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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Blackwell, Morton: Files
Folder Title: Religious Schools - Tax Status
(1 of 3)
Box: 23
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
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meeting on IRS Bob Jones U File
THE WHITE HOUSE
WASHINGTON
Fuel Fielding
Rousts Reshdoory
from 60dwin
Peter Rustoven
Howie Phillips
think Uhlman
Bob Baldwin
Munty Anderson
Paul Weyrich
Mouton Blackwell
Connie masshur
Bd Rollins
Jack Claston
Shawie Cooksie
Futher Fion!
Brad Reynolds
Bill Billings
Ken Cribb
Wn. Ball
Buch Chapoten
Ed mere
Ed Schmiltz
Jon-8th Ection
THE WHITE HOUSE
WASHINGTON
Invitation to IRS
to go in ym
may not
Never survive count suprome
NL RBCases courts
- Supreme court
Ball, final No restraint point on IRS
administration
2. National Policy
dis mandating
proference of particalar
religious belief
EHD DL TD
048953SS
RC
MB
Document No.
WHITE HOUSE STAFFING MEMORANDUM
3/12/82
ASAP
DATE:
ACTION/CONCURRENCE/COMMENT DUE BY:
DRAFT PRESS RELEASE RE GROVE CITY
SUBJECT:
ACTION FYI
ACTION FYI
VICE PRESIDENT
GERGEN
MEESE
HARPER
BAKER
JAMES
DEAVER
JENKINS
STOCKMAN
MURPHY
CLARK
ROLLINS
DARMAN
P
SS
WILLIAMSON
DOLE
WEIDENBAUM
DUBERSTEIN
BRADY/SPEAKES
FIELDING
ROGERS
FULLER
Remarks:
Richard G. Darman
Assistant to the President
(x2702)
Response:
U.S. Department of Justice
/
Civil Rights Division
Office of the Assistant Attorney General
Washington, D.C. 20530
MEMORANDUM
To:
Craig Fuller
Dan Oliver
From:
Wm. Bradford Reynolds
Assistant Attorney General
Civil Rights Division
Subject: Grove City
Here is a draft press release regarding the Grove City
case. Please advise me of any suggested revisions you may
have.
CC: Ken Cribb
DRAFT
The Department of Justice today filed in the United States
Court of Appeals for the Third Circuit its brief on behalf of the
Department of Education in Grove City College, et al. V. Terrell H.
Bell, et al. , a case challenging the application of Title IX of the
Education Amendments of 1972.
Title IX forbids sex discrimination in educational programs
receiving federal financial assistance. Grove City College receives
no direct federal grants, but enrolls students who receive Basic
Educational Opportunity Grants (BEOGs) and Guaranteed Student Loans
(GSLs). In a suit brought by Grove City College the federal district
court agreed with the government that BEOGs were covered by Title IX,
but held that GSLs fell within an exemption from fund termination which
Title IX provides for contracts of guaranty. The court also enjoined
the Department from requiring Grove City College to sign the Assurance
Of Compliance then in use before receiving federal financial assistance.
The brief maintains the position of the Department of
Education in the lower court that institutions enrolling students
who receive BEOGs are covered by Title IX. It also maintains the
Department's position that under current regulations covered
institutions must sign the Assurance Of Compliance. In addition,
the government's brief argues that current regulations for fund
termination are valid.
The government no longer argues that guaranteed student loans
are alone sufficient to subject private institutions to the termin-
ation requirements of Title IX and its implementing regulations.
DRAFT
DRAFT
- 2 -
It, therefore, is not appealing the district court's decision
holding that GSLs fall with the statute's exemption for contracts
of guaranty. The Department of Education plans to amend the pertinent
regulations so as to reflect its current position with regard to
coverage of private educational institutions which do not receive
federal grants directly but enroll students who receive GSLs.
DRAFT
THE WHITE HOUSE
WASHINGTON
March 10, 1982
Dear Dr. Jones:
Thank you for your kind letter of March 1. I will do my
best to keep you informed of matters that relate to the
University.
Thank you for sending me a copy of "Biblical Answers to
Bothersome Questions". I enjoyed reading it.
If I can be of further assistance, please contact me.
Sincerely,
Morton C. Blackwell
Special Assistant to the President
Dr. Bob Jones III
President
Bob Jones University
Greenville, S.C. 29614
BOB JONES University GREENVILLE, SOUTH CAROLINA. 29614
EXECUTIVE OFFICES
TELEPHONE (803) 242-5100
March 1, 1982
Mr. Morton Blackwell
Old Executive Office Building
Room 191
The White House
Washington, DC 20500
Dear Mr. Blackwell:
Thank you for being so kind to us Tuesday. It was gracious indeed of
you to spend so much time. You have shown sincere interest in our
cause from the very beginning, and we owe you a great deal. I hope you
will communicate with me if you see any sudden shift in mood or purpose
there as it relates to the University. It is comforting to have a friend
and ally in a place of influence, and I want you to know that we want to
help you if we can ever do so.
Under separate cover I am sending a little book that I prepared recently
which I hope you will find to be a blessing.
Kind regards.
Sincerely yours,
Bob Jones III
Bob Jones III
President
BJIII: se
THE WHITE HOUSE
WASHINGTON
March 11, 1982
MEMORANDUM FOR ELIZABETH H. DOLE
THRU:
DIANA LOZANO
FROM:
MORTON BLACKWELL
SUBJECT:
GROVE CITY COLLEGE DECISION
We must not be panicked into making a politically disasterous
decision.
When Thelma raised the issue this morning on how an anti-
Grove City College decision would help save embattled Southern
Republican Congressmen, I was confident that her political
reading on this was badly in error. She mentioned the Alabama
Congressmen and specifically Albert Lee Smith of Birmingham.
I very discreetly called my friend, Congressman Smith, swore
him to secrecy, and asked him his opinion of the political
effect of decisions either way on the Grove City College matter.
His response was that a decision against Grove City College
would be disasterous with his hard core supporters. He said
that if he thought the President would decide against Grove
City College, he would urgently try to personally convince the
President to support the College.
It is true that he supported the Voting Rights Act, but he
said that this was a very different situation. He reminded
me that he has repeatedly made public statements critical of
the I.R.S. tax exemption bill which the Administration sent to
Congress in the Bob Jones matter.
He said that if the Justice Department files a brief against
Grove City College, he would not be alone among Southern Republican
Congressmen in publically condemning the Administration or) this
issue.
This was the foremost example of a member whom Thelma thought
would be helped by siding against Grove City College. My
convinction is strengthened that this move would damage our
Southern Congressmen.
IRS- Bob
THE WHITE HOUSE
Janes
Office of the Press Secretary
Ele
For Immediate Release
January 18, 1982
FACT SHEET
Tax Exemption Bill Summary
The proposed legislation being submitted by the President to
the Congress will, for the first time, give the Secretary of
the Treasury and the Internal Revenue Service express authority
to deny tax-exempt status to private, non-profit educational
organizations with racially discriminatory policies. The legis-
lation recognizes and is sensitive to the legitimate special
needs of private religious schools.
Section 1 of the bill adds to section 501 of the Internal
Revenue Code a new subsection that expressly prohibits granting
tax exemptions to private schools with racially discriminatory
policies, notwithstanding that such schools otherwise meet the
tests for exemption presently listed in section 501 (c) (3).
Religious schools of all faiths are permitted to limit, or give
preferences and priorities, to members of a particular religious
organization or belief in their admissions policies or religious
training and worship programs. However, the bill expressly
provides that a tax exemption will not be granted if any such
policy, program, preference or priority is based upon race
or a belief that requires discrimination on the basis of race.
Section 2 of the bill amends several sections of the Internal
Revenue Code dealing with deductions to provide, consistent with
the exemption provisions of the new law, that no deductions will
be allowed for contributions to a school with a racially discrimi-
natory policy.
A BILL
To amend the Internal Revenue Code of 1954 to prohibit the
granting of tax-exempt status to organizations maintaining
schools with racially discriminatory policies.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled,
SECTION 1. DENIAL OF TAX EXEMPTIONS TO ORGANIZATIONS MAINTAINING
SCHOOLS WITH RACIALLY DISCRIMINATORY POLICIES.
Section 501 of the Internal Revenue Code of 1954 (relating
to exemption from tax) is amended by redesignating subsection (j)
as subsection (k) and inserting a new subsection (j) reading as
follows:
"(j) ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DIS-
CRIMINATORY POLICIES. --
"(1) IN GENERAL. -- An organization that normally
maintains a regular faculty and curriculum (other than an
exclusively religious curriculum) and normally has a regu-
larly enrolled body of students in attendance at the place
where its educational activities are regularly carried on
shall not be deemed to be described in subsection (c) (3),
and shall not be exempt from tax under subsection (a), if
such organization has a racially discriminatory policy.
-2-
"(2) DEFINITIONS. --- For the purposes of this subsec-
tion --
"(i) An organization has a 'racially discrimi-
natory policy' if it refuses to admit students of
all races to the rights, privileges, programs, and
activities generally accorded or made available
to students by that organization, or if the organi-
zation refuses to administer its educational policies,
admissions policies, scholarship and loan programs,
athletic programs, or other programs administered
by such organization in a manner that does not dis-
criminate on the basis of race. The term 'racially
discriminatory policy' does not include an admissions
policy of a school, or a program of religious train-
ing or worship of a school, that is limited, or grants
preferences or priorities, to members of a particular
religious organization or belief, provided, that no
such policy, program, preference, or priority is based
upon race or upon a belief that requires discrimination
on the basis of race.
"(ii) The term 'race' shall include color or
national origin."
-3-
SEC. 2. DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO ORGANIZATIONS
MAINTAINING SCHOOLS WITH RACIALLY DISCRIMINATORY
POLICIES.
(a) Section 170 of the Internal Revenue Code of 1954
(relating to allowance of deductions for certain charitable,
etc., contributions and gifts) is amended by adding at the
end of subsection (f) a new paragraph (7) reading as follows:
"(7) DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO
ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DISCRIM-
INATORY POLICIES. -- No deduction shall be allowed under
this section for any contribution to or for the use of an
organization described in section 501 (j) (1) that has a
racially discriminatory policy as defined in section
501 (j) (2) ."
(b) Section 642 of such Code (relating to special rules
for credits and deductions) is amended by adding at the end of
subsection (c) a new paragraph (7) reading as follows:
" (7) DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO
ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DISCRIM-
INATORY POLICIES. -- No deduction shall be allowed under
this section for any contribution to or for the use of an
organization described in section 501(j)(1) that has a
-4- -
racially discriminatory policy as defined in section
501 (j) (2) . "
(c) Section 2055 of such Code (relating to the allowance
of estate tax deductions for transfers for public, charitable,
and religious uses) is amended by adding at: the end of subsec-
tion (e) a new paragraph (4) reading as follows:
"(4) No deduction shall be allowed under this section
for any transfer to or for the use of an organization de-
scribed in section 501(j)(1) that has a racially discrimi-
natory policy as defined in section 501(j)(2)."
(d) Section 2522 of such Code (relating to charitable and
similar gifts) is amended by adding at the end of subsection (c)
a new paragraph (3) reading as follows:
" (3) No deduction shall be allowed under this section
for any gift to or for the use or an organization described
in section 501(j)(1) that has a racially discriminatory
policy as defined in section 501 (j) (2) "
SEC. 4. EFFECTIVE DATE.
The amendments made by this Act shall apply after July 9,
1970.
IRS
prevatishoos
Orin G. Briggs
803-252-1700
James B. Carraway
Law Office
Orin G. Brigge
1804 Bull Street
Columbia, South Carolina 29201
February 5, 1982
SHORT SUMMARY OF LEGAL ISSUES WITH PROPOSED
TAX-EXEMPT LEGISLATION
In 1970, the Internal Revenue Service (IRS) began the
enforcement of a policy which was not authorized by Congress,
which policy had the effect of conditioning the granting of
tax-exempt status upon compliance with federal public policy,
even though that public policy was in conflict with religious
belief.
In 1978, IRS proposed a new revenue procedure for grant-
ing tax-exempt status which would have mandated a 20% minority
enrollment as a condition to tax exemption. Congress has for
three consecutive years prohibited the enforcement of the new
revenue procedure by means of the Ashbrook and Dornan Amendments
to the Treasury Department Appropriations Act.
In testimony before the Senate Finance Committee, Deputy
Secretary of the Treasury Department, R. T. McNamar addressed the
question of whether IRS had the authority to add to the statutory
provision on tax exemption found in Section 501 (c) (3) in the
Internal Revenue Code. In his testimony he said:
The Justice Department memo makes clear that
there is no statutory language or Congressional
direction, no legislative history, and no defini-
tive Supreme Court opinion, that authorizes or
requires the IRS to revoke the tax exemptions of
schools that do not comply with Federal public
policy or otherwise violate the civil rights laws.
What is the law? The U. S. Supreme Court has not ruled on
the question of whether the federal government, through IRS, can
condition the granting of tax-exempt status to a religious school
on the condition that the religious school conform all of its
beliefs and practices to government policy.
There is indeed a legitimate and critical First Amendment
religious liberty question which is raised by any legislative pro-
posal which is aimed at the laudable goal of denying tax-exempt
status to white-flight schools.
Short Summary of Legal Issues
Page 2
February 5, 1982
Those who would advocate the passage of legislation with-
out resolving the First Amendment question can cite only four
Federal Court cases in 200 years of American jurisprudence in
support of their cause. The first two cases, Green V. Connally
and Norwood V. Harrison have absolutely nothing to do with church
schools and the cases specifically did not address the protections
afforded to religious schools by the religion clauses of the First
Amendment to the U. S. Constitution. The other two cases, Golds-
boro Christian Schools V. United States and Bob Jones University V.
United States, failed completely to discuss the First Amendment
constraints on governmental regulation of religious institutions.
The only authorities cited by the Circuit Court in the Bob Jones
decision for the infringement of religious liberty were Green V.
Connally, Norwood V. Harrison and four law review articles.
The proponents of legislation designed to regulate the
beliefs of tax-exempt church schools have made three erroneous
assumptions - (1) that tax exemption amounts to government aid,
(2) that because of tax exemption, taxpayers are required to sub-
sidize the unacceptable beliefs and practices of the offending
tax-exempt organization, (3) that the "law" authorizes IRS to
regulate the beliefs of churches and their schools. On the first
point the U. S. Supreme Court made it clear in Walz V. Tax Com-
mission that the granting of tax exemption is an act of neutrality
and does not amount to granting aid or a subsidy to tax-exempt
organizations. On the second point it is a total fabrication to
suggest that the small savings to taxpayers that contribute to a
tax-exempt organization amounts to a subsidy, because, in fact,
tax-exempt church schools are saving state and federal govern-
ments approximately Two Thousand ($2,000.00) Dollars per student
per year because these students are not participating in the
public school program which is supported by the taxpayers. On the
third point, the Administration's announcement on the repeal of
the illegal regulations which had been promulgated by the IRS to
justify its regulation of church beliefs made it very clear that
IRS was never authorized to promulgate the intrusive regulations
which were such a threat to the foundation freedom of free
exercise of religion.
Two other critical points need to be raised before ve
summarize this short summary of legal issues. The dissenting
judge in the Fourth Circuit Court opinion in the Bob Jones case
said that these issues touch at the very right of a church to be
free from government control; on this point Judge Widener said:
Short Summary of Legal Issues Page 3
February 5, 1982
"
we are dealing in this case not with the
right of the government to interfere in the
internal affairs of a school operated by a
church, but with the internal affairs of the
church itself." (Emphasis added)
The most critical issue in all of this discussion is the
very clear statement of the U. S. Supreme Court that holds in a
number of cases that government cannot condition government benefits
upon compliance with government policy which forces a religious
institution to violate its basic tenants of faith unless there is
a very clear showing of a "compelling state interest", a showing
of specific harm to the governmental policy caused by an exemption
for the religious institution from the governmental policy and a
showing that the government cannot accomplish its goal with a less
onerous regulatory scheme. On the specific point of conditioning
government "benefits" upon compliance with government policy, the
U. S. Supreme Court in Thomas V. Review Board, 49 U.S.L.W. 4341
(1981) said:
Where the state conditions receipt of an important
benefit upon conduct proscribed by a religious
faith, or where it denies such a benefit because of
conduct mandated by religious belief, thereby putting
substantial pressure on an adherent to modify his
behavior and to violate his beliefs, a burden upon
religion exists. While the compulsion may be
indirect, the infringement upon free exercise is
nonetheless substantial. (Emphasis added)
In summary it should be evident to every reader of this
memorandum that legislation cannot be passed by the Congress which
would have the effect of denying tax-exempt status to church
schools upon their compliance with government policy in violation
of sincerely-held religious belief unless Congress makes a very
detailed inquiry into all of the First Amendment cases of the U.
S. Supreme Court and makes a very detailed analysis of the com-
pelling state interest issue.
Any legislation addressing the question of tax-exempt
status for religious schools that do not conform with governmental
policy should have as a minimum the following six basic concepts:
1. The definition of a "racial discriminatory
policy" must be written so as to proscribe specific
kinds of conduct.
Short Summary of Legal Issues
Page 4
February 5, 1982
2. The legislation should require proof of inten-
tional discrimination rather than make the deter-
mination on what we call an "effects" test.
3. The burden of proof should be on IRS to prove
discrimination rather than embodying the usual tax
law presumption of guilt until proven innocent.
4. There should be a due process determination of
discrimination on the record, preferably a deter-
mination in the U. S. District Court.
5. The legislation should specifically protect
policies which are based upon sincerely-held
religious belief.
6. The legislation should not contain a retro-
active provision which would have the effect of
condoning twelve years of illegal bureaucratic
IRS law.
Orin G. Briggs
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 80-1124
September Term, 19 81.
Inez Wright, individually and on
Civil Action No. 96-1425
behalf of her minor children,
Oscar Clay Renfro, Anthony Lee
United States Court cí Appeals
Renfro, Lisa Marie Wright, and
for the District ci Columbia Circuit.
Ephron Antoni Wright, Jr., et al.,
Appellants
FILED FEB 1 3 1932
V.
Donald T. Regan, Secretary of
GEORGE A., FISHER
the Treasury, et al.
CLERK
No. 82-1134
William H. Green, on his own behalf
Civil Action No. 69-01355
and on behalf of his minor children,
et al.,
FILED
file
Appellants
V.
FEB 18 1982
Donald T. Regan, as Secretary of
the Treasury of the United States,
CLERK, U.S. DISTRICT COURT
et al.
DISTRICT OF COLUMBIA
BEFORE: Wright, Tamm and Ginsburg, Circuit Judges
ORDER
On consideration of movants' request for an injunction
pending appeal in No. 82-1134, for an injunction under the
"All Writs Act" to preserve the status quo and protect the
potential effectiveness of this court's decision in No. 80-1124,
and for consolidation of Nos. 82-1134 and 80-1124, it is hereby
ORDERED that the application to consolidate Nos. 82-1134
and 30-1124 is denied; and it is further
ORDERED that the motion for an injunction pending appeal
in No. 82-1134 be referred forthwith to the motions panel for
expeditious consideration; and it is further
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 80-1124
September Term, 19 81
82-1134
-2-
ORDERED that the motion for relief under the "All Writs
Act" in No. 80-1124 be filed and that a response thereto by
the Secretary of the Treasury and the Commissioner of Internal
Revenue be filed within fifteen days of the date of this order;
and it is further
ORDERED, that to preserve the status quo pending response
to the motion in No. 80=1124 and, thereafter, the court's
determination of its authority to consider and decide the issues
presented, see United States V. United Mine Workers, 330 U.S.
258 (1947), the Secretary of the Treasury and Commissioner of
Internal Revenue are directed not to grant or restore federal
tax-exempt status pursuant to 26 U.S.C. $ 501 (c) (3) to any
school that unlawfully discriminates on the basis of race,
see Runyon V. McCrary, 427 U.S. 160 (1976), by failing to
maintain a "racially nondiscriminatory policy as to students,"
as that term is defined in the declaratory judgment in Green V.
Connally, 330 F. Supp. 1150, 1179 (D.D.C.), aff'd mem. sub nom.
Coit V. Green, 404 U.S. 997 (1971).
Per Curiam
Submitted
+ 1/10/82
It is universally conceded that the IRS-school-tax-exemption
iniative was damaging to the Administration. The Grove City
case gives us a chance to recover some of the lost ground with
supportive groups.
There is little doubt that loans to students is a very slender
argument for bringing colleges under Federal regulation
applicable only to schools receiving Federal aid. A major
thrust of the Reagan Administration is deregulation. On
strictly legal grounds, a decision that there is no statutory
authority for such regulation would be defensible.
The political impact would be excellent. We could call in
pro-family and private education leaders, most of whom are
still in shock at the IRS mess, and renew their faith in
the ability of this administration to do them some good.
These groups learned an important lesson in the IRS matter.
It is safe to say that they would now jump at the opportunity
to praise loudly a clear Administration decision which would
end harassment of Grove City College. Moreover, this would
be a clear sign to 1980 campaign activists who care about this
that further campaign work in 1982 would be worthwhile. Right
now, they have serious doubts that their former work did
any good.
Opponents of such an Administration move would have an
almost impossible task of stirring up emotion against us on this.
This is much firmer ground for us to stand on. Unlike the
Bob Jones case, there are no charges that Grove City discriminates.
This is a clean, anti-big-government, deregulation issue.
One caveat, though. We must be prepared to go the whole course
when we move on this or any other issue important to social
issue conservatives. Another retreat after a forward step
will earn withering contempt from private sector conservatives.
Many already suspect we are gutless and that our idea of a
disaster is criticism in the Washington Post. They know
the President cannot achieve much of what he ran to accomplish
without the will to persevere in the face of media criticism.
One column by Carl Rowan does not a groundswell make.
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
ATTENDEES - January 26, 1982 IRS MEETING
Fred Fielding - 2mdFL ww/w#
Peter Rusthoven -106
Mike Uhlmann - 228
Marty Anderson - 2nd Fl ww/wH
Morton Blackwell
Ed Rollins -
175
Sherrie Cooks 107 EW/WH
Brad Reynolds - Justice
Buck Chapoton Treasury ant see.
Ken Cribb - ,127
Ed Meese ww/wH
Ed Schmultz Dep A.G. justice
Dr R J.
Rousas Rushdoony - Bay 158 Vallecito Calf 95251
Ron Godwin
Howard Phillips
Bob Baldwin
Paul Weyrich
Connie Marshner
Jack Clayton
Father Fiore
Bill Billings
William Ball
Souise Ropog-
Fanfax Christian School
273-3040
sent - U.S news of WorldReport 2/8/82
Ball - Mathins interview
LAW OFFICES
BALL & SKELLY
511 N. SECOND STREET
P O BOX 1108
HARRISBURG, PENNSYLVANIA 17108
WILLIAM BENTLEY BALL
TELEPHONE
JOSEPH G. SKELLY
AREA CODE 717
PHILIP J. MURREN
232-8731
RICHARD E. CONNELL
KATHLEEN A. O'MALLEY
January 19, 1982
TO: FRIENDS OF RELIGIOUS LIBERTY
IRS-RELIGIOUS SCHOOLS CRISIS;
BOB JONES UNIVERSITY CASE
Please give this memorandum your immediate attention.
As of Thursday, January 7, the prospects for removal
of IRS threats to religious liberty seemed, not indeed per-
fect, but very good. In Green V. Regan (the Mississippi case
in the U.S. District Court for the District of Columbia) we
had at last secured intervention on behalf of a religious
school, and the Government in that case had announced that
it would suspend all further action against religious schools
in Mississippi pending the outcome of that case. At the U.S.
Supreme Court level, the Bob Jones University case was now
in place. Our brief, filed November 27, rebutted, we felt,
every possible justification for denial of tax exemption to
a religious institution merely on the ground that it sincerely
held a religious belief which was unacceptable to Government.
We looked forward eagerly to oral argument in February or
early March and to a favorable decision.
Had the Supreme Court handed down a favorable decision
in Bob Jones, civil rights and secular groups would have
complained, but no national explosion would have resulted.
That is because the Supreme Court is not ordinarily a politi-
cal target, and because Americans tend to abide by decisions
- even unpopular decisions - of the Supreme Court. Further,
this decision would have been backed by extensive reasoning,
and the decision might have won wide public acclaim.
-- 2 -
On Friday, January 8, the situation was dramatically
changed when, at 4 p.m., the Government suddenly went before
the Supreme Court and announced that it was revoking all the
illegal IRS rulings, restoring tax exemption to Bob Jones
University, and asked the Supreme Court to vacate the Fourth
Circuit judgments in the Bob Jones and Goldsboro Christian
Schools cases as moot. Lawrence Wallace, Esq., of the Solici-
tor General's Office, having informed me of this, we then
warned Christian school representatives that a nationwide
explosion was sure to ensue.
In this we have also now witnessed an awesome triumph
of media distortion. The avalanche of telecasts, editorials
and cartoons have almost totally omitted any reference to:
(a) whether Congress gave IRS the power it has asserted, (b)
whether religious institutions must lock-step their practices
to "federal public policy" as the price of their tax exemp-
tion (and thus their existence). Among writers and journals
friendly to human liberty, only James J. Kilpatrick has aired
the real issue in this crisis which is: must a religious
institution which practices an unpopular doctrine give up
that practice because it conflicts with "federal public
policy"?
The Administration's action, though ostensibly favoring
Bob Jones and Goldsboro, has resulted in imminent and extreme
danger to the whole Christian school movement. The action
appeared as an exercise of raw political power, on the very
eve of oral argument in a case long since lodged in the Su-
preme Court. The Government, in its earlier brief to the
Supreme Court in Bob Jones, had taken the exact opposite
position. This sudden, last-minute reversal looked like an
attempt to "throw" the case. We did not need that kind of
"help".
Now the Christian school movement faces the worst: an
Administration bill which loosely employs the term "discrim-
ination", which authorizes IRS to invade and exercise super-
vision over wholly religious institutions down to the last
detail of their operation, and creates oppressive compliance
and enforcement procedures. The media and pressure group
"explosion" of the past ten days has provided exactly the
right climate to bring such legislation about, and we now
see, in the Administration's bill, a political solution to a
sensitive constitutional problem.
- 3 -
Now a bill has been set before the Congress which, if
enacted, would become the worst expression of insensitivity
to church-state concerns ever adopted. The bill is flatly
unconstitutional:
1. It is, because it is to be retroactive to 1970, an
ex post facto (i.e., "after the fact") law which would vio-
late express constitutional provisions prohibiting such
legislation.
2. Because it permits IRS to investigate and influence
all of the "policies", "programs", "rights", "privileges",
and "activities" of religious schools, it violates constitu-
tional proscriptions against excessive church-state entangle-
ment. It is worth noting that the complete envelopment of
religious ministries by a tax collection agency which is
here authorized, far exceeds that which would have been pos-
sible, had the Supreme Court not intervened, under the plan
by NLRB, during the Carter years, to exercise jurisdiction
over labor relations in church-schools.
3. The bill singles out for express disapproval (and
consequent penalty) any religious "belief that requires dis-
crimination on the basis of race. It is absolutely incredible
- and completely without valid precedent - that an Act of
Congress would so specify a sincerely held point of religious
conviction for secular punishment. The precedent such a pro-
vision would set, in the hands of future legislators, courts,
and Government officials, is frightening to consider. "Free
exercise of religion" would become, instead of a preferred
freedom, a mere privilege, to be enjoyed only at the suffer-
ance of Government.
4. The effect of the bill is to establish an official
preference for belief systems which accord with Government
policy respecting race. This is but the beginning of a fully
established religion, consisting of a minimum floor of church
doctrines which Government does not find offensive. Further,
protection of unpopular religious beliefs is now to be rele-
gated to shifting legislative majorities and unelected, as
well as elected, executive officials.
A BILL
To amend the Internal Revenue Code of 1954 to prohibit the
granting of tax-exempt status to organizations maintaining
schools with racially discriminatory policies.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled,
SECTION 1. DENIAL OF TAX EXEMPTIONS TO ORGANIZATIONS MAINTAINING
SCHOOLS WITH RACIALLY DISCRIMINATORY POLICIES.
Section 501 of the Internal Revenue Code of 1954 (relating
to exemption from tax) is amended by redesignating subsection (j)
'as subsection (k) and inserting a new subsection (j) reading as
follows:
"(j) ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DIS-
CRIMINATORY POLICIES. --
"(1) IN GENERAL. -- An organization that normally
maintains a regular faculty and curriculum (other than an
exclusively religious curriculum) and normally has a regu-
larly enrolled body of students in attendance at the place
where its educational activities are regularly carried on
shall not be deemed to be described in subsection (c) (3),
and shall not be exempt from tax under subsection (a), if
such organization has a racially discriminatory policy.
-2-
"(2) DEFINITIONS. -- For the purposes of this subsec-
tion --
"(i) An organization has a 'racially discrimi- -
natory policy' if it refuses to admit students of
all races to the rights, privileges, programs, and
activities generally accorded or made available
to students by that organization, or if the organi-
zation refuses to administer its educational policies,
admissions policies, scholarship and loan programs,
athletic programs, or other programs administered
by such organization in a manner that does not dis-
criminate on the basis of race. The term 'racially
discriminatory policy' does not include an admissions
policy of a school, or a program of religious train-
ing or worship of a school, that is limited, or grants
preferences or priorities, to members of a particular
religious organization or belief, provided, that no
such policy, program, preference, or priority is based
upon race or upon a belief that requires discrimination
on the basis of race.
"(ii) The term 'race' shall include color or
national origin. "
-3-
SEC. 2. DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO ORGANIZATIONS
MAINTAINING SCHOOLS WITH RACIALLY DISCRIMINATORY
POLICIES.
(a) Section 170 of the Internal Revenue Code of 1954
(relating to allowance of deductions for certain charitable,
etc., contributions and gifts) is amended by adding at the
end of subsection (f) a new paragraph (7) reading as follows:
"(7) DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO
ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DISCRIM-
INATORY POLICIES. -- No deduction shall be allowed under
this section for any contribution to or for the use of an
organization described in section 501(j)(1) that has a
racially discriminatory policy as defined in section
501(j)(2)."
(b) Section 642 of such Code (relating to special rules
for credits and deductions) is amended by adding at the end of
subsection (c) a new paragraph (7) reading as follows:
" (7) DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO
ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DISCRIM-
INATORY POLICIES. -- No deduction shall be allowed under
this section for any contribution to or for the use of an
organization described in section 501(j)( (1) that has a
- -4-
racially discriminatory policy as defined in section
501(j)(2)."
(c) Section 2055 of such Code (relating to the allowance
of estate tax deductions for transfers for public, charitable,
and religious uses) is amended by adding at the end of subsec-
tion (e) a new paragraph (4) reading as follows:
"(4) No deduction shall be allowed under this section
for any transfer to or for the use of an organization de-
scribed in section 501(j)(1) that has a racially discrimi-
natory policy as defined in section 501(j)(2) "
(d) Section 2522 of such Code (relating to charitable and
similar gifts) is amended by adding at the end of subsection (c)
a new paragraph (3) reading as follows:
"(3) No deduction shall be allowed under this section
for any gift to or for the use or an organization described
in section 501 (j) (1) that has a racially discriminatory
policy as defined in section 501(j)(2)."
SEC. 4. EFFECTIVE DATE.
The amendments made by this Act shall apply after July 9,
1970.
THE WHITE HOUSE
WASHINGTON
January 12, 1982
MEMORANDUM FOR ELIZABETH H. DOLE
THRU:
DIANA LOZANO Diana
FROM:
MORTON BLACKWELL
WR
SUBJECT:
REAGAN ADMINISTRATION ATTACK ON RELIGIOUS SCHOOLS
In my discussions with Diana Lozano today, which I believe were
communicated to you, I emphasized the disaster that was impending
in the decision about tax exempt status for private and religious
schools.
One wonders which significant friends will next be betrayed.
I am reminded of the Aesop fable where the dog with the bone
in his mouth grabs at the reflection of himself in the water
for another bone and loses the bone that he had.
Will this decision win us the slightest increase in the black
vote in the 1982 elections? No. Will this decision immensely
anger the rapidly growing religious school community, which
has been entirely supportive of the President? Yes.
Could the President have issued a statement which would have
left this decision up to the Congress? Yes.
It is as if this was a conspiracy designed to please our enemies
and anger our allies.
We kicked the Right to Work Committee in the teeth on the Hobbs
Act, and the AFL-CIO unions established for the first time a
formal linkage with the Democratic party. What did we gain
in that exchange other than one "nice" news item?
One of my oldest friends, a key organizer of grass-roots,
conservative activity, has suggested that this is an
appropriate time for me to resign from this Administration.
Here is what I suggest. The President should by any convenient
means clarify his intentions as follows:
1. He should make it clear that any proposed legislation
must require that the burden of proof of racial
discrimination be on the government. Schools must be
presumed innocent until proven guilty.
2. He must insist that proposed legislation impose no
requirements on religious schools more restrictive than
they were before August, 1978.
Page 2.
Prior to 1978, schools were self-certified as non-segregated.
At that time, the Carter Administration proposed detailed,
obnoxious guidelines which would greatly increase the power of
the government to the detriment of private, largely religious
schools.
The Congress overwhelmingly rejected these guidelines. There
were a series of Ashbrook amendments to deny funding for
implementation of these guidelines.
On July 13, 1979, the House voted 297-63 for one of these Ashbrook
amendments. On August 20, 1980, the House voted 300-107 on the
same issue. On July 30, 1981, the House voted 337-83 for a third
time reaffirming the Ashbrook position.
On September 6, 1979, the Senate approved 47-43 a prohibition
parallel to the Ashbrook amendment. There were no Senate roll
call votes on this in 1980 and 1981.
The 1980 Republican platform specifically pledges an end to the
IRS "regulatory vendetta" against Christian schools.
The possibility arises that the Reagan Administration will force
through the Congress outrageous regulations which the Carter
Administration attempted to impose. The conservative religious
community rose up and defeated the liberal Carter scheme.
I am confident that the immense efforts which the conservative
community and the Christian school movement will now devote
in opposition to this Administration initiative will be extracted
from the amount of efforts they would have put into the campaigns
of candidates supportive of the President in the 1982 elections.
Bob Jones University is virtually the last hold out of
fundamentalist Christians who believe that race-mixing is contrary
to scripture. Virtually all of the President's supporters in
the conservative religious community disagree with the Bob Jones
policy, which is to prohibit interracial dating. But they are
certain to rise to the defense of religious schools to practice
their beliefs according to the First Amendment guarantees of
religious freedom.
Those who do not actively oppose the Administration on this issue
will at least tend to reassess the value of participating in the
political process, inasmuch as none of them were seriously consulted
prior to this basic decision by the Reagan Administration to intrude
on how they run their institutions. They will view this as the
camel's nose in their tent.
Now stand by for agitation from the feminists because the President
did not include discrimination by sex, from the gay community because
sexual orientation is not included, from the handicapped because
they were not included. This is a Pandora's Box.
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
January 18, 1982
FACT SHEET
Tax Exemption Bill Summary
The proposed legislation being submitted by the President to
the Congress will, for the first time, give the Secretary of
the Treasury and the Internal Revenue Service express authority
to deny tax-exempt status to private, non profit educational
organizations with racially discriminatory policies. The legis-
lation recognizes and is sensitive to the legitimate special
needs of private religious schools.
Section 1 of the bill adds to section 501 of the Internal
Revenue Code a new subsection that expressly prohibits granting
tax exemptions to private schools with racially discriminatory
policies, notwithstanding that such schools otherwise meet the
tests for exemption presently listed in section 501 (c) (3).
Religious schools of all faiths are permitted to limit, or give
preferences and priorities, to members of a particular religious
organization or belief in their admissions policies or religious
training and worship programs. However, the bill expressly
provides that a tax exemption will not be granted if any such
policy, program, preference or priority is based upon race
or a belief that requires discrimination on the basis of race.
Section 2 of the bill amends several sections of the Internal
Revenue Code dealing with deductions to provide, consistent with
the exemption provisions of the new law, that no deductions will
be allowed for contributions to a school with a racially discrimi-
natory policy.
A BILL
To amend the Internal Revenue Code of 1954 to prohibit the
granting of tax-exempt status to organizations maintaining
schools with racially discriminatory policies.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled,
SECTION 1. DENIAL OF TAX EXEMPTIONS TO ORGANIZATIONS MAINTAINING
SCHOOLS WITH RACIALLY DISCRIMINATORY POLICIES.
Section 501 of the Internal Revenue Code of 1954 (relating
to exemption from tax) is amended by redesignating subsection (j)
as subsection (k) and inserting a new subsection (j) reading as
follows:
"(j) ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIAL { DIS-
CRIMINATORY POLICIES. ---
"(1) IN GENERAL. -- An organization that not ally
maintains a regular faculty and curriculum (other than an
exclusively religious curriculum) and normally has a requ-
larly enrolled body of students in attendance at th. place
where its educational activities are regularly carr. ed on
shall not be deemed to be described in subsection (c)|3),
and shall not be exempt from tax under subsection (3), if
such organization has a racially discriminatory policy.
-2-
"(2) DEFINITIONS. -- For the purposes of this subsec-
tion --
"(i) An organization has a 'racially discrimi-
natory policy' if it refuses to admit students of
all races to the rights, privileges, programs, and
activities generally accorded or made available
to students by that organization, or if the organi-
zation refuses to administer its educational policies,
admissions policies, scholarship and loan programs,
athletic programs, or other programs administered
by such organization in a manner that does not dis-
criminate on the basis of race. The term 'racially
discriminatory policy' does not include an admissions
policy of a school, or a program of religious train-
ing or worship of a school, that is limited, or grants
preferences or priorities, to members of a particular
religious organization or belief, provided, that no
such policy, program, preference, or priority is based
upon race or upon a belief that requires discrimination
on the basis of race.
"(ii) The term 'race' shall include color or
national origin."
-3- -
SEC. 2. DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO ORGANIZATIONS
MAINTAINING SCHOOLS WITH RACIALLY DISCRIMINATORY
POLICIES.
(a) Section 170 of the Internal Revenue Code of 1954
(relating to allowance of deductions for certain charitable,
etc., contributions and gifts) is amended by adding at the
end of subsection (f) a new paragraph (7) reading as follows:
"(7) DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO
ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DISCRIM-
INATORY POLICIES. -- No deduction shall be allowed under
this section for any contribution to or for the use of an
organization described in section 501(j)( (1) that has a
racially discriminatory policy as defined in section
501(j)(2)."
(b) Section 642 of such Code (relating to special rules
for credits and deductions) is amended by adding at the end of
subsection (c) a new paragraph (7) reading as follows:
"(7) DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO
ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DISCRIM-
INATORY POLICIES. -- No deduction shall be allowed under
this section for any contribution to or for the use of an
organization described in section 501(j) (1) that has a
- -4-
racially discriminatory policy as defined in section
501(j)(2)."
(c) Section 2055 of such Code (relating to the allowance
of estate tax deductions for transfers for public, charitable,
and religious uses) is amended by adding at the end of subsec-
tion (e) a new paragraph (4) reading as follows:
"(4) No deduction shall be allowed under this section
for any transfer to or for the use of an organization de-
scribed in section 501(j)(1) that has a racially discrimi-
natory policy as defined in section 501(j) (2) "
(d) Section 2522 of such Code (relating to charitable and
similar gifts) is amended by adding at the end of subsection (c)
a new paragraph (3) reading as follows:
"(3) No deduction shall be allowed under this section
for any gift to or for the use or an organization described
in section 501(j)(1) that has a racially discriminatory
policy as defined in section 501 (j) (2) ."
SEC. 4. EFFECTIVE DATE.
The amendments made by this Act shall apply after July 9,
1970.
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
January 18, 1982
TEXT OF LETTER SENT TO
THE PRESIDENT OF THE SENATE AND
THE SPEAKER OF THE HOUSE
Dear Mr. President/Mr. Speaker:
As you are aware, the Department of the Treasury announced on
January 8 that the Internal Revenue Service would no longer deny
tax-exempt status to private, non-profit educational organizations
that engage in racially discriminatory practices but otherwise
qualify for such status under the present Internal Revenue Code.
That decision reflects my belief that agencies such as the IRS should
not be permitted, even with the best of intentions and to further
goals that I strongly endorse, to govern by administrative fiat by
exercising powers that the Constitution assigns to the Congress.
I share with you and your colleagues an unalterable opposition to
racial discrimination in any form. Such practices are repugnant
to all that our Nation and its citizens hold dear, and I believe
this repugnance should be plainly reflected in our laws. To that
end, I am herewith submitting to the Congress proposed legislation
that would prohibit tax exemptions for any schools that discriminate
on the basis of race. This proposed legislation is sensitive to
the legitimate special needs of private religious schools.
I pledge my fullest cooperation in working with you to enact such
legislation as rapidly as possible, and urge that you give this matter
the very highest priority.
I have been advised by the Secretary of the Treasury that he will not
act on any applications for tax exemptions filed in response to the
IRS policy announced on January 8, until the Congress has acted on
this proposed legislation.
I believe the course I have outlined is the one most consistent
both with our mutual determination to eradicate all vestiges of
racial discrimination in American society, and with a proper view
of the powers vested in the Congress under our constitutional system.
I feel this legislative action is important to and desired by all
citizens of this great Nation; I am confident that you will give this
issue the prompt attention it deserves.
Sincerely,
/s/ Ronald Reagan
REASURY NEWS
DEPARTMENT THE TREASURY
789
Department of the Treasury 0 Washington, D.C. . Telephone 566-2041
FOR IMMEDIATE RELEASE
Contact:
Marlin Fitzwater
Monday, January 18, 1982
(202) 566-5252
TREASURY - IRS TO HOLD ACTION ON TAX EXEMPTIONS
Recognizing the President's desire to have legislation
introduced to prohibit the granting of tax exemptions to
certain educational institutions that engage in racially
discriminatory practices, the Secretary of Treasury has
instructed the Commissioner of Internal Revenue not to act
on any applications for tax exemptions filed in response
to the Internal Revenue Service's policy announced on
Friday, January 8, 1982, until Congress has acted on the
proposed legislation (except as required by the memorandum
in support of the motion to vacate as filed in the Supreme
Court on January 8, 1982).
XXX
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
January 18, 1982
FACT SHEET
Tax Exemption Bill Summary
The proposed legislation being submitted by the President to
the Congress will, for the first time, give the Secretary of
the Treasury and the Internal Revenue Service express authority
to deny tax-exempt status to private, non-profit educational
organizations with racially discriminatory policies. The legis-
lation recognizes and is sensitive to the legitimate special
needs of private religious schools.
Section 1 of the bill adds to section 501 of the Internal
Revenue Code a new subsection that expressly prohibits granting
tax exemptions to private schools with racially discriminatory
policies, notwithstanding that such schools otherwise meet the
tests for exemption presently listed in section 501 (c) (3).
Religious schools of all faiths are permitted to limit, or give
preferences and priorities, to members of a particular religious
organization or belief in their admissions policies or religious
training and worship programs. However, the bill expressly
provides that a tax exemption will not be granted if any such
policy, program, preference or priority is based upon race
or a belief that requires discrimination on the basis of race.
Section 2 of the bill amends several sections of the Internal
Revenue Code dealing with deductions to provide, consistent with
the exemption provisions of the new law, that no deductions will
be allowed for contributions to a school with a racially discrimi-
natory policy.
A BILL
To amend the Internal Revenue Code of 1954 to prohibit the
granting of tax-exempt status to organizations maintaining
schools with racially discriminatory policies.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled,
SECTION 1. DENIAL OF TAX EXEMPTIONS TO ORGANIZATIONS MAINTAINING
SCHOOLS WITH RACIALLY DISCRIMINATORY POLICIES.
Section 501 of the Internal Revenue Code of 1954 (relating
to exemption from tax) is amended by redesignating subsection (j)
as subsection (k) and inserting a new subsection (j) reading as
follows:
"(j) ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DIS-
CRIMINATORY POLICIES. --
"(1) IN GENERAL. -- An organization that normally
maintains a regular faculty and curriculum (other than an
exclusively religious curriculum) and normally has a requ-
larly enrolled body of students in attendance at the place
where its educational activities are regularly carried on
shall not be deemed to be described in subsection (c) (3),
and shall not be exempt from tax under subsection (a), if
such organization has a racially discriminatory policy.
-2-
= (2) DEFINITIONS. -- For the purposes of this subsec-
tion - -
"(i) An organization has a 'racially discrimi-
natory policy' if it refuses to admit students of
all races to the rights, privileges, programs, and
activities generally accorded or made available
to students by that organization, or if the organi-
zation refuses to administer its educational policies,
admissions policies, scholarship and loan programs,
athletic programs, or other programs administered
by such organization in a manner that does not dis-
criminate on the basis of race. The term 'racially
discriminatory policy' does not include an admissions
policy of a school, or a program of religious train-
ing or worship of a school, that is limited, or grants
preferences or priorities, to members of a particular
religious organization or belief, provided, that no
such policy, program, preference, or priority is based
upon race or upon a belief that requires discrimination
on the basis of race.
"(ii) The term 'race' shall include color or
national origin."
-3-
SEC. 2. DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO ORGANIZATIONS
MAINTAINING SCHOOLS WITH RACIALLY DISCRIMINATORY
POLICIES.
(a) Section 170 of the Internal Revenue Code of 1954
(relating to allowance of deductions for certain charitable,
etc., contributions and gifts) is amended by adding at the
end of subsection (f) a new paragraph (7) reading as follows:
" (7) DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO
ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DISCRIM-
INATORY POLICIES. -- No deduction shall be allowed under
this section for any contribution to or for the use of an
organization described in section. 501(j)(1) that has a
racially discriminatory policy as defined in section
501 (j) (2) "
(b) Section 642 of such Code (relating to special rules
for credits and deductions) is amended by adding at the end of
subsection (c) a new paragraph (7) reading as follows:
"(7) DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO
ORGANIZATIONS MAINTAINING SCHOOLS WITH RACIALLY DISCRIM-
INATORY POLICIES. -- No deduction shall be allowed under
this section for any contribution to or for the use of an
organization described in section 501(j)(1) that has a
-4-
racially discriminatory policy as defined in section
501(j)(2)."
(c) Section 2055 of such Code (relating to the allowance
of estate tax deductions for transfers for public, charitable,
and religious uses) is amended by adding at the end of subsec-
tion (e) a new paragraph (4) reading as follows:
" (4) No deduction shall be allowed under this section
for any transfer to or for the use of an organization de-
scribed in section 501(j)(1) that has a racially discrimi-
natory policy as defined in section 501(j)(2)."
(d) Section 2522 of such Code (relating to charitable and
similar gifts) is amended by adding at the end of subsection (c)
a new paragraph (3) reading as follows:
"(3) No deduction shall be allowed under this section
for any gift to or for the use or an organization described
in section 501(j)(1) that has a racially discriminatory
policy as defined in section 501(i) ) (2) . 110
SEC. 4. EFFECTIVE DATE.
The amendments made by this Act shall apply after July 9,
1970.
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
January 18, 1982
TEXT OF LETTER SENT TO
THE PRESIDENT OF THE SENATE AND
THE SPEAKER OF THE HOUSE
Dear Mr. President/Mr. Speaker:
As you are aware, the Department of the Treasury announced on
January 8 that the Internal Revenue Service would no longer deny
tax-exempt status to private, non-profit educational organizations
that engage in racially discriminatory practices but otherwise
qualify for such status under the present Internal Revenue Code.
That decision reflects my belief that agencies such as the IRS should
not be permitted, even with the best of intentions and to further
goals that I strongly endorse, to govern by administrative fiat by
exercising powers that the Constitution assigns to the Congress.
I share with you and your colleagues an unalterable opposition to
racial discrimination in any form. Such practices are repugnant
to all that our Nation and its citizens hold dear, and I believe
this repugnance should be plainly reflected in our laws. To that
end, I am herewith submitting to the Congress proposed legislation
that would prohibit tax exemptions for any schools that discriminate
on the basis of race. This proposed legislation is sensitive to
the legitimate special needs of private religious schools.
I pledge my fullest cooperation in working with you to enact such
legislation as rapidly as possible, and urge that you give this matter
the very highest priority.
I have been advised by the Secretary of the Treasury that he will not
act on any applications for tax exemptions filed in response to the
IRS policy announced on January 8, until the Congress has acted on
this proposed legislation.
I believe the course I have outlined is the one most consistent
both with our mutual determination to eradicate all vestiges of
racial discrimination in American society, and with a proper view
of the powers vested in the Congress under our constitutional system.
I feel this legislative action is important to and desired by all
- citizens of this great Nation; I am confident that you will give this
issue the prompt attention it deserves.
Sincerely,
File/ IRS Bob Jones n
THE WHITE HOUSE
WASHINGTON
2/24
February 24, 1982
Jim
Fyi, JAB has
not seen
MEMORANDUM FOR EDWIN MEESE III
JAMES A. BAKER III
MICHAEL K. DEAVER
FROM:
FRED F. FIELDING 1
SUBJECT:
BOB JONES/GOLDSBORO LITIGATION
(TAX EXEMPTION FOR PRIVATE SCHOOLS)
Attached please find the memorandum from the Department
of Justice setting forth the Department's course of
action it will follow in handling the pending Supreme
Court litigation.
This should also be brought to the President's attention
at the appropriate time.
/Enclosure
-
FEB 23 1981
ENT
Office of the Attorney General
OML SEQUITUR
Washington, n. C. 20530
February 23, 1982
MEMORANDUM FOR:
Fred Fielding
Counsel to the President
FROM:
Kenneth W. Starr KUS
Counselor to the Attorney General
I am attaching an original and one photocopy of the
memorandum which we discussed yesterday. The memorandum,
as you will see, sets forth the Department's course of
action in handling the pending Supreme Court litigation.
Attachments
MEMORANDUM
On February 18, a panel of the Court of Appeals for the
District of Columbia Circuit entered an order in Wright V.
Regan, Civ. No. 76-1426, enjoining for the present the
Department of Treasury and the Internal Revenue Service from
granting tax exemptions to private schools engaged in racial
discrimination. The injunction is temporary in nature, and
not a final appealable order. It is intended to preserve
the status quo pending further action by the appellate court
in Wright on plaintiffs' motion for permanent injunctive
relief.
As a result of the February 18 order, the Department of
Treasury and IRS cannot complete the processing of tax
exemptions to Bob Jones University and Goldsboro Christian
School. This means that the Bob Jones/Goldsboro cases
currently pending on writs of certiorari in the U.S. Supreme
Court are not now likely to become moot (contrary to the
Government's January 8 filing with the Court suggesting
mootness).
In light of these legal developments, the Department of
Justice will make an additional Supreme Court filing in Bob
Jones/Goldsboro before the week's end. This filing (1) will
be in the nature of a brief of the United States; (2) will
suggest to the Court that, in light of the Wright injunctive
order, our earlier suggestion of mootness may well no longer
be applicable; (3) will seek leave to make a filing on the
merits "out of time," and (4) will address specifically both
the issue of statutory construction and the issues of First
Amendment rights. The brief will argue, first, that the IRS
lacks statutory authority to deny the tax exemptions in
question and, second, that if (contrary to the Government's
position) Congressional authorization is found to exist, no
First Amendment protections are available.
This filing will signal no new change in the
Government's position in these cases. As maintained on
January 8, the Treasury and Justice Departments will
continue to assert that the IRS lacks authority to deny
these two schools tax exemptions, thereby supporting the
position of Bob Jones and Goldsboro on the statutory
question. This is the stand that has drawn strong criticism
from the civil rights community. At the same time, the
Government will be arguing that there is no First Amendment
impediment to prevent Congress from denying tax exemptions
to private schools that practice racial discrimination.
That is the same position reflected in the legislation that
the President sent to Congress on January 12, a position
that has received criticism from certain religious groups.
It is believed likely that the Court will appoint an
amicus or permit an intervenor to argue the other side of
the statutory construction issues, seeking to uphold the
Fourth Circuit's holdings. The Bob Jones/Goldsboro cases
would likely be set for oral argument by the Supreme Court
in April and a decision rendered by the close of the Court's
Term on or about June 30, 1982.
nac
NATIONAL ASSOCIATION OF
EVANGELICALS
OFFICE OF PUBLIC AFFAIRS/1430 K STREET NW/WASHINGTON DC 20005/[202] 628-7911
February 12, 1982
Mr. Morton Blackwell
Special Assistant to the President
for Public Liaison
The White House
Washington, D.C. 20500
Dear Morton:
I wanted you to have a copy of my letter to Elizabeth Dole and
of our effort on behalf of the President to achieve a satisfactory
result concerning the racial discrimination issue.
If you read our proposed bill, the result of several days of
intense work and hard debate among evangelicals, you will discover
that religious liberty is protected but that our first emphasis is
on eliminating racial discrimination.
Cordia Be yours,
Robert P. Dugan, Jr.
Director
RPDJr:pasl
Enclosures
NAE L'OMMISSIONS
Co of on Fducation Commission
Commissione Chaplains
E. angelica C OF chrries Commission Evengelical Sor Action Commission Evangelism and Home Missions Association
Higher Ed scation Commission R ewardship Commissioner Women's Fell webp
AFFILIATES
American Associal on of Evangelica Student - nngelinal Foreign Missions Association
National Religious Broadcasters
SUBGIDIARS CORPORATIONS
Encounter Ministries, Inc.
World Relief Corporation
SERVICE AGENCIES Evanger cal Childreno Family Agency One EQO
Evanger al Family Service, Syracuse NY
Evangelical Punchasing Service Family Ministry Certitios CA Universal Travel Service
NA TIONAL OFFICE 450E Gundersen DriverP.O Bux 28/M leation. lines 60187 1312) 665-0500
nac
NATIONAL ASSOCIATION Of
EVANGELICAL
OFFICE OF BLIC AFT ARS/1430KSEBE NW WASI INGTON DC 20005/[202] 628-7911
February 12, 1982
The Honorable Elizabeth H. Dole
Assistant to the President for Public Liaison
The White House
Washington, D.C. 20500
Dear Elizabeth:
Is there any possibility that you might be able to attend the
Annual Convention of the National Association of Evangelicals, even
though our invitation comes at this late date? Your genuine, personal
expressions of interest in evangelical concerns emboldens me to
make this request. We are meeting in Arlington Heights, Illinois,
March 2-4.
The enclosed outline of the convention plenary sessions and
workshops reveals a full program. Nevertheless, we would be delighted
to make time for you to bring a significant message to the convention
in the opening plenary session on Tuesday evening. You will note
the convention theme of "Save The Family," but we would be honored
to have you speak on other crucial issues with which the Reagan
Administration is dealing if you desire to do so.
If you are able to accept this warm invitation, you might wish
to discuss the possibility of enhancing the impact of your visit
with us by one or two additional opportunities the next day. We
could discuss those on the telephone.
This letter comes with my most cordial greetings.
Faithfu yours,
Robert P. Dugan, Jr.
Director
RPDJr:jdk
Enclosures
nae
NATIONAL ASSOCIATION OF
EVANGELICALS
OFFICE OF PUBLIC AFFAIRS/1430 K STREET NW/WASHINGTON DC 20005/(202) 628-7911
PRESS RELEASE: INTERNATIONAL MEDIA SERVICES
FEBRUARY 8, 1982
CONTACT:
Robert P. Dugan, Jr., Director
Forest Montgomery, Counsel
Members of Congress are complaining about being flooded with phone calls
from fearful Christians who have been led to believe that the sky is falling
on religious freedom. We understand. Our phones have been ringing off the
hook too. We've heard what alarmists are saying.
Triggering the anxiety is the Reagan Administration bill to deny tax-
exempt status to private schools which practice racial discrimination. The
bill was quickly devised to protect the President from political harm, after
the Justice Department asked the Supreme Court to vacate the Bob Jones
University case. The adverse public reaction, charging the President with
upholding discrimination, was incredibly unforeseen by the President's
advisors. A cynic dubbed handling of the matter "botchulism" -that's b-o-t-
c-h-u-l-i-s-m." The matter was handled terribly.
The new bill does have problems, but a word of caution is in order. We
are not -- repeat, not -- facing the worst persecution of the church since
the days of the Roman Empire.
There's a storm of criticism from the right. The bill is depicted as
"an attack on all Christian schools." It isn't -- unless those schools
discriminate racially. Research shows, however, that the overwhelming
majority of Christian schools do not discriminate.
Another storm of criticism is moving in from the left. Liberals contend
that no such legislation is needed, since federal law already authorizes the
IRS to deny tax-exempt status to discriminatory schools. They're wrong too.
The Civil Rights Act is silent on the question of denying tax-exemption to a
school that is racially discriminatory and the Supreme Court has never ruled
on that issue.
In putting the worst possible interpretation on the Administration bill,
and in conjuring up the spectre of a hostile government battering down the
doors of defenseless Christian schools, some religious leaders have done a
disservice to evangelicals. We are made to appear to be defenders of
segregation and discrimination when we are not.
NAE COMMISSIONS
Commission on Chaplains
Evangelical
Churchmen Commission Evangelical Social Action Commission Evangelism and Home
Missions
Association
Higher Education Commission
Stewardship Commission
Women's Fellowship
World Relief Commission
AFFILIATES
American Association of Evangelical Students
Evangelical Foreign Missions
Association
National Association of Christian Schools
National Religious Broadcesters
National Sunday
School Association
SERVICE AGENCIES
Evangelical Family Service. Syracuse
Evengelical Child and
Family Agency, Chicago
Family Ministries, Serritas, Calif.
Evangelical Purchasing Service
National Office: 350 Main Place / Box 28 / Wheaton, Illinois 60187 / (312) 665-0500
What to do? NAE and others are working on a legislative proposal which
would deny tax-exempt status to private schools practicing racial
discrimination, while affording ample safeguards for private religious
schools against excessive government regulation. Several Senators have asked
for our help. We are optimistic about our proposal.
nae
NATH INAL ASSOCINION OF
EVANGELICALS
OFFICE OF PUBLIC AFFAIRS/1430 K STREET NW/WASHINGTON DC 20005/[202] 628-7911
PRESS RELEASE
January 11, 1982
NATIONAL ASSOCIATION OF EVANGELICALS
CONTACT: MR. FOREST MONTGOMERY, COUNSEL
A significant Supreme Court suit which pitted religious freedom against public
policy has apparently been settled without a decision by the Court.
At this point it looks as if the fundamentalist Bob Jones University has won
its case against withdrawal of its tax exempt status. The Reagan Administration
recently revoked a federal policy of denying tax exemption to private schools that
discriminate against blacks.
Was this a victory for religious freedom? Yes. And no. The discretionary
power of the IRS to define legitimate charitable tax exempt activity, on public
policy grounds, has been curbed. Good. Congress alone has that responsibility.
Bob Jones University's religious freedom had been violated in the name of public
policy.
But: the administration went too far. Dropping the case before the Supreme
Court decided it unfortunately means that even an avowedly segregationist school can
enjoy the benefits of tax exempt status. In prohibiting inter-racial marriage, Bob
Jones University was practicing a sincerely held religious belief--not invidious
racial discrimination. The distinction is crucial and was the focus of NAE's brief
in the Supreme Court on behalf of Bob Jones. Many segregationist academies are
indeed practicing blatant racial discrimination. Such racism deserves no pro-
tection.
So, the National Association of Evangelicals finds the government's decision to
drop this important case a mixed bag. The Supreme Court should have been allowed to
hear the case and we believe it would have ruled in favor of Bob Jones. NAE would
welcome congressional action denying tax exemption to schools guilty of racial dis-
crimination.
This is Bob Dugan, in Washington.
nae
NATIONAL ASSOCIATION OF
EVANGELICALS
OFFICE OF PUBLIC AFFAIRS/1430 K STREET NW/WASHINGTON DC 20005/[202] 628-7911
EXPLANATORY STATEMENT
WORKING DRAFT
of
LEGISLATIVE PROPOSAL
(This draft is for discussion purposes only;
it does not have official NAE approval.)
There is a pressing need for Congress to address difficult and
complex issues which have arisen in the implementation of provisions
of tax law which affect both the national public policy against
racial discrimination and the preservation of religious liberty.
It is believed that the attached proposal reflects a reasonable
balance of these competing considerations. The proposed bill would
afford Congress an opportunity to act responsibly in resolving
those issues.
The bill has two major purposes:
(1) To deny tax-exempt status to racially discriminatory
private schools.
(2) To prevent excessive entanglement of government with
religious schools by prescribing appropriate guidelines for rules
and regulations so that the regulatory process will not be burdensome.
The bill is an amalgam of the Administration's bill, S. 2024,
introduced by Senator Dole on January 28, 1982; Revenue Procedure
75-50, 1975-2 Cum. Bull. 587; section 5 of S. 2029, introduced by
Senator Helms on January 28, 1982; and additional provisions, such
as the findings and purposes stated in sections 2 and 3 of the
proposed bill.
The proposal closely follows the Administration's bill in
denying tax exemption to private schools that are racially discriminatory.
The proposal would remove present uncertainties occasioned by the
administration's policy change, as well as uncertainties in the
case law which existed before that policy change.
NAE COMMISSIONS
Commission on Chaplains
Evengelical
Churchmen
Commission
Evangelical Social
Action Commission
Evangelism and Home
Missions
Association
Higher Education Commission
Stewardship Commission
Women's Fellowship
World Relief Commission AFFILIATES American Association of Evangelical Students Evangelical Foreign Missions
Association Vatuloral seciation of Christian Schools National Religious Broadcasters National Sunday
School Association
SERVICE AGENCIES
Evangelical Family Service,
Syracuse
Evengelical Child and
Family Argency, Chicago
Family Ministries, Serrites, Calif.
Evangelical Purchasing Service
National Office: 350 S. Main Place / Box 28 / Wheaton, Illinois 60187 / [312] 665-0500
-2-
The proposal essentially enacts Revenue Procedure 75-50, with
changes designed to insure that the regulatory process will be the
minimum necessary for the IRS to determine if a school operates in
a racially discriminatory manner. The proposal explicitly prohibits
the kind of affirmative action contained in the IRS revenue procedures
and revised procedures published in the Federal Register of August
22, 1978, and February 13, 1980, respectively.
From section 5 of the Helms' bill, S. 2029, the proposal establishes
a declaratory judgment procedure, but expands that provision to
afford an aggrieved party basically the same cause of action that
the Secretary could bring under that section.
While adhering philosophically to much of the source materials,
constructive modifications have been made in an effort to respond
to the legitimate concerns of all groups following this matter.
A BILL
To amend the Internal Revenue Code of 1954 to deny tax exempt status
to racially discriminatory private schools, to protect religious
freedom in the promulgation of rules, regulations, and procedures
affecting private schools, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SHORT TITLE
Section 1, This Act may be cited as the "Racial Justice and
Religious Freedom Tax Act of 1982".
FINDINGS
Sec. 2. The Congress makes the following findings:
(1) People of all races are entitled to equal dignity and
respect before the law as a basic constitutional right.
(2) It is the national public policy that educational opportunity
should be available to all persons without regard to their race,
color, or national or ethnic origin.
(3) Invidious racial discrimination in education is contrary
to national public policy.
(4) The liberty of individuals and institutions to observe
and practice their religious beliefs is a basic constitutional
right.
(5) There is a pressing need to address difficult and complex
issues which have arisen in the implementation of provisions of tax
law which affect both the national public policy against invidious
racial discrimination and the preservation of religious liberty.
-2-
(6) The granting of tax exemption to private schools and the
allowance of charitable contribution deductions thereto should be
denied where such schools are operated in a racially discriminatory
manner and thus frustrate national public policy.
(7) Regulatory requirements imposed on national public policy
grounds should be based upon a clear expression of the intent of
Congress rather than left to the discretion of the Internal Revenue
Service.
(8) The involvement of religious organizations in the operation
of many private schools necessitates appropriate limitations on
regulatory and compliance activity by the Internal Revenue Service
to prevent excessive entanglement of government with religious
institutions.
STATEMENT OF PURPOSES
Sec. 3. The primary purposes of this Act are as follows:
(1) To deny tax-exempt status to private schools that practice
invidious racial discrimination.
(2) To prevent excessive entanglement of government with
religious schools by prescribing limited guidelines for rules and
regulations so that the regulatory process will not be burdensome
to private schools.
DENIAL OF TAX EXEMPTIONS TO SCHOOLS WITH RACIALLY DISCRIMINATORY
POLICIES
Sec. 4. Section 501 of the Internal Revenue Code of 1954
(relating to exemption from tax) is amended by redesignating subsection
-3-
(j) as subsection (k) and inserting a new subsection (j) as follows:
"(j) schools with racially discriminatory policies.-
(1) In general -- A school shall not be deemed to be described
in subsection (c) (3), and shall not be exempt from tax under subsection
(a), if such school has a racially discriminatory policy.
"(2) Definitions For the purposes of this subsection -
(i) A school has a 'racially discriminatory policy' if it
does not extend to students of all races on an equal basis the
rights, privileges, programs, and activities generally accorded or
made available to students by that school, or if the school discriminates
on the basis of race in administration of its admissions policies,
educational policies, scholarship and loan programs, athletic programs,
or other programs. The term 'racially discriminatory policy' does
not include an admissions policy of a school, or a program of religious
training or worship of a school, that is limited, or grants preferences
or priorities, to members of a particular religious organization if
membership in the religious organization is open to all on a racially
nondiscriminatory basis.
"(ii) The term 'race' shall include color and national or
ethnic origin.
(iii) The term 'school'shall have the same meaning it has in
section 170(b)(1)(A)(ii) of the Code."
Sec. 5. Denial of deductions for contributions to schools
with racially discriminatory policies.
(a) Section 170 of the Internal Revenue Code of 1954 (relating
to allowance of deductions for certain charitable, etc., contributions
and gifts) is amended by adding at the end of sucsection (f) a new
paragraph (7) reading as follows:
"(7) Denial of deducations for contributions to schools with
racially discriminatory policies. No deduction shall be allowed
under this section for any contribution to or for the use of a
-4-
school described in section 501(j)(1) that has a racially discriminatory
policy as defined in section 501(j) (2)
(b) Section 642 of such Code (relating to special rules for
credits and deductions) is amended by adding at the end of subsection
(c) a new paragraph (7) reading as follows:
"(7) Denial of deductions for contributions to schools with
racially discriminatory policies. No deduction shall be allowed
under this section for any contribution to or for the use of a
school described in section 501(j)(1) that has a racially discriminatory
policy as defined in section 501(j)(2)
(c) Section 2055 of such Code (relating to the allowance of
estate tax deductions for transfers for public, charitable, and
religious uses) is amended by adding at the end of subsection (e) a
new paragraph (4) reading as follows:
"(4) No deduction shall be allowed under this section for any
transfer to or for the use of a school described in section 501(j)(1)
that has a racially discriminatory policy as defined in section
501(j)(2)
(d) Section 2522 of such Code (relating to charitable and
similar gifts) is amended by adding at the end of subsection (c) a
new paragraph (3) reading as follows:
"(3) No deduction shall be allowed under this section for any
gift to or for the use of a school described in section 501(j)(1)
that has a racially discriminatory policy as defined in section
501(j)(2). =
RULES AND REGULATIONS
Sec. 6. (a) In promulgating rules and regulations implementing
the amendments to the Code made by section 4 of this Act, the Secretary
-5-
shall prescribe the minimum guidelines and recordkeeping requirements
appropriate for determining whether private schools that are applying
for recognition of exemption from federal income tax under section
501(c) (3) of the Code, or are presently recognized as exempt from
tax, have racially nondiscriminatory policies as to students.
(b) The guidelines of subsection (a) of this section shall
prescribe the following general requirements --
(1) That a school include a statement in its charter, bylaws,
or other governing instruments, or in a resolution of its governing
body, that it has a racially nondiscriminatory policy as to students
and therefore does not discriminate against applicants and students
on the basis of race, color, or national or ethnic origin.
(2) That a school include a statement of its racially nondiscrim-
inatory policy as to students in all its brochures and catalogues
dealing with student admissions, programs and scholarships, as well
as its other written advertising that it uses as a means of informing
prospective students of its programs.
(3) That a school make its racially nondiscriminatory policy
generally known to minorities in the community served by the school.
(4) That a school must be able to show that its programs and
facilities are operated in a racially nondiscriminatory manner.
(5) That, as a general rule, all scholarship or other comparable
benefits procurable for use at the school must be offered on a
racially nondiscriminatory basis. Their availability on this basis
must be generally known to minorities in the community being served
by the school and must be referred to in the publicity required by
this section.
(6) That an individual authorized to take official action on
behalf of a school that claims to be racially nondiscriminatory as
-6-
to students must certify annually, under penalties of perjury, that
to the best of his knowledge and belief the school has satisfied
the requirements of this section and implementing rules and regulations.
(7) That a school filing an application for exemption under
section 501(c) (3) of the Code must supply the Internal Revenue
Service with the following information --
(A) the racial composition for the current academic year and
the projected composition for the next academic year in terms of
students, faculty, and administrative staff,
(B) the amount of scholarships and loan funds, if any, awarded
to students enrolled and the racial composition of students who
have received such awards,
(C) a listing of incorporators, founders, board members, and
donors of land or buildings, whether individuals or organizations,
and
(D) a statement whether any of the organizations described in
subparagraph (C) of this paragraph have at the time the application
is filed an objective of maintaining segregated public or private
school education and, if so, a statement whether any of the individuals
described in subparagraph (C) of this paragraph are officers or
active members of such organizations at the time the application is
filed.
(8) That an exempt school must maintain for a minimum period
of three years, beginning with the year after the year of compilation
or acquisition, the following records for the use of the Internal
Revenue Service upon proper request --
(A) records indicating the racial composition of the student
body, faculty, and staff for each academic year,
(B) records sufficient to document that scholarships and
other financial assistance is awarded on a racially nondiscriminatory
basis, and
(C) copies of all brochures, catalogues, and advertising
dealing with student admissions, programs and scholarships.
-7-
(c) Nothing in this section shall be construed as preventing
the Secretary from accepting estimates, alternative information
sources, or making other reasonable accommodation to the recordkeeping
requirements imposed by this section where substantially the same
information may be obtained thereby. Further, nothing in this
section shall be construed as authorizing the Secretary to prescribe
by regulation or otherwise any affirmative action other than that
prescribed in this section.
(d) Failure to maintain or to produce upon a proper request
the records required by subsection (b) (8) of this section will
create a presumption that the school has failed to comply with the
guidelines of paragraphs (1) through (7) of subsection (b) of this
section, or the implementing rules and regulations.
RULES OF CONSTRUCTION
Sec. 7(a) Nothing in this Act shall be construed as authorizing
the Secretary to promulgate any rules and regulations creating
presumptions of racial discrimination or requiring affirmative
action such as the procedures published by the Internal Revenue
Service in the Federal Register on August 22, 1978, or the revised
procedures published in the Federal Register on February 13, 1980.
(b) The absence of any credible evidence that a qualified
person has been denied admission to a school because of race, color,
or national or ethnic origin shall create a presumption that the
school does not have a racially discriminatory policy. This presumption
shall be inoperative if the presumption of section (6) (d) of this
Act is applicable.
(c) Any affirmative action program initiated by a school
shall be taken into account by the Secretary as evidence of a racially
nondiscriminatory policy.
-8-
DECLARATORY JUDGMENT PROCEDURE
Sec. 8(a). Subchapter A of chapter 76 of the Internal Revenue
Code of 1954 (relating to civil actions by the United States) is
amended by redesignating section 7408 as section 7409, and by inserting
after section 7407 the following new section:
"Section 7408. ACTION TO REVOKE TAX-EXEMPT STATUS OF SCHOOL
ON BASIS OF RACIAL DISCRIMINATION
"(a) Notwithstanding technical compliance by a school with
rules and regulations promulgated by the Secretary, a civil action
for declaratory judgment may be brought by the Secretary, in the
United States district court for the district in which the school
is located, if the Secretary has reason to believe such school is
operated in a racially discriminatory manner. The Secretary shall
bear the burden of proof in any such civil action -
"(b) LIMITATIONS. --
(1) No adverse action until school has exhausted appeals. --
The Secretary shall not deny or revoke the exempt status of a school
under section 501(c)(3) or deny deductions for contributions to
such school under section 170 until the school has exhausted all
appeals from the final adverse order of the district court in the
declaratory judgment action brought under this section.
(2) The date of revocation of exemption shall be made retroactive
to the date of the district court decision declaring the school to
be operated in a racially discriminatory manner.
"(c) RETENTION OF JURISDICTION; REINSTATEMENT OF STATUS.
The district court before which an action is brought under this
section which results in the denial or revocation of exempt status
under section 501(c)(3) shall retain jurisdiction of such case, and
shall, upon a determination that such school has not operated in a
-9-
racially discriminatory manner for a period of at least a full
academic year since the initial declaratory judgment, issue an
order to such effect and vacate the revocation of exemption. Such
an order may be appealed by the Secretary, but unless vacated,
shall be binding on the Secretary with respect to qualification for
exemption under section 501(c)(3).
"(D) DISCRETIONARY AWARD OF COSTS AND FEES TO PREVAILING SCHOOL.
--In any civil action brought under this section, the prevailing
party, unless the prevailing party is the Secretary, may be awarded
a judgment of costs and reasonable attorney's fees in such action.".
(b) The table of sections for such subchapter is amended by
striking out the last item and inserting in lieu thereof the following:
"Sec. 7408. Action to revoke tax-exempt status of school on
basis of race discrimination.
"Sec. 7409. Cross references.".
(c) Civil actions by private party. --
(1) An action for declaratory judgment that a school operates
in a racially discriminatory manner may be brought by any aggrieved
party, in the United States district court for the district in
which the school is located.
(2) Costs and attorney's fees. -- The prevailing party may be
awarded a judgment of costs and reasonable attorney's fees.
(3) Retention of jurisdiction. -- The district court in which
such a civil action for declaratory judgment is filed shall retain
jurisdiction in the same manner as provided in section 7408(c) of
the Code as added by section 8(a) of this Act.
(4) Limitations. -- If the court finds that the school operates
in a racially discriminatory manner, the limitations provided in
section 7408(b) of the Code as added by section 8(a) of this Act
-10-
shall apply as if the prevailing party in such civil action were
the Secretary.
SAVINGS PROVISIONS
Sec. 9(a). The tax-exempt status of schools for the period
July 10, 1970, through the day preceding the effective date of this
act is unaffected by this Act.
(b) Any grant of tax exemption to a school prior to the effective
date of this Act to settle litigation without a final decision on
the merits is unaffected by this Act.
EFFECTIVE DATE
Sec. 10. This Act shall take effect on the day of its enactment.