FACT THAT SOME SCHOOLS THAT HAD BEEN ADJUDGED DISCRIMINATORY BY THE COURTS CONTINUED TO BE TAX EXEMPT. ACCORDINGLY, ON AUGUST 22, 1978, THE SERVICE, AS IT HAD IN 1975, A PROPOSED REVENUE PROCEDURE 17.

16

PUBLISHED FOR PUBLIC COMMENT
IT WAS INTENDED TO SERVE AS A

GUIDE FOR IRS PERSONNEL AND THE PUBLIC FOR USE IN DETERMINING
WHETHER A PRIVATE SCHOOL ACTUALLY OPERATED ON A RACIALLY NON-

DISCRIMINATORY BASIS.

15 PROPOSED IRS REVENUE PROCEDURE AFFECTING TAX EXEMPTION OF PRIVATE SCHOOLS: HEARINGS BEFORE THE SUBCOMMITTEE ON OVERSIGHT OF THE HOUSE COMMITTEE ON WAYS AND MEANS, 96TH CONG. 1ST SESs. 479 (1979).

16

NORWOOD V. HARRISON 382 F.

ON

SUPP. 921, 929 (N.D. MISS. 1974), REMAND FROM SUPREME COURT, 413 U.S. 455 (1973); BRUMFIELD V. NODD, 425 F. SUPP. 528 (E.D. LA. 1976)

17 PROPOSED REVENUE PROCEDURE 73 FED. REG. 37, 296 (1978)

AS A RESULT OF THE STRONG PUBLIC REACTION TO THE PU

OF THE PROPOSED PROCEDURES, HEARINGS WERE HELD ON APRIL BEFORE THE SENATE SUBCOMMITTEE ON TAXATION AND DEBT MANA OF THE FINANCE COMMITTEE, AND ON JULY 26, 1979, BEFORE T SENATE FINANCE COMMITTEE. THE SERVICE ALSO TESTIFIED BE SUBCOMMITTEE ON OVERSIGHT OF THE COMMITTEE ON WAYS AND M FEBRUARY 20 AND MARCH 23, 1979.

18

ANNOUNCEMENT 79-38, 1979-11 IRM 33

ON SEPTEMBER 29, 1979, AMENDMENTS TO THE TREASURY APPROPRIATIONS BILLS, BY REPRESENTATIVES DORNAN AND ASHBROOK PRECLUDED THE SERVICE FROM ADOPTING THE PROPOSED REVENUE PROCEDURES AND FROM FORMULATING GUIDELINES, REGULATIONS, STANDARDS OR MEASURES WHICH WOULD CAUSE THE LOSS OF TAX EXEMPT STATUS TO PRIVATE, RELIGIOUS, OR CHURCH-OPERATED SCHOOLS UNDER SECTION 501(c)(3) OF THE CODE UNLESS IN EFFECT PRIOR TO AUGUST 22, 1978. THESE RESTRICTIONS HAVE BEEN CARRIED OVER TO SUBSEQUENT APPROPRIATIONS BILLS. THE 1982 CONTINUING RESOLUTIONS ADOPTED THESE RESTRICTIONS AND FURTHER RESTRICTED THE SERVICE FROM IMPLEMENTING COURT ORDERS.

ON MAY 1, 1980, A LIMITED NATIONWIDE EXAMINATION PROGRAM WAS INSTITUTED. IN GENERAL, EXAMINATIONS WERE TO BE CONDUCTED ONLY IN INSTANCES WHERE THERE WAS AN INDICATION OF RACIAL DISCRIMINATION OR WHERE COMPLAINTS OF RACIAL DISCRIMINATION WERE MADE. THIS EXAMINATION PROGRAM CONTINUES AT THIS TIME.

IN MAY AND JUNE OF 1980, THE DISTRICT COURT IN GREEN ENTERED 19 REVISED INJUNCTIVE ORDERS AGAINST THE SERVICE AND TREASURY. THESE ORDERS REQUIRED THE SERVICE TO REVIEW THE TAX EXEMPT STATUS OF MISSISSIPPI PRIVATE SCHOOLS UNDER STANDARDS SIMILAR TO THOSE PROPOSED BY THE SERVICE IN 1979. FOR EXAMPLE, A PRIVATE SCHOOL FOUNDED AT THE TIME OF PUBLIC SCHOOL DESEGREGATION WAS REQUIRED AS A CONDITION FOR CONTINUED EXEMPTION TO SHOW THAT IT HAD ENGAGED IN OBJECTIVE ACTS, SUCH AS MINORITY RECRUITMENT, TO OVERCOME AN INFERENCE THAT IT DISCRIMINATED, NOTWITHSTANDING A PUBLISHED POLICY OF NONDISCRIMINATION. ON JULY 7, 1980, THE GOVERNMENT ANNOUNCED THAT

19

GREEN V. MILLER, 45 AFTR 2D 80-1566 (D.D.C. 1980)