The Service and the Justice Department argue t to be entitled to the benefits of a tax exemption a must be "charitable" in the broadest sense, and thu and conform to the fundamental public policies of s it is clearly a basic public policy of the United S prohibit an element of discrimination based on race organization even a religious organization considered "charitable" if it practices racial disc -0 ca This has been the position of the Service sinc has many times been upheld by the courts. Congress will contend that section 501 (c) (3) of the Internal Code speaks of "charitable" activities as only one of activities which entitle an organization to tax (the others being, for example, religious, scientif educational activities), and that there is no basis that a "charitable" purpose is more important than He may also argue that the Ashbrook Amendment expre of Congress that the Service not deny tax exempt st fide religious schools, and that this policy should public policy which opposes racial discrimination. Congressman Lott has written to you and to Com concerning this matter. Commissioner Egger's draft attached. In that reply, the Commissioner re-asser traditional position of the Service, and denies tha Amendment applies to the Bob Jones matter. My own view is that you should support the Cam position fully. It is one thing for government aff to interfere with the rights of free speech or free sman Lott will express displeasure with the issuance ters of revocation, but he understands that the acting under a court order which was put in place currence of the past Administration and with which Egger and the current Administration are not in evertheless, the five affected schools have now the Tax Court and the Service must defend its ctions within the next few months. the Service's actions were taken pursuant to court essman Lott will not have much to complain about, till assert that the Service was free to find that ools had demonstrated non-discrimination even though duce no affirmative evidence in support of such Ashbrook Amendment. guage of the Ashbrook Amendment purports to deny Treasury Department and the Internal Revenue Service ose of formulating or carrying out "any rule, policy, egulation, standard, court order, or measure which the loss of tax exempt status for private, religious erated schools under section 501(c)(3) of the IRC ess in effect prior to August 22, 1978." sman Lott will argue that the Ashbrook Amendment, binding on the Department through its inclusion recent continuing resolution, prohibits you and oner from carrying out the order in the Green case above. As noted at the outset of this memo, this nstitutional confrontation between Congress and University. This is not strictly correct. The A ment by its terms applies only to actions by the Service (in compliance with court orders or other August 22, 1978. The revocation of the tax exemp Jones University occurred in 1970, and the Ashbro does not prevent the Service or the Treasury Depa taking actions with respect to determinations mad August 22, 1978. Attachment U.S. Department of Justice Office of the Deputy Attorney : The Deputy Attorney General Honorable Trent Lott U. S. House of Representatives Dear Congressman Lott: Washington, D.C. 20530 The Attorney General and the Solicitor General have r quested me to answer your letters of October 30th concerni the cases of Goldsboro Christian Schools, Inc. v. United States, No. 81-1, and Bob Jones University v. United States No. 81-3, now pending in the Supreme Court. As you have noted, the Solicitor General is disqualified in these cases When the status of private schools with reference to Sections 170 and 501(c)(3) of the Internal Revenue Code cam into question around 1970, Commissioner of Internal Revenue Randolph Thrower, after extensive study of the relevant sta utory and constitutional provisions, and after review at the highest levels of the Government, announced the positio of the Internal Revenue Service thereafter set forth in Revenue Ruling 71-447, 1971-2 Cumulative Bulletin 230. That position has been maintained by each of Commissioner Thrower successors, including the current incumbent. The view of th Commissioner has been defended in litigation by the Departme of Justice under the several Attorneys. General. then and ther after in office. It has been approved by two United States Courts of Appeals in three separate lawsuits. The Departmen has been unable to conclude that abandonment of the legal position in defense of the Commissioner's regulations in Bob Jones and Goldsboro would be expedient.”” We believe that the cases now pending in the Supreme Court will squarely present the substantive issues involved, and we look to the decision of that Court for authoritative answers to the questions presented. We shall of course be happy to keep you informed of any developments in the cases. Sincerely yours, Edward C. Schmults I have previously furnished you with a mem December 15, discussing the issues which Trent with you during a meeting or phone call this we discussions of these questions within Treasury the issues in the Bob Jones case -- discussed i are significant enough to raise at the White Ho brief in that case must be filed with the Supre December 31 and it is the consensus among those matter at the Service and at Treasury that the considered at the White House before the brief becomes Administration policy. I am currently preparing a full briefing m you on the subject of the Bob Jones case, prepa raising the issue with Jim Baker or Ed Meese. received some guidance from the White House, it avoid any comments in conversation with Congres commit the Administration one way or the other. As my earlier memo indicated, the case ard Service's revocation in 1970 of the tax exempti University. The Service's theory -- that an o entitled to tax exemption merely because it is character, but that it must also be charitable it promotes fundamental public policies federal district court but upheld by the United Appeals for the Fourth Circuit. In its brief i before the Supreme Court, the Justice Departmer advance this argument, and certiorari was grant - -- was Congressman Lott will express unhappiness Administration is continuing to pursue this cas I suggest that you tell Congressman Lott that y are currently reviewing the question as you IRS policies which are of major significance response for him before the end of the year. possible, I think you should avoid suggesting t that the issue will be raised in the White Hous to preserve the President's position of non-inv matter, whichever way it goes. T |