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[Tuition Tax Credit Bill: Anti-Discrimination Issues] (9)
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[Tuition Tax Credit Bill: Anti-Discrimination Issues] (9)
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual
collections.
Collection: Barr, William Files
Folder Title:[Tuition Tax Credit Bill: Anti-
Discrimination Issues] (9)
Box: 13
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]
Citation Guidelines: https://reaganlibrary.gov/citing
WITHDRAWAL SHEET
Ronald Reagan Library
Collection: BARR, WILLIAM: Files
Archivist: cas
File Folder: [Tuition Tax Creditg] [14 of 14] OA 9094
Date: 9/18/98
Bill Discrimination Issues]
DOCUMENT
SUBJECT/TITLE
DATE
RESTRICTION
NO. AND TYPE
1. memo
Michael Uhlmann to Edwin Harper re Bob Jones tax
10/14/82
P5
exemption/racial discrimination case p.
2
only
COS
(1 p.)
10/5/00
2. memo
copy of item #1 p. 2 only (1 p.)
10/14/82
P5
RESTRICTION CODES
Presidential Records Act [44 U.S.C. 2204(a)]
Freedom of Information Act [5 U.S.C. 552(b)]
P-1 National security classified information [(a)(1) of the PRA].
F-1 National security classified information [(b)(1) of the FOIA].
P-2 Relating to appointment to Federal office [(a)(2) of the PRA].
F-2 Release could disclose internal personnel rules and practices of an agency [(b)(2) of the
P-3 Release would violate a Federal statute [(a)(3) of the PRA].
FOIA].
P-4 Release would disclose trade secrets or confidential commercial or financial information
F-3 Release would violate a Federal statue ((b)(3) of the FOIA].
[(a)(4) of the PRA].
F-4 Release would disclose trade secrets or confidential commercial or financial information
P-5 Release would disclose confidential advice between the President and his advisors, or
[(b)(4) of the FOIA].
between such advisors [(a)(5) of the PRA).
F-6 Release would constitute a clearly unwarranted invasion of personal privacy [(b)(6) of the
P-6 Release would constitute a clearly unwarranted invasion of personal privacy [(a)(6) of
FOIA].
the PRA].
F-7 Release would disclose information compiled for law enforcement purposes [(b)(7) of
the FOIA].
C. Closed in accordance with restrictions contained in donor's deed of gift.
F-8 Release would disclose information concerning the regulation of financial institutions
[(b)(8) of the FOIA].
F-9 Release would disclose geological of geophysical information concerning wells ((b)(9) of
the FOIA].
090842
DOCUMENT NO.
PD
OFFICE OF POLICY DEVELOPMENT
STAFFING MEMORANDUM
DATE:
10/18/82
ACTION/CONCURRENCE/COMMENT DUE BY:
FYI
SUBJECT:
Bob Jones Tax Exemption/Racial Discrimination Case
ACTION FYI
ACTION
FYI
HARPER
DRUG POLICY
PORTER
TURNER
BARR
D. LEONARD
BOGGS
OFFICE OF POLICY INFORMATION
BRADLEY
HOPKINS
CARLESON
COBB
DENEND
PROPERTY REVIEW BOARD
FAIRBANKS
OTHER
FERRARA
GALEBACH
GARFINKEL
GUNN
B. LEONARD
LI
MONTOYA
ROCK
ROPER
SMITH
UHLMANN
ADMINISTRATION
REMARKS:
See note on page 2.
Edwin L. Harper
Please return this tracking
Assistant to the President
sheet with your response
for Policy Development
(x6515)
OFFICE OF
THE WHITE HOUSE
POLICY DEVELOPMENT
WASHINGTON
1982 OCT 15 P 5: 10
October 14, 1982
MEMORANDUM FOR EDWIN L. HARPER
FROM:
MICHAEL M. UHLMANN
SUBJECT:
Bob Jones Tax Exemption/Racial Discrimination Case
(Reference 090842)
Steve Galebach reports the following observations from the
oral argument in this case before the Supreme Court on Tuesday,
October 12.
The briefs filed on our side were well-crafted, a good match
for the massively researched amicus brief filed against us by
William Coleman. Brad Reynolds and the attorneys for Bob Jones
and Goldsboro Schools made a strong legal argument that existing
tax law does not allow the IRS to impose its notions of federal
public policy to cut off tax exempt status for racially discrim-
inatory schools. If the Court looks seriously at the law of this
case, rather than just the politics, we should win.
The Washington Post coverage was more favorable to our posi-
tion than one might have expected. The Post reporter went out of
his way to acknowledge the reputation of Bob Jones's counsel,
William Ball, as a leading constitutional litigator who opposes
racial discrimination but who took this case out of concern for
the legal aspects and the religious liberty implications. The
reporter did not try to cast our side as apologists for racism.
Further, it was evident at the argument that the Justices
are sensitive to the dangerous implications of upholding IRS
power in this case. Justice O'Connor asked Coleman if his logic
would not apply equally against churches that discriminate on the
basis of race. Coleman had no real answer.
Justice Powell asked why other compelling federal policies
would not militate equally against tax exemption for certain
groups, such as those dealing with sex discrimination. Coleman
answered that race discrimination is a category apart, which is
true, but his argument provided little comfort to those who fear
that IRS and the courts could extend any broad concept of public
policy to encompass more than just racial discrimination.
-2-
Recommendation
Agril
We should be ready with two basic alternative courses of
action, depending on which way the Bob Jones case is decided:
o If the Court decides in favor of our position, we must be
ready with a statute such as the one we proposed in Jan-
uary; we could probably now improve on that wording in
light of our experience with the Tuition Tax Credit bill,
in designing an anti-discrimination provision acceptable
to a broad liberal-conservative spectrum.
If the Supreme Court decides against our position, we
should be ready to take immediate action to guarantee
that the IRS not be able to apply its own public policy
notions to churches as well as schools, or to deviations
from other federal policies beyond anti-racial discrimi-
nation. There are two steps that could be very effec-
tive in this regard, and that could be pursued simul-
taneously:
-- introducing a statute saying that tax exempt status
under 501(c)3 is barred only for schools that dis-
criminate on the basis of race; and
-- having the IRS publish a notice of proposed rule-
making, requesting opinions of interested parties on
what types of institutions should be barred from tax
exempt status by federal policy, and which federal
policies should be enforced to deny tax exempt
status. If the comments so warranted, the IRS could
then publish a final rule stating that only educa-
tional institutions are affected, and only the
federal policy against racial discrimination is so
compelling as to apply to bar tax exempt status.
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
December 22, 1982
FOR:
BILL BARR
FROM:
STEVE GALEBACH
I have had this lying around for a while without time to work
on it. How would you like to take a crack at it?
A related question is how we revise our tuition tax credit
legislation with regard to racial discrimination provisions, and
whether we introduce it at the start of the new Congress or wait
until after the Bob Jones decision comes out.
Bill- Let's plan course of artin
T.- Ser L w/ to Bill
090842
DOCUMENT NO.
PD
OFFICE OF POLICY DEVELOPMENT
STAFFING MEMORANDUM
DATE:
10/18/82
ACTION/CONCURRENCE/COMMENT DUE BY:
FYI
SUBJECT:
Bob Jones Tax Exemption/Racial Discrimination Case
ACTION FYI
ACTION
FYI
HARPER
DRUG POLICY
PORTER
TURNER
BARR
D. LEONARD
BOGGS
OFFICE OF POLICY INFORMATION
BRADLEY
HOPKINS
CARLESON
COBB
DENEND
PROPERTY REVIEW BOARD
FAIRBANKS
OTHER
FERRARA
GALEBACH
GARFINKEL
GUNN
B. LEONARD
LI
MONTOYA
ROCK
ROPER
SMITH
UHLMANN
ADMINISTRATION
REMARKS:
See note on page 2.
Edwin L. Harper
Please return this tracking
Assistant to the President
sheet with your response
for Policy Development
(x6515)
OFFICE OF
THE WHITE HOUSE
POLICY DEVELOPMENT
WASHINGTON
1982 OCT 15 P 5: 10
October 14, 1982
MEMORANDUM FOR EDWIN L. HARPER
FROM:
MICHAEL M. UHLMANN
SUBJECT:
Bob Jones Tax Exemption/Racial Discrimination Case
(Reference 090842)
Steve Galebach reports the following observations from the
oral argument in this case before the Supreme Court on Tuesday,
October 12.
The briefs filed on our side were well-crafted, a good match
for the massively researched amicus brief filed against us by
William Coleman. Brad Reynolds and the attorneys for Bob Jones
and Goldsboro Schools made a strong legal argument that existing
tax law does not allow the IRS to impose its notions of federal
public policy to cut off tax exempt status for racially discrim-
inatory schools. If the Court looks seriously at the law of this
case, rather than just the politics, we should win.
The Washington Post coverage was more favorable to our posi-
tion than one might have expected. The Post reporter went out of
his way to acknowledge the reputation of Bob Jones's counsel,
William Ball, as a leading constitutional litigator who opposes
racial discrimination but who took this case out of concern for
the legal aspects and the religious liberty implications. The
reporter did not try to cast our side as apologists for racism.
Further, it was evident at the argument that the Justices
are sensitive to the dangerous implications of upholding IRS
power in this case. Justice O'Connor asked Coleman if his logic
would not apply equally against churches that discriminate on the
basis of race. Coleman had no real answer.
Justice Powell asked why other compelling federal policies
would not militate equally against tax exemption for certain
groups, such as those dealing with sex discrimination. Coleman
answered that race discrimination is a category apart, which is
true, but his argument provided little comfort to those who fear
that IRS and the courts could extend any broad concept of public
policy to encompass more than just racial discrimination.
-2-
Agreed Thousand
Recommendation
We should be ready with two basic alternative courses of
action, depending on which way the Bob Jones case is decided:
o If the Court decides in favor of our position, we must be
ready with a statute such as the one we proposed in Jan-
uary; we could probably now improve on that wording in
light of our experience with the Tuition Tax Credit bill,
in designing an anti-discrimination provision acceptable
to a broad liberal-conservative spectrum.
If the Supreme Court decides against our position, we
should be ready to take immediate action to guarantee
that the IRS not be able to apply its own public policy
notions to churches as well as schools, or to deviations
from other federal policies beyond anti-racial discrimi-
nation. There are two steps that could be very effec-
tive in this regard, and that could be pursued simul-
taneously:
-- introducing a statute saying that tax exempt status
under 501 (c) 3 is barred only for schools that dis-
criminate on the basis of race; and
-- having the IRS publish a notice of proposed rule-
making, requesting opinions of interested parties on
what types of institutions should be barred from tax
exempt status by federal policy, and which federal
policies should be enforced to deny tax exempt
status. If the comments so warranted, the IRS could
then publish a final rule stating that only educa-
tional institutions are affected, and only the
federal policy against racial discrimination is so
compelling as to apply to bar tax exempt status.
B.11-
Murren 5 points
LAW OFFICES
BALL & SKELLY
may be welpful to keep
511 N. SECOND STREET
P.O. BOX 1108
in wind in drafting a $ 11.
HARRISBURG, PENNSYLVANIA 17108
S.
TELEPHONE
WILLIAM BENTLEY BALL
AREA CODE 717
JOSEPH G. SKELLY
232-8731
PHILIP J. MURREN
RICHARD E. CONNELL
KATHLEEN A.O'MALLEY
SANDRA E. WISE
February 14, 1983
Stephen H. Galebach, Esq.
Old Executive Office Building
The White House
Washington, D.C. 20500
Dear Steve:
As you requested, we enclose herewith our most recent
(February, 1982) draft of legislation amending IRC §501 in
order to deny tax exemption to racially segregative
educational institutions.
Numerous refinements are needed in this draft, and any
such legislation will of course have to be carefully crafted
to fit the precise contours of the forthcoming Supreme Court
decision. Consider this draft, then, an embodiment of
certain principles:
(1) That the term "racially discriminatory", when
applied to educational institutions, carries too much
previous interpretive baggage (negative) to permit schools
the comfort of knowing the exact scope of activities from
which they will be deterred, or for which they will face
this extremely severe penalty.
(2) That findings of fact re-affirming the importance
of liberty in religious, and other private education are
essential.
(3) Only that conduct by an institution which is
specifically intended to penalize a person because of
his/her race should be proscribed.
Stephen H. Galebach, Esq.
- 2 -
(4) IRS administrative power and discretion must be
narrowly circumscribed by clear definitions, prohibitions
and procedures, in order to minimize the potential for abuse
by this, the federal agency possessing the greatest arsenal
of procedural weapons and legal presumptions.
(5) No express denial of exemption must be directed at
any institution's particular religious beliefs, even those
beliefs which relate specifically to the question of race.
This had been a shortcoming of the Administration's prior
bill (S. 2024).
We most urgently ask that we be consulted carefully
prior to introduction of any bill on this subject which
bears the Administration's endorsement.
We also believe it imperative that no legislation be
permitted to rush through Congress on the tide of emotional
or media-induced reaction to a favorable Supreme Court
ruling. Here intervention with the Senate Finance Committee
members and staff appears critical.
Congratulations on the nuptials, and much happiness to
to you.
Very Phil truly yours,
Philip J. Murren
Enc.
CC: Dr. Bob Jones, III
John C. Stophel, Esq.
Mr. Jack Clayton
A BILL
To amend the Internal Revenue Code of 1954 to prohibit the
granting of tax-exempt status to organizations maintaining
racially segregative schools.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled,
SECTION 1. FINDINGS.
(a) The Congress finds that -
(1) It is the policy of the United States that
educational opportunity is to be available to all
persons without limitations based upon a person's
race, nationality or ethnic origin;
(2) Racially segregative institutions, as defined
herein, should not enjoy tax-exempt status; the right
of persons to equality before the law is a civil right;
(3) The liberty of individuals and institutions to
observe and practice sincerely held religious beliefs is
also a civil right, and no non-tax-funded educational
institution which is religious in character and would
not exist except for its religious mission should be
denied tax-exempt status on the ground that any such
observance or practice does not conform to governmental
policy, it being contrary to the national tradition of
liberty of mind and spirit to permit government to pre-
scribe what shall be orthodox in matters of belief;
(4) The American constitutional principle of church-
state separation requires that government be barred, in
its taxing activities, from excessive entanglements with
religious educational institutions;
(5) While the denial of tax-exempt status to private,
non-tax-funded religious educational institutions can burden
or destroy them, tax exemption does not constitute a sub-
sidy to such institutions, nor does the tax exemption of
such institutions constitute "financial assistance" to them
within the meaning of such acts of Congress as title VI of
the Civil Rights Act of 1964 and title IX of the Education
Amendments of 1972.
SEC. 2. DENIAL OF TAX EXEMPTION TO ORGANIZATIONS MAIN-
TAINING RACIALLY SEGREGATIVE SCHOOLS.
Section 501 of the Internal Revenue Code of 1954 (re-
lating to exemption from tax) is amended by redesignating
subsection (j) as subsection (k) and inserting a new sub-
section (j) reading as follows:
"(j) ORGANIZATIONS MAINTAINING RACIALLY SEGREGATIVE
SCHOOLS. --
"(1) IN GENERAL. -- An organization that normally
maintains a regular faculty and curriculum and
normally has a regularly 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
maintains a racially segregative school.
"(2) DEFINITION. -- For the purposes of this
subsection the term "Racially segregative school"
means a school which maintains a policy (whether
written or as evidenced by a pattern of conduct)
whereby it intentionally and deliberately denies
admission to, expels, limits the availability of
its programs to, or provides for separate treatment
for, persons as students on the basis of their race,
color, or national or ethnic origin. Such term shall
not be construed to preclude the limitation, by a
religious school, of admissions, or granting of pre-
ferences to students of the religious faith of that
school."
SEC. 3. DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO ORGANIZATIONS
MAINTAINING RACIALLY SEGREGATIVE SCHOOLS.
(a) Section 170 of the Internal Revenue Code of 1954 (re-
lating 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 RACIALLY SEGREGATIVE SCHOOLS. --
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) which maintains a racially segregative
school 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:
- 2 -
"(7) DENIAL OF DEDUCTIONS FOR CONTRIBUTIONS TO
ORGANIZATIONS MAINTAINING RACIALLY SEGREGATIVE SCHOOLS. --
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) which maintains a racially
segregative school 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
described in section 501 (j) (1) which maintains a racially
segregative school 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 an organiza-
tion described in section 501(j) (1) which maintains a
racially segregative school as defined in section
501 (j) (2) "
SEC. 4. DECLARATORY JUDGMENT PROCEDURE ESTABLISHED.
(a) IN GENERAL. -- 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 7409, and by inserting after section 7407 the following
new section:
"SEC. 7408. ACTION TO REVOKE OR DENY TAX-EXEMPT
STATUS OF PRIVATE SCHOOL ON BASIS
OF RACIAL SEGREGATION.
"(a) GENERAL RULE. -- The Secretary may not --
"(1) revoke or change the qualification
or classification of a private school as an
organization described in section 501 (c) (3)
which is exempt from taxation under section
501(a),
"(2) deny, withhold approval of, the
initial qualification or classification of a
private school as such an organization, or
'(3) condition acceptance or approval of
an application for qualification or classifica-
tion of a private school as such an organization,
or
-3-
"(4) revoke the advance assurance of
deductibility issued to a private school,
on the grounds that the school is racially segrega-
tive unless a court of the United States, in a civil
action for a declaratory judgment brought by the
Secretary in accordance with the provisions of this
section, has found that the school is intentionally
racially segregative.
(b) PROCEDURE TO BE FOLLOWED BY THE SECRE-
TARY. - -Whenever the Secretary has reason to believe
that a private school is racially segregative, the
Secretary shall file a civil action for a declaratory
judgment in the United States district court for the
district in which the private school is located.
'(c) NO ADVERSE ACTION UNTIL SCHOOL HAS
EXHAUSTED APPEALS. -- In the case of a private
school with respect to which a court has found
under subsection (a) that it is racially segre-
gative, the Secretary shall not take any action
with respect to the initial qualification or
continued qualification of the school as an
organization described in section 501 (c) (3) which
is exempt from tax under section 501 (a) or as an
organization described in section 170(c) (2) (B),
section 642, section 2055, or section 2522, until
the school has exhausted all appeals from the final
order of the district court in the declaratory judg-
ment action brought under this section.
(d) RETENTION OF JURISDICTION; REINSTATEMENT
OF STATUS. -- The district court before which an
action is brought under this section which resulted
in the denial of initial qualification or revocation
of qualification of a private school as an organiza-
tion described in section 501 (c) (3) which is exempt
from tax under section 501 (a), or as an organization
described in section 170 (c) (2) (B), section 642,
section 2055, or section 2522, shall retain jurisdic-
tion of such case, and shall, upon a determination
that such school has not been racially segregative
for a period of not less than a full school year since
such denial or revocation became final, and shall issue
an order to such effect and vitiate such denial or
revocation. Such an order may be appealed by the
Secretary, but, unless vacated, be binding on the
Secretary with respect to such qualification.
- 4 -
'(e) AWARD OF COST 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 attorney's fees in such action.
SEC. 5. EFFECTIVE DATE.
The amendments made by this Act shall apply to actions
of the Secretary of the Treasury taken with respect to the
initial qualification or continuing qualification of an organi-
zation as an organization described in section 501 (c) (3) of the
Internal Revenue Code of 1954 which is exempt from taxation under
section 501 (a) of such Code, or which is described in section
170 (c) (2) (B), section 642, section 2055, or section 2522 of such
Code, after the date of enactment of this Act; Provided, however,
that no school, and no donors thereto, shall be accorded retro-
active recognition of tax-exempt status or deductibility of con-
tributions on the basis of this Act.
- 5 -
$ 104
CONGRESSIONAL RECORD SENATE
January 28, 1982
from Kansas introduced that legisla-
religious beliefs is a civil right, and no edu-
"(ii) was not given a bad conduct dis-
charge, or, If an officer. did not resign for
tion by request on behalf of the ad-
cational institution which is religious in
ministration today. Furthermore, the
character and would not exist except for its
the good of the service;".
(b) The amendments made by this Act
Senate Finance Committee has sched-
religious mission should be denied tax.
shall apply with respect to terminations of
uled hearings on this matter for next
exempt status on the ground that any such
service on or after July 1, 1981, but only for
observance or practice does not conform to
the purposes of determining eligibility for
Monday, February 1.
Since today's session of the Senate is
governmental policy;
benefits for weeks of unemployment begin-
abbreviated due to the joint session to
(10) the Secretary of the Treasury should
ning after the date of the enactment of this
celebrate the 100th anniversary of the
be required to bring an action for declara-
Act.
tory judgment in the Federal courts to as-
CHANGES IN EXISTING LAW PROPOSED To BE
birth of President Franklin Roosevelt,
certain whether a private school has a ra-
MADE BY S. 2028
I will not take the Senate's time to dis-
cially discriminatory policy as to students
[Delete material in brackets; add material in
cuss this bill now. But I will be making
prior to any action affecting the tax-exempt
italics]
further remarks on this bill at a later
status of, or deductibility of contributions,
TITLE 5-GOVERNMENT
time.
to such school.
ORGANIZATION AND EMPLOYEES
Mr. President, I ask unanimous con-
(b) Therefore, Congress determines that-
sent that my bill be printed in the
(1) private schools with a racially discrimi-
RECORD.
natory policy as to students should not be
There being no objection, the bill
Chapter 85-UNEMPLOYMENT
granted tax-exempt status under section 501
was ordered to be printed in the
of the Internal Revenue Code of 1954 and
COMPENSATION
RECORD, as follows:
contributions to such schools should not be
S. 2029
deductible under section 170 of such Code,
Be it enacted by the Senate and House of
and
Subchapter II-Ex-Servicemen
Representatives of the United States of
(2) the Secretary of the Treasury should
§ 8521. Definitions; Application.
America in Congress assembled,
be required to bring an action for declara-
(a) For the purposes of this subchapter-
SHORT TITLE
tory judgment in the Federal courts to as-
(1) "Federal service" means active service,
SECTION 1. This Act may be cited as the
certain whether a private school has a ra-
including active duty for training purposes,
"Private School Non-Discrinination and
cially discriminatory policy as to students
In the armed forces which either began
Due Process Act of 1982".
prior to any action affecting the tax-excmpt
after January 31, 1955, or terminated after
FINDINGS: DECLARATION OF CONGRESSIONAL
status of, or deductibility of contributions
October 27, 1958, if-
POLICY
to, such school.
[(A) that service was continuous for 365
days or more, or was terminated earlier be-
SEC. 2. (a) Congress finds that-
DENIAL OF EXEMPTION FROM TAX TO PRIVATE
cause of an actual service-incurred injury or
(1) private schools with a racially discrimi-
SCHOOLS WITH RACIALLY DISCRIMINATORY
disability; and]
natory policy as to students should not be
POLICIES
(A) that service was-
granted tax-exempt status under section 501
SEC. 3. Section 501 of the Internal Reve-
(i) continuous for 730 days or more or was
of the Internal Revenue Code of 1954 and
terminated earlier because of an actual serv-
contributions to such schools should not be
nue Code of 1954 (relating to exemption
deductible under section 170 of such Code;
from tax) is amended by redesignating sub-
ice-incurred injury or disability; or
(2) it is the policy of the United States
section (j) as subsection (k) and inserting in
(ii) continuous for 365 days and was
that the granting of Federal tax exemptions
lieu thereof the following new subsection:
either terminated under section 1171 or 1173
of title 10; and
and deductions not encourage racial dis-
"(j) PRIVATE SCHOOLS WITH RACIALLY Dis-
(B) with respect to that service, the indi-
crimination among citizens, especially with
CRIMINATORY POLICIES.-
vidual-
regard to the opcration of private schools;
"(1) IN GENERAL.-A private school that
[(i) was discharged or released under hon-
(3) during the 1970's, the Internal Reve-
normally maintains a regular faculty and
orable conditions;
nue Service exceeded its statutory authority
curriculum (other than an exclusively reli-
[(ii) did not resign or voluntarily leave
by issuing and enforcing revenue rulings
gious curriculum) and normally has a regu-
the service; and
and procedures which denied tax-exempt
larly enrolled body of students in attend-
[(iii) was not released or discharged for
status to private schools meeting certain cri-
cause as defined by the Secretary of De-
teria of racial discrimination and which
ance at the place where its educational ac-
fense;]
denied deductions for charitable contribu-
tivities are regularly carried on shall not be
tions to such schools;
deemed to be described in paragraph (3) of
(i) was discharged or released under con-
(4) such actions were not authorized by
subsection (c), and shall not be exempt from
ditions other than dishonorable; and
section 501 or section 170 of the Internal
tax under subsection (a), if such school has
(ii) was not given a bad conduct dis-
charge, or if an officer, did not resign for the
Revenue Code of 1954, their legislative his-
a racially discriminatory policy as to stu-
good of the service;
tories, or any other Act of Congress;
dents.
(5) the financial well-being of many pri-
"(2) DEFINITIONS.-For purposes of this
By Mr. HELMS:
vate schools depends on the assurance that
subsection-
S. 2029. A bill to amend the Internal
contributions to such schools are deductible
"(A) RACIALLY DISCRIMINATORY POLICY AS
Revenue Code of 1954 to prohibit the
under the Internal Revenue Code, and any
TO STUDENTS.-A private school has a 'racial-
action by the Internal Revenue Service af-
granting of tax-cxempt status to pri-
ly discriminatory policy as to students' if it
fecting the tax-exempt status of such
vate schools with racially discriminato-
schools threatens their existence;
has been found, pursuant to the procedure
ry policies and to require the Secre-
(6) the granting of exemptions from Fed-
established by section 7408, intentionally to
tary of the Treasury to obtain a judi-
eral taxation does not constitute a subsidy
deny admission to, expel, or provide sepa-
rate classifications for students on the basis
cial finding of racial discrimination
or financial assistance to the beneficiaries
before terminating or denying tax-
thereof, and Acts of Congress which place
of race, color, or national origin. The term
exempt status to private schools on
conditions on the receipt of Federal grants,
'racially discriminatory policy as to stu-
such as title VI of the Civil Rights Act of
dents' does not include an admissions policy
the grounds of racial discrimination;
1964 and title IX of the Education Amend-
of a school which limits its students to, or
to the Committee on Finance.
ments of 1972, do not apply to organizations
grants preferences or priorities to, members
PRIVATE SCHOOL NON-DISCRIMINATION AND DUE
solely because they are tax-exempt;
of a particular religious organization or
PROCESS ACT OF 1982
(7) many private schools in the United
belief and does not include any policy, pro-
Mr. HELMS. Mr. President, today I
States are operated by religious organiza-
gram, or other activity of a school which is
offer legislation to help clear up the
tions or associations and as such are entitled
limited to members of a particular religious
to the free exercise of religion as guaran-
confusion surrounding recent actions
organization, or which is required by any
teed by the first amendment to the Consti-
regarding the tax-exempt status of pri-
sincerely held religious belief.
tution;
rate religious schools.
(8) the first amendment to the Constitu-
"(B) PRIVATE SCHOOL--The term 'private
Much has been said and written
tion requires that Congress exercise utmost
school' means any privately operated school
about his issue, and I perceive that
care when legislating in areas that may
which meets the requirements of State law
some in the media-and some outside
touch on the free exercise of religion, and it
relating to compulsory school attendance
the media-are confused.
bars the Federal Government, in its taxing
other than a school offering care or instruc-
activities, from excessive entanglements
tion for students solely below the first
The President has sent a legislative
with religious educational institutions;
grade, nursery schools, schools for the blind
proposal to Congress, and I under-
(9) the liberty of individuals and institu-
or deaf, or schools operated solely for the
stand that my distinguished colleague.
tions to observe and practice sincerely held
handicapped or emotionally disturbed.".
January 28, 1982
CONGRESSIONAL RECORD - SENATE
105
DENIAL OF DEDUCTION FOR CONTRIBUTION TO
"(1) EVIDENTIARY STANDARD.-In an action
United States is not self-sufficient in
PRIVATE SCHOOL WITH RACIALLY DISCRIMINA-
brought under subsection (b), the Secretary
the production of refined copper.
TORY POLICIES
shall be required to prove, by clear and con-
Nonetheless, however, the current
SEC. 4. (a) Subsection (f) of section 170 of
vincing evidence, that the private school has
tariff language discriminates against
the Internal Revenue Code of 1954 (relating
adopted a racially discriminatory policy as
to allowance of deductions for certain chari-
to students (as defined in section 501(j)(2)).
importers of copper scraps for domes-
table contributions and gifts) is amended by
"(2) No adverse action until school has ex-
tic end-use application; in particular,
adding at the end thereof the following new
hausted appeals.-
companies which produce cuprous
In the case of a private school with re-
paragraph:
oxide from the copper scrap item rod
"(7) DENIAL OF DEDUCTION FOR CONTRIBU-
spect to which a court has found under sub-
mill scale. Currently, importers have
section (a) that it has a racially discrimina-
TION TO PRIVATE SCHOOL WITH RACIALLY DIS-
to pay a duty of 8 cents per pound of
CRIMINATORY POLICIES.-No deduction shall
tory policy as to students. the Secretary
shall not deny or revoke its exempt status
contained copper on all scale imported
be allowed under this section for any contri-
bution to or for the use of a private school
under section 501 or deny deductions for
from Canada; however, a smelter or re-
contributions to such school under section
finer of the same product would not
described in section 501(j).".
(b) Subsection (c) of section 642 of such
170 until such organization has exhausted
pay any duty. The existing policy dis-
Code (relating to special rules for credits
all appeals from the final order of the dis-
criminates against imported applica-
and deductions with respect to estates and
trict court in the declaratory judgment
tion for this raw material and presents
trusts) is amended by adding at the end
action brought under this section.
an additional hardship on companies
thereof the following new paragraph:
"(d) RETENTION OF JURISDICTION: REIN-
which import this copper scrap item.
"(7) DENIAL OF DEDUCTION FOR CONTRIBU-
STATEMENT OF STATUS.-The district court
TION TO PRIVATE SCHOOL WITH RACIALLY DIS-
before which an action is brought under
For various reasons resting on tech-
CRIMINATORY POLICIES.-No deduction shall
this section which results in the denial or
nicalities, it is not possible to amend
be allowed under this section for any contri-
revocation of exempt status under section
currently existing tariff schedules to
bution to or for the use of private school de-
501 or the denial of a deduction under sec-
compensate for this anomaly.
scribed in section 501(j).".
tion 170 shall retain jurisdiction of such
Acting on the advice of the Depart-
(c) Subsection (e) of section 2055 of such
case, and shall, upon a determination that
ment of the Treasury and the Customs
Code (relating to the allowance of estate tax
such school-
deductions for transfers for public, charita-
"(1) has not had a racially discriminatory
Service, the most viable method of as-
blc. and religious uses) is amended by
policy as to students for a period of not less
sisting American importers of copper
than a full academic year since such denial
rod mill scale to sccure duty-free
adding at the end thereof the following new
or revocation became final, and
status is to establish a new tariff item
paragraph:
"(5) No deduction shall be allowed under
"(2) does not have a racially discriminato-
number providing for the free entry of
this section for any transfer to or for the
ry policy as to students.
this particularly described merchan-
use of a private school described in section
issue an order to such effect and vitiate
dise.
501(j)."
such denial or revocation. Such an order
Mr. President, I ask unanimous con-
(d), Subsection (c) of section 2522 of such
may be appealed by the Secretary, but
unless vacated, be binding on the Secretary
sent that this bill be printed in the
Code (relating to charitable and similar
gifts) is amended by adding at the end
with respect to such qualification.
RECORD.
thereof the following new paragraph:
"(e) AWARD OF COST AND FEES TO PREVAIL-
There being no objection, the bill
"(3) No deduction shall be allowed under
ING SCHOOL.-In any civil action brought
was ordered to be printed in the
this section for any gift to or for the use of
under this section, the prevailing party,
RECORD, as follows:
a private school described in section 501(j).".
unless the prevailing party is the Secretary,
2031
DECLARATORY JUDGMENT PROCEDURE
may be awarded a judgment of costs and at-
ESTABLISHED
torney's fees in such action."
Be it enacted by the Senate and House of
"(f) SECTION TO APPLY ONLY TO SCHOOLS
Representatives of the United States of
SEC. 5. (a) Subchapter A of chapter 76 of
WITH PUBLICLY ANNOUNCED POLICY OF NON-
America in Congress assembled, That sub-
the Internal Revenue Code of 1954 (relating
DISCRIMINATION-Subsection (a) shall not
part B of part 1 of the Appendix to the
to civil actions by the United States) is
apply with respect to any private school
Tariff Schedules of the United States (19
amended by redesignating section 7408 as
unless that school has published, in such
U.S.C. 1202) is amended by inserting in nu-
section 7409, and by inserting after section
manner as the Secretary may require, public
merical sequence the following new item:
7407 the following new section:
notice that it does not have a racially dis-
SEC. 7408. ACTION TO REVOKE OR DENY
"911.05 Copper scale
Free.
No change.
On
or
after
criminatory policy as to students."
(provided for in
the 3-year
TAX-EXEMPT STATUS OF PRI-
(b) The table of sections for such sub-
item 603.50. part
period
VATE SCHOOL ON BASIS OF
1. schedule 6).
beginning
RACIAL DISCRIMINATION.
chapter is amended by striking out the last
on the
"(a) GENERAL respect to a pri-
item and inserting in lieu thereof the fol-
date of the
lowing:
enactment
vate school (as defined in section 501(j)),
of this
the Secretary may not-
"Sec. 7408. Action to revoke or deny tax-
item."
"(1) revoke or change the exempt status
exempt status of private school on basis of
of a private school under section 501(a),
racial discrimination.
"(2) deny or withhold approval of an ap-
"Sec. 7409. Cross references.".
SEC. 2. The amendment made by the first
section of this Act shall apply with respect
plication for exempt status under such sec-
EFFECTIVE DATA
to articles entered, or withdrawn from ware-
tion by a private school,
SEC. 6. The amendments made by this Act
house for consumption. on or after the date
"(3) condition acceptance or approval of
shall apply to actions taken by the Secre-
of the enactment of this Act.
an application by a private school for
tary after the date of enactment of this
exempt status under such section,
Act.
"(4) revoke the advance assurance of
By Mr. SASSER (for himself and
exempt status issued to a private school, or
By Mr. BAUCUS:
Mr. BAKER):
"(5) deny a deduction under section 170 as
S. 2031. A bill to provide for a 3-year
S. 2032. A bill to amend section
to contributions made to a private school,
suspension of the duty on copper
103(e)(4) of title 23, United States
on the grounds that such school discrimi-
scale; to the Committee on Finance.
Code, to provide that amounts availa-
nates on the basis of race as to students
SUSPENSION OF DUTY ON COPPER SCALE
ble as a result of a withdrawal of ap-
unless a court of the United States, in a civil
Mr. BAUCUS. Mr. President, within
proval of a portion of the Interstate
action for a declaratory judgment brought
the language of the U.S. Customs'
Highway System may be used to pro-
by the Secretary in accordance with the
tariff item 911.10, pertaining to copper
vide operating assistance for mass
provisions of this section, has found that
such school has a racially discriminatory
waste and scrap, an anomaly has been
transportation systems; to the Com-
policy as to students.
created which discriminates against
mittee Environment and Public
"(b) PROCEDURE To BE FOLLOWED BY THE
importers of copper rod mill scale
Works.
SECRETALY.-Whenever the Secretary has
from Canada.
URBAN MASS TRANSIT COSTS
rcason to believe that a private school has a
It is my belief that public and con-
racially discriminatory policy as to students,
Mr. SASSER. Mr. President, I am
the Secretary shall file a civil action for a
gressional policy did not intend for
pleased to introduce today, along with
declaratory judgment in the United States
this discrimination: quite conversely,
my distinguished colleague Senator
district court for the district in which the
the suspension of duty on copper
BAKER, S. 2032, a bill designed to
private school is located.
waste imported from Canada is appro-
permit interstate highway transfer
"(c) LIMITATIONS.-
priate public policy because the
funds to be used for the purpose of de-
60 TEXAS LAW REVIEW 259 (1982)
Observation
Tax Exemptions for Racially Discriminatory
Religious Schools
Douglas Laycock*
Section 501(c)(3) of the Internal Revenue Code exempts charita-
ble, educational, and religious organizations from tax on their income.¹
Charitable contributions to organizations exempt under section
501(c)(3) generally may be deducted from the donor's taxable income.²
Other sections exempt these organizations from unemployment taxes³
and some social security taxes.4
Since 1970, the Internal Revenue Service has denied tax exempt
status to schools that discriminate on the basis of race. The Service was
forced to adopt this policy in Mississippi as a result of litigation;5 there-
after, it voluntarily applied the policy to the rest of the country.⁶ The
Reagan administration temporarily abandoned this policy in January
1982. It explained that Congress had not included a nondiscrimination
requirement in section 501(c)(3), and that the executive branch had no
authority to impose such a requirement on its own.⁷ Four days later, in
response to widespread protest, the administration announced that it
would submit legislation denying tax exemptions to racially discrimina-
*
Professor of Law, The University of Texas. B.A., 1970, Michigan State University, J.D.
1973, University of Chicago. My views on this subject have been sharpened by conversations with
Stephen Cohen, Calvin Johnson, Steven Goode, Sanford Levinson, William Marshall, John Rob-
ertson, Elizabeth Warren, and Mark Yudof.
1. I.R.C. § 501(c)(3) (1976); see also id. § 501(a).
2. Id. § 170(a)(1), (c)(2).
3. Id. § 3306(c)(8).
4. Id. § 3121(b)(8)(B).
5. Green V. Kennedy, 309 F. Supp. 1127 (D.D.C.) (preliminary injunction), appeal dismissed
sub nom. Cannon V. Green, 398 U.S. 956 (1970), permanent injunction issued sub nom. Green V.
Connally, 330 F. Supp. 1150 (D.D.C.), aff'd mem. sub пот. Coit V. Green, 404 U.S. 997 (1971).
6. Internal Revenue Service News Releases (July 10 and July 19, 1970), [1970] STAND. FED.
TAX REP. (CCH) 11 6790, 6814. This policy was subsequently formalized in Revenue Rulings 71-
447, 1972-2 C.B. 230, and 75-231, 1975-1 C.B. 158. The development of the policy is reviewed in
"Statement by Randolph W. Thrower Before the Ways and Means Committee on the Tax Exempt
Status of Racially Discriminatory Private Schools," 35 TAX LAW. 701, 701-09 (1982) [hereinafter
cited as "Statement by Randolph W. Thrower"].
7. Senate Finance Committee, "Summary of Documents Submitted by the Department of
Treasury, Department of Justice and Internal Revenue Service," reprinted in XIV TAX NOTES 306,
308 (Feb. 8, 1982) [hereinafter cited as Finance Committee Report].
259
Texas Law Review
Vol. 60:259, 1982
tory schools.⁸ Civil rights groups opposed the legislation on the ground
that it was unnecessary;9 representatives of segregated schools opposed
it on the merits. 10 As of this writing, the legislation has not made sig-
nificant progress toward enactment. Meanwhile, the administration
has announced that it will not grant any tax exemptions until the con-
troversy is resolved,¹ and a court of appeals has issued a stay order
preserving the status quo of no exemptions.¹²
Most of the public discussion surrounding the controversy has em-
phasized the Reagan administration's departure from the national
commitment to racial equality. The administration has denied any dis-
criminatory intent and defended its position by appealing to the sepa-
ration of powers principle and respect for congressional authority. But
the dispute also raises important issues of religious freedom, issues that
have received surprisingly little attention from the administration, the
civil rights community, or the press. 13 Many of the tax exempt schools
are religious schools. Indeed, the administration's review of the issue
was triggered by its need to file a brief in the Supreme Court in Bob
Jones University V. United States,¹⁴ in which the Service denied a per-
vasively religious school a tax exemption because it banned interracial
dating among its students. Bob Jones argues, and the United States
now agrees, that section 501(c)(3) exempts schools whether or not they
discriminate. Bob Jones also argues that the first amendment religion
clauses protect its discriminatory policy and preclude the United States
from denying tax exemptions because of that policy. The United States
disagrees with Bob Jones on the first amendment issue,¹⁵ and the ad-
ministration's bill¹⁶ does not have an exception for religious schools
8. Id.
9. Reagan's Bill on Racial Bias Faces Trouble, Wall St. J., Feb. 1, 1982, at 23, col. 3.
10. Id.
11. Finance Committee Report, supra note 7, at 308.
12. Wright V. Regan, 49 A.F.T.R.2d 82-757 (D.C. Cir. 1982).
13. Aspects of the issue have been analyzed in student case notes and two recent law review
articles. Compare Simon, The Tax-Exempt Status of Racially Discriminatory Religious Schools, 36
TAX L. REV. 477 (1981) (concluding that freedom of religion does not preclude denial of tax
exemptions to schools that discriminate), and Comment, The Tax-Exempt Status of Sectarian Edu-
cational Institutions that Discriminate on the Basis of Race, 65 IOWA L. REV. 258 (1979) (same), and
2 WHITTIER L. REV. 713 (1980) (same), with Neuberger & Crumplar, Tax Exempt Religious
Schools Under Attack: Conflicting Goals of Religious Freedom and Racial Integration, 48 FORD-
HAM L. REV. 229 (1979) (same, but proposed revenue procedures for identifying discriminatory
schools are unconstitutional), and Note, The Internal Revenue Service's Treatment of Religiously
Motivated Racial Discrimination by Tax Exempt Organizations, 54 NOTRE DAME LAW. 925 (1979)
(some church schools that discriminate are constitutionally protected from denial of tax exemp-
tions), and 50 U. CIN. L. REV. 615 (1981) (same).
14. 639 F.2d 147 (4th Cir. 1980), cert. granted, 102 S. Ct. 386 (1981).
15. Justices to Rule on Tax Status of Biased Schools, Wall St. J., Apr. 20, 1982, at 4, col. 1.
16. S. 2024, 97th Cong., 2d Sess. (1982).
260
Tax Exemptions
that discriminate on the basis of race. Bob Jones and a companion
case¹⁷ are still pending before the Supreme Court. The Court has in-
vited an amicus curiae to defend the denial of exemptions, 18 and the
cases have been carried over to next term.
I. The Competing Rights
The controversy over tax exemptions for racially discriminatory
schools requires resolution of a conflict between two of our most pre-
cious rights. In the absence of extraordinarily strong countervailing
considerations, racial discrimination ought to be prohibited and tax ex-
emptions denied to any organization that discriminates on the basis of
race. But when religious organizations are denied an exemption be-
cause of their discriminatory practices, the right to free exercise of re-
ligion raises just such a strong countervailing consideration.
Three aspects of the liberty protected by the free exercise clause
are at stake in this conflict, each independently sufficient to limit gov-
ernment interference with church racial policy. First is the right of
conscientious objection to government policy. 19 A few churches consci-
entiously believe that God commands racial discrimination. We may
respond that God commands no such thing, and that such beliefs are
despicable. As citizens, we may denounce such churches, or seek to
persuade them of their error. But such churches are protected in their
beliefs; the free exercise clause protects unpopular churches as well as
popular ones.
Some judges and commentators have approached the problem of
racially discriminatory churches as though conscientious objection
were the only free exercise right at stake. 20 But that is an error; two
other free exercise rights are independent of conscientious objection.
The second free exercise right at issue is freedom from discrimination
among religions, a right also protected by the establishment clause. 21
17. Goldsboro Christian Schools, Inc. V. United States, 436 F. Supp. 1314 (E.D.N.C. 1977),
aff'a mem., 644 F.2d 879 (4th Cir.), cert. granted; 102 S. Et. 386 (1981).
18. Bob Jones Univ. V. United States, 102 S. Ct. 1965 (1982); Goldsboro Christian Schools,
Inc. V. United States, 102 S. Ct. 1964 (1982).
19. See Thomas v. Review Bd., 450 U.S. 707 (1981); Wisconsin V. Yoder, 406 U.S. 205
(1972); Sherbert v. Verner, 374 U.S. 398 (1963); Laycock, Towards a General Theory of the Religion
Clauses: The Case of Church Labor Relations and the Right to Church Autonomy, 81 COLUM. L.
REV. 1373, 1389-90 (1981).
20. See, e.g., Fiedler V. Marumsco Christian School, 631 F.2d 1144 (4th Cir. 1980); Brown V.
Dade Christian Schools, Inc., 556 F.2d 310, 314 (5th Cir. 1977), cert. denied, 434 U.S. 1063 (1978);
Simon, supra note 13, at 501; Note, supra note 13, at 945-46 n.125.
21. See Larson v. Valente, 102 S. Ct. 1673, 1683 (1982); Everson V. Board of Educ., 330 U.S.
1, 15 (1947); Adams & Hanlon, Jones V. Wolf: Church Autonomy and the Religion Clauses of the
First Amendment, 128 U. PA. L. REV. 1291, 1337 (1980); Casad, The Establishment Clause and the
261
Texas Law Review
Vol. 60:259, 1982
For government to grant tax exemptions to churches that do not dis-
criminate, and deny tax exemptions to churches that do discriminate, is
to approve of some churches and disapprove of others. However much
we may disapprove of churches that practice discrimination, govern-
ment cannot act on our disapproval; such picking and choosing among
approved and disapproved religions is at the very core of what the re-
ligion clauses were designed to prevent.
Third, and often overlooked, is the right of church autonomy.²²
Churches are entitled to autonomy in the management of their internal
affairs. A church that discriminates should not be required to show
that it feels compelled to do so by conscience or divine command.
Many activities that are not required by conscience or doctrine are ob-
viously exercises of religion; singing in the church choir and reciting
the Roman Catholic rosary are obvious examples. Managing the
church is another. When a church decides that its institutions should
be segregated, it is exercising religion, even if it chooses segregation
simply as a matter of policy, with or without a theological basis, and
whether or not it justifies its policy to the government.23
It is neither easy nor pleasant to choose between racial equality
and freedom of religion. The question is not which right is more im-
portant, although it has sometimes been formulated in those terms. 24
Both rights are extraordinarily important. Both are enshrined in the
Constitution. Even conceding that some constitutional rights may be
more important than others, both of these rights have been counted
among our preferred freedoms.²⁵
The first amendment religion clauses were adopted in response to
specific and recent experience of religious intolerance,²⁶ just as the
Ecumenical Movement, 62 MICH. L. REV. 419, 422-23 (1964); Ellman, Driven from the Tribunal:
Judicial Resolution of Internal Church Disputes, 69 CALIF. L. REV. 1378, 1407 (1981); Laycock,
supra note 19, at 1382, 1413-14. Government may not discriminate among religions with respect
to any element of free exercise.
22. See Jones V. Wolf, 443 U.S. 595 (1979); NLRB V. Catholic Bishop, 440 U.S. 490 (1979);
Serbian E. Orthodox Diocese V. Milivojevich, 426 U.S. 696 (1976); Adams & Hanlon, supra note
21.
23. I have argued for the existence of such a right of church autonomy elsewhere, see Lay-
cock, supra note 19, at 1389-1417, and I will not repeat that analysis here.
24. Bob Jones, 639 F.2d at 153-54; Neuberger & Crumplar, supra note 13, at 271; Simon,
supra note 13, at 509-10; see also Green V. Connally, 330 F. Supp. 1151, 1167, 1169 (D.D.C.
1971).
25. The famous footnote in United States V. Carolene Prods. Co., 304 U.S. 144, 152 n.4
(1938), singled out both religious and racial minorities for special constitutional solicitude. The
first case cited in the paragraph on minorities is Pierce V. Society of Sisters, 268 U.S. 510 (1925),
which upheld the right to attend religious schools in lieu of public schools. Also see West Virginia
State Bd. of Educ. V. Barnette, 319 U.S. 624, 639 (1943) (religion); Jackson V. Statler Found., 496
F.2d 623 (2d Cir. 1974) (race).
26. Everson V. Board of Educ., 330 U.S. 1, 8-11 (1947); see S. COBB, THE RISE OF RELIGIOUS
262
Tax Exemptions
fourteenth amendment equal protection clause was adopted in response
to racial intolerance. Religious persecution has been as common and
as vicious as racial oppression in the history of mankind.27 It simply
will not do to say that racial equality is more important than religion,
or that religion is more important than racial equality. Posing the
question in those terms only invites each of us to choose the right we
prefer for ourselves. In our highly secularized society, it may be that a
majority would find racial equality more important. Thirty years ago,
a majority would have found religion more important, and racial
equality not very important at all. Opinion polls cannot substitute for
the Constitution; the very purpose of constitutional rights is to insulate
important freedoms from changes in majority opinion. Asking which
right is more important will not resolve the conflict between them.
Rather, the problem is to determine the appropriate scope of each
right. I submit the following principle as the basis for reaching the
answer: the internal affairs of churches are an enclave where the free
exercise clause must control; outside such enclaves, the policy against
racial discrimination controls. When one seeks to affiliate with a
church, or with a pervasively religious school, he must do so on the
church's terms. Similarly, when the church ventures into secular soci-
ety, it must do so on society's terms.
Let me explain the second half of the proposed principle first. A
religiously motivated citizen who is conscientiously opposed to racial
equality encounters legally required nondiscrimination almost every-
where he goes. His government cannot discriminate; his places of pub-
lic accommodation cannot discriminate; his employer cannot
discriminate; his landlord cannot discriminate. Indeed, he cannot dis-
criminate himself. If he owns a business, he must hire and serve all
races on an equal basis. 28 If he buys or sells property, he must deal
with blacks and whites on equal terms.² His objection to racial equal-
ity does not entitle him to be excused from these obligations; when he
participates in government or the secular economy, he must obey the
secular rules that apply to all.
The result is no different when his church acts collectively. The
LIBERTY IN AMERICA 19-73 (1902) & (reprint 1970); M. GREENE, THE DEVELOPMENT OF RELIG-
IOUS LIBERTY IN CONNECTICUT 233-72 (1905) & (reprint 1970); L. PFEFFER, CHURCH, STATE AND
FREEDOM 20-30, 71-93 (1953).
27. See sources cited in Laycock, Taking Constitutions Seriously: A Theory of Judicial Re-
view, 59 TEXAS L. REV. 343, 386 n.327 (1981).
28. See 42 U.S.C. § 1981 (1976), construed in Johnson V. Railway Express Agency, Inc., 421
U.S. 454, 459-60 (1975); 42 U.S.C. § 2000a(a) (1976).
29. See 42 U.S.C. § 1982 (1976), construed in Jones V. Alfred H. Mayer Co., 392 U.S. 409
(1968).
263
Texas Law Review
Vol. 60:259, 1982
church is not entitled to exclude blacks from the public park during a
church picnic. 30 It is not entitled to discriminate in its operation of a
commercial business. Indeed, I believe that if a church offers the
church building itself for sale in the open market, it cannot discrimi-
nate among potential buyers on the basis of race. Our societal commit-
ment to racial equality is so important that the views of dissenting
churches are regularly subordinated to it whenever the church, or an
individual believer, ventures into the outside world.
Inside the church, however, the balance must be struck the other
way. The churches must be free to select their own members on any
terms they choose, and to discríminate among those members on any
terms the faithful will accept. Despite the strong national policy
against sex discrimination, Congress has no power to tell the Catholic
Church it must ordain women. 32 Similarly, Congress had no power to
tell the Church of Jesus Christ of Latter Day Saints to admit blacks to
the priesthood before the recent change in that church's teaching on the
subject. Ordering a church to admit black members is not much differ-
ent. And when a church school is pervasively religious, run as an inte-
gral part of the church itself, ordering it to accept black students is also
not much different. The free exercise clause requires that pervasively
religious schools not be penalized for discrimination in admissions or
other internal policies.³³
A statute denying tax exemptions to schools that discriminate will
seriously infringe the autonomy even of church schools that do not dis-
criminate, because every school will face the risk of being required to
prove its nondiscriminatory policy. Even nondiscriminatory churches
with long and admirable records of educating minorities³⁴ have reason
30. See Gilmore V. City of Montgomery, 417 U.S. 556 (1974).
31. See King's Garden, Inc. V. FCC, 498 F.2d 51, 56-57 (D.C. Cir.), cert. denied, 419 U.S.
996 (1974); cf. NLRB V. World Evangelism, Inc., 656 F.2d 1349, 1353-54 (9th Cir. 1981) (rejecting
church's claim to exemption from National Labor Relations Act, 29 U.S.C. §§ 151-169 (1976), for
its wholly owned hotel).
32. ,See McClure V. Salvation Army, 460 F.2d 553, 558 (5th Cir.), cert. denied as untimely
filed, 409 U.S. 896 (1972).
33. For an elaboration of the distinction between internal and external matters, see Laycock,
supra note 19, at 1403-09. For an analysis of the religious function of church schools, see id. at
1411.
34. For example, over 90% of private, inner-city schools enrolling low-income blacks are
Catholic, Lutheran, Baptist, Episcopalian, or Seventh Day Adventist. T. VITULLO-MARTIN,
CATHOLIC INNER CITY SCHOOLS: THE FUTURE 15 (1979). Catholic schools have had far greater
success than public schools in educating low-income minorities. J. COLEMAN, T. HOFFER & S.
KILGORE, HIGH SCHOOL ACHIEVEMENT (1982); A. GREELEY, CATHOLIC HIGH SCHOOLS AND MI-
NORITY STUDENTS (1982). There were 249,300 blacks and 261,200 Hispanics enrolled in Catholic
schools in 1981-82. F. BREDEWEG, A STATISTICAL REPORT ON U.S. CATHOLIC SCHOOLS 1981-82,
at 16. Yet many of the schools run by these churches in white neighborhoods would have to prove
their innocence under the nondiscrimination injunction described in the next paragraph of text.
264
Tax Exemptions
to fear the governmental intrusion required to enforce a nondiscrimina-
tion policy. Consider the injunction issued in Green V. Miller,35 order-
ing the Internal Revenue Service to adopt more vigorous procedures
for identifying discriminatory schools. There the district court ruled
that an inference of present discrimination arises with respect to any
private school that was established or expanded while the public
schools in its locality were desegregating. That is not an implausible
inference; many private schools were established for the express pur-
pose of creating a segregated alternative to forcibly integrated public
schools. But it is plainly an overbroad inference. Desegregation cases
can drag on for years, and many private schools have been established
or expanded for perfectly innocent reasons during local public school
desegregation. What must such schools do to rebut the inference of
discrimination? The only means suggested in the injunction is an ag-
gressive program to recruit black students and teachers. 36 For a reli-
gious school established to educate the members of a particular church,
such a recruiting program would require a serious diversion of effort
from its religious purpose. Such burdens are regularly imposed on sec-
ular organizations, but to impose them on churches is to interfere with
the free exercise of religion.³⁷
Indeed, any shifting of the burden of proof that requires churches
to prove their entitlement to the tax exemption, rather than requiring
government to prove their lack of entitlement, is constitutionally sus-
pect. This is true even if churches are not entitled to discriminate. This
is the teaching of Speiser V. Randall³⁸ and First Unitarian Church V.
County of Los Angeles.³⁹ In those cases, California denied tax exemp-
tions to individuals and churches who refused to sign a loyalty oath.
The Supreme Court held that because freedom of speech was at stake,
California could not require taxpayers to prove their loyalty; rather, it
must assume the burden of proving their disloyalty. The principle is
simply that the risk of error in fact finding must be allocated in favor of
35. 45 A.F.T.R.2d 80-1566, 1567 (D.D.C. 1980).
36. Id. Some recruiting efforts would have little effect. A survey of blacks in one county in
Georgia indicated strong preference for the public school and organized efforts in the black com-
munity to discourage black support for the private school. Only some of the black hostility was
based on doubt that the private school's advertised open admissions policy was sincere. "State-
ment by Randolph W. Thrower," supra note 6, at 710-11.
37. Neuberger & Crumplar, supra note 13, analyze a proposed revenue procedure similar to,
but less stringent than, the injunction in Green. Although they believe that churches have no right
to discriminate, id. at 271, they conclude that the proposed procedure was unconstitutional.
38. 357 U.S. 513 (1958).
39. 357 U.S. 545 (1958).
265
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the constitutional right. There is no reason to believe that free exercise
rights are entitled to lesser protection.
Even so, Speiser would not squarely invalidate an attempt to apply
the injunction in Green to religious schools. California reversed the
burden of proof for all taxpayers, without any preliminary showing by
the state; Green reversed the burden of proof only for a class of schools
believed to be more likely to discriminate than others. But because the
government is required to show so little, and the resulting inference of
discrimination is so overbroad, many innocent schools will find them-
selves in the same situation as the taxpayers in Speiser and Unitarian
Church. It requires only a very limited extension of Speiser and Uni-
tarian Church to invalidate the injunction in Green when it is applied to
church schools.
II. The Supreme Court's Cases
The Supreme Court has not yet specifically decided whether
churches and church schools that discriminate may be denied a tax ex-
emption available to all other churches and schools. It has decided
cases in other contexts that strongly support the principles I have just
summarized. One line of cases restricts state entanglement in church
affairs.40 This doctrine was developed in response to establishment
clause challenges to aid to church schools, but it has recently been ex-
tended to government regulation of churches.⁴¹ Another line of cases
restricts secular resolution of internal church disputes, especially in
cases of schisms and disputed clerical appointments.⁴²
In these cases, the Court has made clear that individuals affiliate
themselves with a church on the church's own terms. It has repeatedly
stated that all who join a church do so with the "implied consent" to its
government, to which they "are bound to submit."43 The Court has
40. Committee for Pub. Educ. & Religious Liberty V. Regan, 444 U.S. 646, 659-60 (1980);
NLRB V. Catholic Bishop, 440 U.S. 490, 501-03 (1979); Roemer v. Board of Pub. Works, 426 U.S.
736, 765 (1976); Meek v. Pittenger, 421 U.S. 349, 372 (1975); Hunt V. McNair, 413 U.S. 734, 745-49
(1973); Lemon V. Kurtzman, 403 U.S. 602, 620-21 (1971); Walz V. Tax Comm'n, 397 U.S. 664, 674-
76 (1970). For an analysis of the relationship between the Court's entanglement doctrine and the
right to church autonomy, see Laycock, supra note 19, at 1392-94.
41. NLRB V. Catholic Bishop, 440 U.S. 490, 501-03 (1979).
42. Jones V. Wolf, 443 U.S. 595 (1979); Serbian E. Orthodox Diocese V. Milivojevich, 426
U.S. 696 (1976); Maryland & Va. Eldership of the Churches of God V. Church of God, 396 U.S.
367 (1970); Presbyterian Church V. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393
U.S. 440 (1969); Kedroff V. Saint Nicholas Cathedral of the Russian Orthodox Church, 344 U.S.
94 (1952); Gonzalez V. Roman Catholic Archbishop, 280 U.S. 1 (1929); Watson V. Jones, 80 U.S.
(13 Wall.) 679 (1871). For analysis of these cases, see Adams & Hanlon, supra note 21; Ellman,
supra note 21, at 1387-1400; Laycock, supra note 19, at 1394-98.
43. Serbian E. Orthodox Diocese V. Milivojevich, 426 U.S. 696, 711 (1976); Presbyterian
266
Tax Exemptions
said that it is "the essence of religious faith that ecclesiastical decisions
are reached and are to be accepted as matters of faith whether or not
rational or measurable by objective criteria. Constitutional concepts of
due process, involving secular notions of 'fundamental fairness' or im-
permissible objectives, are therefore hardly relevant
"44 These
cases imply that a church can expel a member for any reason, including
his race; it follows that a church can refuse to admit a member for any
reason in the first place. Analogously, under the free speech clause the
Court has recognized that freedom to associate in political parties "nec-
essarily presupposes the freedom to identify the people who comprise
the association, and to limit the association to those people only."45
The Court has also recognized that the right to church autonomy
extends beyond matters compelled by conscience. It has recognized
"freedom for religious organizations, an independence from secular
control or manipulation-in short, power to decide for themselves, free
from state interference, matters of church government as well as those
of faith and doctrine."46 It has extended constitutional protection to
"church administration"⁴⁷ and "the operation of the churches. The
Court has also held that the ban on secular resolution of disputes over
church doctrine "applies with equal force to disputes over church polity
and church administration."
More recently, the Court held that church schools are exempt from
the National Labor Relations Act.⁵⁰ Finding a serious risk of excessive
government entanglement with religion, the Court avoided the consti-
tutional issue by requiring Congress to express clearly its affirmative
intention that the Act be applied in circumstances of such doubtful
constitutionality.5¹ Finding no such clear expression, the Court held
the Act inapplicable. The constitutional issue was not actually re-
Church V. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440, 446 (1969);
Watson V. Jones, 80 U.S. (13 Wall.) 679, 729 (1871).
44. Serbian E. Orthodox Diocese v. Milivojevich, 426 U.S. 696, 714-15 (1976) (footnote
omitted).
45. Democratic Party v. Wisconsin ex rel. LaFollette, 450 U.S. 107, 122 (1981).
46. Kedroff V. Saint Nicholas Cathedral of the Russian Orthodox Church, 344 U.S. 94, 116
(1952); accord Presbyterian Church V. Mary Elizabeth Blue Hull Memorial Presbyterian Church,
393 U.S. 440, 448 (1969); see Serbian E. Orthodox Diocese V. Milivojevich, 426 U.S. 696, 721-22
(1976).
47. Kedroff V. Saint Nicholas Cathedral of the Russian Orthodox Church, 344 U.S. 94, 107
(1952); accord Jones V. Wolf, 443 U.S. 595, 605 (1979); Serbian E. Orthodox Diocese v.
Milivojevich, 426 U.S. 696, 710 (1976).
48. Kedroff v. Saint Nicholas Cathedral of the Russian Orthodox Church, 344 U.S. 94, 107
(1952).
49. Serbian E. Orthodox Diocese V. Milivojevich, 426 U.S. 696, 710 (1976).
50. NLRB V. Catholic Bishop, 440 U.S. 490 (1979).
51. Id. at 500.
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Vol. 60:259, 1982
solved, and the National Labor Relations Act, although quite impor-
tant, is not as important as the policy of racial equality. But the case is
another illustration of the basic principle I have suggested: churches
have a constitutionally protected interest in the autonomous manage-
ment of their internal affairs, including the affairs of their schools.
III. The Lower Court Cases
The lower courts that have considered the questions raised by Γa-
cially discriminatory religious schools have been sharply divided. The
Green litigation, in which the Commissioner was ordered not to exempt
discriminatory schools, has not decided the free exercise issue; no con-
troversy concerning a church school has been squarely presented
there.⁵² Two cases in the Fourth Circuit have raised the issue. In Bob
Jones University v. United States,⁵³ the district judge ruled that a perva-
sively religious university was constitutionally entitled to a section
501(c)(3) exemption despite its ban on interracial dating among its stu-
dents. In the court of appeals, two judges voted to reverse, largely be-
cause they found racial equality more important than freedom of
religion;54 one judge dissented and noted that he would have dissented
even if the university had adhered to its former policy of not admitting
unmarried black students.⁵ In Goldsboro Christian Schools, Inc. V.
United States,⁵ the district judge upheld the denial of a section
501(c)(3) exemption to a pervasively religious school that refused to
admit any blacks. The Fourth Circuit affirmed without opinion. Both
cases are now pending before the Supreme Court.
There have also been two closely analogous cases involving pri-
vate discrimination suits against religious schools. In Brown V. Dade
Christian Schools, Inc.,57 in which plaintiffs had been denied admis-
sion, no majority could agree on anything. Five judges found it unnec-
essary to balance free exercise rights against antidiscrimination policy,
because, in their view, the church's policy of segregation was not reli-
giously motivated.⁵ Two judges found that antidiscrimination policy
outweighed free exercise on the particular facts, because they did not
52. Green V. Connally, 330 F. Supp. 1150, 1169 (D.D.C.), aff'd mem. sub nom. Coit V. Green,
404 U.S. 997 (1971).
53. 468 F. Supp. 890 (D.S.C. 1978), rev'd, 639 F.2d 147 (4th Cir. 1980), cert. granted, 102 S.
Ct. 386 (1981).
54. 639 F.2d 147, 153-54 (4th Cir. 1980), cert. granted, 102 S. Ct. 386 (1981).
55. Id. at 164.
56. 436 F. Supp. 1314 (E.D.N.C. 1977), affd mem, 644 F.2d 879 (4th Cir.), cert. granted, 102
S. Ct. 386 (1981).
57. 556 F.2d 310 (5th Cir. 1977) (en banc), cert. denied, 434 U.S. 1063 (1978).
58. Id. at 312-14 (plurality opinion).
268
Tax Exemptions
find segregation to be a very important part of the church's beliefs.
They found that the church believed that admitting blacks would be to
disobey God, but not to endanger eternal salvation.⁵ Six judges found
a serious conflict between the free exercise clause and antidiscrimina-
tion policy and voted to remand for further consideration; one of these
judges indicated his belief that "no court should have the power to
compel any church to admit any student to any school operated for
religious reasons. In Fiedler V. Marumsco Christian School,61 the dis-
trict judge found that the school's ban on interracial dating was consti-
tutionally protected. The court of appeals reversed, following the five-
judge opinion in Dade Christian and holding that the policy was not
religiously motivated.⁶ Apparently, neither church in these cases as-
serted its interest in autonomous management of internal affairs.
The only generalization one can make about these lower court
cases is that every judge took the freedom of religion issue seriously.
No consensus has emerged, or even a majority view.
IV. Implementing a Legislative Exemption for Religious Schools
At least until the Supreme Court speaks in Bob Jones and Golds-
boro, the precise issue remains open. But the general principles of the
religion clauses indicate the solution: There must be an exemption for
pervasively religious schools, and it should not be limited to schools
that feel conscientiously compelled to discriminate.
It is important that such an exemption be carefully drafted. Con-
gress should grant tax exemptions to schools that are sincerely and per-
vasively religious without including private segregation academies that
insincerely seek to bring themselves under a religious umbrella. There
will be some close cases, but the task is manageable. The Supreme
Court has already distinguished pervasively religious schools from
other schools, in the cases on public aid to church schools. 63 The sim-
plest drafting solution might be to use a phrase like "pervasively reli-
gious," and indicate in the legislative history that the statute adopted
the test from those cases. But those cases have not developed clear
rules capable of being immediately applied to the wide variety of
schools that seek section 501(c)(3) status. Congress might prefer to
draft its own definition. The goal is to protect schools that are so reli-
59. Id. at 321 (Goldberg & Brown, JJ., concurring).
60. Id. at 326 (Coleman, J., dissenting).
61. 486 F. Supp. 960 (E.D. Va. 1979), rev'd, 631 F.2d 1144 (4th Cir. 1980).
62. 631 F.2d 1144 (4th Cir. 1980).
63. See, e.g., Hunt V. McNair, 413 U.S. 734, 743-44 (1973).
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gious that attending them is constitutionally equivalent to joining the
church. If a school requires certain religious beliefs as a condition of
admission, or gives preference to persons with those beliefs, or if it
makes a concerted effort to integrate religious instruction into the en-
tire curriculum, the persons who apply for admission submit them-
selves to the school's religious authority and cannot complain if they
are discriminated against. In my judgment, the principle of Speiser V.
Randall⁶⁴ requires that the government carry the burden of proving
that a school is not pervasively religious.
It is not pleasant to contemplate litigation over whether schools
are pervasively religious; litigation over sensitive religious issues is to
be avoided wherever possible.⁶⁵ But litigation over pervasive religios-
ity is not nearly as bad as the alternatives. Those judges who make the
right to free exercise protection turn on whether the school's policy is
compelled by official church doctrine require much more sensitive liti-
gation. Those who insist that the school's policy be compelled by im-
portant church doctrine require even more outrageous litigation;67
secular courts have no business distinguishing among religious beliefs
on the basis of whether the believer thinks a particular disobedience of
God will be punished by damnation. The remaining alternatives are to
abandon any effort at distinction and either deny tax exemptions even
to pervasively religious schools or grant tax exemptions even to secular
segregation academies. Neither of those alternatives is acceptable, be-
cause either completely sacrifices one of the two competing policies
that the Constitution requires us to protect.
V. The Distinction Between Denying Tax Exemptions and Other
Penalties
Some commentators believe that it is constitutional to deny tax
exemptions to church schools that discriminate, even though it would
not be constitutional to impose criminal penalties or even civil liability
for religious discrimination. Two rationales for this distinction have
been suggested. One is that denying tax exemptions imposes only an
64. See supra text accompanying notes 38-39.
65. NLRB V. Catholic Bishop, 440 U.S. 490, 502, 507-08 (1979); New York V. Cathedral
Academy, 434 U.S. 125, 133 (1977); Laycock, Civil Rights and Civil Liberties, 54 CHI.[-]KENT L.
REV. 390, 430-32 (1977).
66. See Fiedler V. Marumsco Christian School, 631 F.2d 1144 (4th Cir. 1980); Brown v. Dade
Christian Schools, Inc., 556 F.2d 310, 312-14 (5th Cir. 1977) (plurality opinion) (en banc), cert.
denied, 434 U.S. 1063 (1978).
67. Brown V. Dade Christian Schools, Inc., 556 F.2d 310, 321 (5th Cir. 1977) (en banc)
(Goldberg and Brown, JJ., concurring), cert. denied, 434 U.S. 1063 (1978).
270
Tax Exemptions
indirect burden on religion, which is more easily justified by a compel-
ling state interest.⁶⁸ The other is that the tax exemption is a form of
subsidy constituting state support for discrimination in violation of the
right to equal protection. The second argument is urged with particu-
lar force with respect to the deductibility of charitable contributions to
segregated schools. The reduction of the donor's tax liability is said to
be analogous to a matching grant to the donee school.70
The two arguments reinforce each other; avoidance of the attenu-
ated equal protection violation is advanced as the compelling govern-
ment interest that justifies the indirect burden on religion. But there is
also a tension between them. The support for discrimination is most
substantial when the amount of tax relief is large, but in that case, the
burden on religion is equally large when the exemption is denied. Sim-
ilarly, the burden on religion is insignificant only if the amount of tax
relief denied is insignificant, but in that case, the potential support for
discrimination is also insignificant.
The "indirect burden" argument is simply wrong. The denial of
tax exemptions to discriminatory churches is a penalty. The claim is
not that churches have a free exercise right to general tax exemptions;
the United States need not grant tax exemptions to churches at all.⁷¹
But once it chooses to do so, it must grant them neutrally; it cannot
penalize or deter the free exercise of religion by denying exemptions
only to those churches it disapproves. There can be no claim that de-
nying generally available tax exemptions to a church that discriminates
racially is a neutral attempt to reflect income more accurately. Plainly,
it is a monetary penalty inflicted upon disfavored religious conduct.
The Supreme Court has been quite clear that such penalties are
unconstitutional whether or not they may be characterized as indi-
rect.⁷² Indeed, in one free speech case, the penalty invalidated was de-
nial of a tax exemption.73 The argument that "indirect" penalties are
less suspect rests principally on language in Braunfeld V. Brown,⁷⁴ in
which the Court upheld a Sunday closing law against the claim that it
68. Simon, supra note 13, at 502-09; Comment, supra note 13, at 277-79.
69. S. SURREY, PATHWAYS TO TAX REFORM: THE CONCEPTS OF TAX EXPENDITURE 40-47
(1973); Simon, supra note 13, at 510; Comment, supra note 13, at 262-69.
70. S. Cohen, Paper Presented at the University of Texas School of Law (February 1982)
(publication pending); see Greenya V. George Washington Univ., 512 F.2d 556, 561 (D.C. Cir.),
cert. denied, 423 U.S. 995 (1975).
71. Simon, supra note 13, at 505-08.
72. See Thomas V. Review Bd., 404 U.S. 707 (1981); Sherbert V. Verner, 374 U.S. 398, 403-06
(1963).
73. Speiser V. Randall, 357 U.S. 513 (1958).
74. 366 U.S. 599 (1961).
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burdened Orthodox Jewish merchants whose religion required them to
close on Saturday as well. Even those who rely on it concede that
Braunfeld is dubious authority in light of more recent cases. Braun-
feld may remain good law on its facts, but it can no longer stand for
any broad principle that "indirect" burdens on religion require less jus-
tification than "direct" burdens.
Whether a tax exemption is support is more problematic. The
Supreme Court has held that including churches in a general tax ex-
emption for charitable institutions does not establish religion. 76 The
section 501(c)(3) exemption appears to fall within that rule.⁷⁷ Accept-
ance of the tax exemption does not convert churches into arms of the
government subject to all the disabilities of government. Tax exempt
churches can teach religion, even though government cannot. Anyone
who disagrees with this analysis should support denial of tax exemp-
tions for all churches, not just those that discriminate.
But "support" may have more than one meaning. A tax exemp-
tion might be "support" for equal protection purposes, or at least racial
purposes, even though it is not "support" for establishment purposes.⁷⁸
I am quite willing to concede this possibility. It only proves what I said
at the beginning: we are faced with a conflict between two rights of
constitutional dimension. It makes no more sense to say that the viola-
tion of free exercise is justified by the compelling interest in avoiding a
violation of equal protection, than to say that the violation of equal
protection is justified by the compelling interest in avoiding a violation
of free exercise. Either conclusion is simply a way of picking one's
favorite constitutional right.79
75. Simon, supra note 13, at 504-05. Justices Harlan and White thought that Braunfeld had
been overruled. Sherbert V. Verner, 374 U.S. 398, 421 (1963) (Harlan, J., dissenting).
76. Walz V. Tax Comm'n, 397 U.S. 664 (1970).
77. Cf. Committee for Public Educ. & Religious Liberty v. Nyquist, 413 U.S. 756, 789-94
(1973). Nyquist invalidated as an establishment of religion a program of graduated tax deductions
for private school tuition. The deduction schedule was dovetailed with a tuition grant program
for low-income families and was gradually phased out at higher income levels. The Court dis-
tinguished the general tax exemption in Walz V. Tax Comm'n, 397 U.S. 664 (1970), on several
grounds. 413 U.S. at 792-94. The § 501(c)(3) exemption falls between the two cases, but much
closer to Walz. It is of long standing; it is not limited to a class composed primarily of religious
institutions; it reduces the risk of burdensome or hostile taxation of churches and of church-state
entanglement; it is not part of a larger program of affirmative financial aid to students at religious
schools. Compare Mueller V. Allen, 676 F.2d 1195 (8th Cir. 1982) (upholding state income tax
deduction for school tuition), with Rhode Island Fed'n of Teachers V. Norberg, 630 F.2d 855 (1st
Cir. 1980) (invalidating similar deduction as establishment of religion).
78. See Norwood V. Harrison, 413 U.S. 455, 469-70 (1973); Jackson V. Statler Found., 496
F.2d 623 (2d Cir. 1974).
79. Nor is it sufficient to say that Congress can pick its favorite constitutional right on the
theory that avoidance of either violation is a compelling government interest that justifies the
other. The protection of constitutional values is ultimately committed to the courts because the
272
Tax Exemptions
The problem of determining the appropriate scope of each right
remains substantially unchanged. Even if tax exemptions constitute
support, they are support that is generally available for the asking. To
deny such exemptions to churches that discriminate in their internal
affairs is to attempt to influence internal church matters by penalizing
churches. With respect to such internal affairs, the free exercise claim
is strongest. And the equal protection claim is weakest, because the
discrimination is confined to an enclave of private conduct for which
the government has no responsibility. In that enclave, the free exercise
claim must control.
VI. Limitations on the Right to Church Autonomy
Some situations justify government interference with internal
church affairs. Any right to group autonomy depends on voluntary
affiliation with the group. 80 If a church member's consent in submit-
ting to church authority is suspect, then he may retain rights to govern-
mental protection from his church. Courts and scholars are grappling
with this problem in the difficult context of cults that are alleged to
kidnap, coerce, or brainwash their members.⁸¹
There is one large group whose consent is always suspect, and that
is children. In Prince V. Massachusetts,82 for example, the Supreme
Court allowed child labor laws to be enforced against a child who be-
lieved she would be damned forever if she did not sell religious tracts.
The Court emphasized the state's strong interest in protecting children;
it gave little weight to the child's views. The protection of children has
traditionally been entrusted to the states, but I am confident that when
Congress acts pursuant to one of its delegated powers-e.g., the power
to tax or to enforce the thirteenth and fourteenth amendments-it can
rely on an interest in protecting children to help overcome free exercise
objections to its legislation. Congress should be able to deny tax ex-
emptions to grade schools that admit more than one race and then dis-
criminate against one of them, if it concludes that young children are
not competent to consent to such discrimination even in pursuit of their
Framers did not fully trust individual rights to the majority. That commitment is not changed
when the individual rights of two minorities conflict.
80. Laycock, supra note 19, at 1403, 1405-06; see supra text accompanying note 43 (Supreme
Court decisions supporting church autonomy on premise that all who join a church do so with
"implied consent" to its government).
81. See Delgado, Religious Totalism: Gentle and Ungentle Persuasion Under the First Amend-
ment, 51 S. CAL. L. REV. 1 (1977); Note, Cults, Deprogrammers, and the Necessity Defense, 80
MICH. L. REV. 271 (1981).
82. 321 U.S. 158 (1944).
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religion. It is harder to reach such a conclusion with respect to high
school students. 83 There may be forms of discrimination to which high
school students cannot validly consent. But the only discriminatory
rule that has been litigated so far is a ban on interracial dating. 84 Such
a rule directly affects such a small percentage of the student body that I
would think high school students can consent to it; most of them might
reasonably expect never to be affected by it.
Protecting children is not a rationale for denying tax exemptions to
schools that exclude some race altogether. Not even children should be
able to force themselves into a church by submitting an application and
then claiming inability to consent to the resulting rejection. Such boot-
strap reasoning could only be a subterfuge for overriding an unpopular
church's right to free exercise. The power to protect children thus turns
out to be only marginally relevant to the need for a free exercise excep-
tion to any statute that denies tax exemptions to racially discriminatory
schools.
The principle that group autonomy depends on voluntary affilia-
tion with the group has another implication that is potentially more
important. If a church harms outsiders, its harmful conduct cannot be
justified on the ground of autonomy. The harmful conduct is no longer
an exclusively internal affair, and interference with it is justified by the
harmful effects on outsiders. For this principle to be invoked, the
harmful effects must be real and substantial, and proximately caused
by the church, or the right to church autonomy will be destroyed. For
example, it cannot be enough that blacks are offended and distressed at
the mere thought of religious enclaves where discrimination still exists.
In some cities, blacks may be able to show serious harm. If segre-
gated church schools draw so many whites from the public schools that
meaningful desegregation of the public schools becomes impossible,
then the church schools have inflicted real harm on outsiders. It is
likely that these schools will be unable to show pervasive religiosity; a
large influx of students who select their school for racial rather than
religious reasons will dilute the religiosity of any school. But assuming
that one or more pervasively religious schools preclude desegregation
in a local public school system, then the harm to public school students
83. High school students are almost but not quite adults, and the law has devised intermedi-
ate rules to deal with them. Bellotti V. Baird, 443 U.S. 622 (1979); Tinker V. Des Moines Indep.
Community School Dist., 393 U.S. 503 (1969); In re Gault, 387 U.S. 1 (1967). College students
must be treated as adults.
84. Fiedler V. Marumsco Christian School, 631 F.2d 1144 (4th Cir. 1980).
274
Tax Exemptions
may justify interference with the church schools' internal policies on
admission of students.
This harm to outsiders may appear too attenuated to justify inter-
ference with internal church affairs. The real culprits are the public
school officials who segregated the schools in the first place; but for
them, the churches' management of their internal affairs would inflict
no cognizable harm on anyone. But there is an additional considera-
tion that weakens the churches' claim to be acting internally and
strengthens the causal link between their conduct and the harm to out-
siders. In addition to their religious functions, church schools serve the
public function of basic education. Normally, they do so on a purely
optional basis; most students attend public schools, and all their rights
to education can be met there. But as the church schools enroll an
increasing share of the student population, they take over more and
more of the public education function. If they preclude the state from
offering a desegregated public education, church schools become more
than just an option; they become the only possible source of a desegre-
gated education. A church that thus exclusively takes over a state func-
tion should become subject to the state's obligation not to discriminate
on the basis of race.
The white primary cases teach a similar lesson. Like a church, a
political party is a private association protected by the first amendment,
free to choose its members as it will. 85 But when it takes over part of
the state's electoral process, and certainly when voting in the party pri-
mary becomes the only effective means of voting for candidates for
public office, then the party must allow blacks to vote on an equal basis
with whites. 86 Its membership policy is no longer an internal affair
when public rights depend on membership.
The same is true of church schools that so take over the public
function of educating white students that desegregated education
outside those church schools becomes impossible. Such schools may be
required to forfeit their tax exemption. I believe they should also be
required to forfeit the immunity from liability for discriminating that I
have argued should exist.
This is not intended to be a surprise ending. My exception should
not swallow my rule, although a trial judge unsympathetic to my rule
could make that happen. A church school should not be penalized be-
cause it expanded while a nearby public school desegregated. Nor
85. Democratic Party V. Wisconsin ex rel. LaFollette, 450 U.S. 107, 121-22 (1981).
86. Terry V. Adams, 345 U.S. 461 (1953); Smith v. Allwright, 321 U.S. 649 (1944).
275
Texas Law Review
Vol. 60:259, 1982
should it be enough that church schools make public school desegrega-
tion more difficult or less thorough. Even so, discriminatory religious
enclaves should be protected if the public system is generally desegre-
gated. But when private schools drain off most of the whites in a
school system, as has happened in some cities, they preclude any mean-
ingful public school desegregation. Moreover, they can no longer be
described as enclaves; they have largely replaced the public school sys-
tem. In that circumstance, even if they are pervasively religious, they
should lose their right to discriminate against blacks, because they are
imposing substantial harm on persons who have made no effort to affil-
iate themselves with the church.
Two other arguments for overriding free exercise rights are either
inapplicable or incorrect. One traditional justification for interference
with internal church affairs is that no one is permitted to consent to
serious bodily harm. The snake-handling cases⁸⁷ and the nearly uni-
versal assumption that human sacrifice can be punished as murder⁸⁸
are the best examples. The government's interest in protecting human
life is unique; it does not suggest a more general power to protect
church members from mistreatment by the church.
A careless reading of Runyon v. McCrary⁸⁹ might suggest that
preventing racial discrimination justifies interference with constitu-
tional rights similar to the right to church autonomy. In Runyon, the
Supreme Court held that segregation in secular private schools is for-
bidden by statute, and that neither freedom of association, parental
rights, nor the right of privacy preclude implementation of that statute.
The Court expressly reserved any question concerning religious
schools.⁹⁰
This reservation of the issue should be taken as genuine; the
Court's holdings concerning the constitutional defenses asserted there
imply nothing about the free exercise of religion. The defendants in
Runyon were claiming a bare right to discriminate, and tried three dif-
ferent labels in their effort to elevate their claim to constitutional status:
freedom of association, parental choice, and privacy. These labels de-
scribed rights that the Court had inferred from the Constitution, but
the defendants' attempted application of them in Runyon went far be-
yond both principle and precedent. The Court inferred freedom of as-
87. Lawson V. Commonwealth, 291 Ky. 437, 164 S.W.2d 972 (1942); State V. Massey, 229
N.C. 734, 51 S.E.2d 179, appeal dismissed, 336 U.S. 942 (1949).
88. For an article arguing this question both ways, see Pepper, The Case of the Human Sacri-
fice, 23 ARIZ. L. REV. 897 (1981).
89. 427 U.S. 160 (1976).
90. Id. at 167-68.
276
Tax Exemptions
sociation as necessary to implement the explicit first amendment rights;
it protects association for purposes of speech, petition, and religion, but
not for the mere purpose of excluding blacks.⁹¹ The parental rights
cases protect the right to influence one's children's education, but they
imply nothing about a right to protect children from assocation with
blacks.⁹² The Court's right of privacy can be inferred from the explicit
constitutional protections for each individual's home and physical per-
son.93 It extends to certain matters of sex, reproduction, and family
life, and to some other activities performed within the home. But there
has never been any suggestion that it extends to nonsexual matters
outside the home; a private school is far less private than anything thus
far protected by the constitutional right to privacy. 94 The implied con-
stitutional rights asserted by defendants in Runyon simply did not ap-
ply to the facts, as the Court explained. Runyon is no warrant for
interfering with the free exercise of religion.
VII. Conclusion
The free exercise of religion includes not only freedom to follow
one's conscience, but freedom to manage internal church affairs au-
tonomously. Some churches may exercise their religion by discriminat-
ing on the basis of race.
The proper resolution of our conflicting constitutional commit-
ments to racial equality and freedom of religion is to allow each to
predominate within its own sphere. Pervasively religious schools are
well within the religious sphere, and they should generally be allowed
to discriminate racially without forfeiting their tax exemptions. But
they need not be allowed to discriminate against young children they
have accepted as members, because we may properly doubt the validity
of a young child's consent to discrimination. And they need not be
allowed to completely frustrate desegregation of a public school system,
because public school students and their parents have not consented to
that harm.
I have suggested a complex solution because the problem itself is
complex. It can be simple only to those who think that one of the two
competing values takes clear priority over the other. But there is no
basis for such rank-ordering in the Constitution. Even our commit-
ment to racial equality must sometimes yield to other values.
91. Id. at 175-76.
92. Id. at 176-77.
93. See Laycock, supra note 27, at 371-76.
94. See Runyon, 427 U.S. at 177-79.
277
June 24, 1982
CONGRESSIONAL RECORD Extensions of Remarks
E 309:
CURBING THE HIGH DEFAULT
the generous nature of the American
Fort Gordon. where they were scheduled to
IN THE STUDENT LOAN PRO-
taxpayer.e
begin two weeks of summer training exer
GRAMS
cises with the 67th Signal Battalion.
A Lockheed-Georgia spokesman notec
HON. LARRY J. HOPKINS
THE BOEING 747 IS EXPENSIVE
that a single C-5 could have carried six o:
TO OPERATE AND ALSO AWK-
the buses from San Juan to Augusta.
OF KENTUCKY
WARD
The Military Airlift command said it char.
IN THE HOUSE OF REPRESENTATIVES
tered a 747 because that was the most eco.
Thursday, June 24, 1982
HON. LARRY McDONALD
nomical aircraft to move such a large group.
"But we couldn't fly into Augusta because
Mr. HOPKINS. Mr. Speaker, I
OF GEORGIA
the plane requires a great deal of support
would like to take this opportunity to
IN THE HOUSE OF REPRESENTATIVES
equipment, especially people moving equip-
tell you about a piece of legislation I
Thursday, June 24, 1982
ment," said Lt. Lorrie Kropp of MAC.
am introducing today aimed at curing
"We tend to try to move people by con-
the high default rate which exists in
Mr. McDONALD. Mr. Speaker, a re-
tract. We like to keep the military aircraft
the student loan programs. I believe
tired Air Force chief master sergeant,
to move equipment," she said.
who retired with 23 years service, 13 of
The travel arrangements for the return
these programs are extremely impor-
which were spent in the Military Air-
trip of the Puerto Rican guardsmen on July
tant to the brain power of this Nation,
lift Command, has furnished me with
have not been made yet, Lt. Kropp said.e
however, I cannot see any reason why
some figures on comparative fuel costs
there should be a massive problem of
for operating the C-5A aircraft versus
default on repayment of these loans.
TAX EXEMPTIONS FOR PRIVATE
I strongly believe student loan pro-
the B-747, configured as the National
RELIGIOUS SCHOOLS
grams are important because they
Emergency Airborne Command Post
allow many people to attend school
or NECAP as it is called. Based upon
HON. WILLIAM E. DANNEMEYER
who otherwise would not have an op-
official Air Force figures it shows the
portunity to obtain an education. At
following:
OF CALIFORNIA
IN THE HOUSE OF REPRESENTATIVES
the same time, I believe the people
who agree at the outset to the terms
C-SA
B-747 (configured
Thursday, June 24, 1982
of the loan have an obligation to repay
E-4A or MECAP)
Mr. DANNEMEYER. Mr. Speaker,
them. Loans are an investment in our
Gallons of fuel per flight hour
3.340
4,186
the storm over tax exemptions for pri-
country's brain bank. They are made
Fael
$4,375
$5,484
vate religious schools has calmed since
under reasonable terms, with more
the Supreme Court has decided to
than fair interest rates and repayment
The above calculation is based upon
hear the Bob Jones University case. It
grace time, still there is abuse and this
fuel costing $1.31 per gallon. It should
is my estimation, however, that when
abuse must be stopped.
be pointed out that this particular B-
our society confronts issues of great
My legislation is directed at individ-
747 is carrying something less than a
import, the proper institution to set
uals who try and take advantage of
third of its lift capacity. Fully loaded,
policy is Congress, which represents
the system-those former students
the disparity would be considerably
the voice of the people it represents.
who have already entered the default
more.
We are lawmakers and, after consider-
status. This bill will not punish States
As for operating the B-747, it does
ing an issue as thoroughly and deeply
and schools with good repayment re-
not do so well in carrying troops as the
as possible, taking into consideration
cords, such as Kentucky which has
Atlanta Constitution of June 22, 1982,
as many facets as our deliberations
one of the lowest default rates in the
reported. For the lack of a proper size
define, we need to write the law with
Nation, 2.3 percent. Let me give you
stairway, at the point of destination,
clearly defined intent. Judges should
one example of the default problem as
the troops could not be unloaded from
not become legislators by default.
reported by GAO-there are 6,000 doc-
the B-747, which required the soldiers
Today, I am introducing legislation to
tors who have defaulted on $5.2 mil-
to fly to another airport and take a
amend the IRS Code to make clear
lion in outstanding loans.
24/2-hour bus ride.
what private actions violate Federal
This problem must be stopped. I sup-
The news item follows:
civil rights policies to such an extent
port the goals of the student loan pro-
LOCKHEED GRINNING OVER BOEING DILEMMA
that the Government must deny a tax
grams, as reflected in my student aid
[By John Maynard]
exemption.
bill, but with the cost of the GSL pro-
gram alone as high as it is-$3 billion
Boeing advocates in the congressional
At the same time, my bill clarifies
and climbing-it is important that we
battle over rebuilding America's military
the law to avoid compromising what is
airlift fleet might have a difficult time con-
perhaps the most cherished of all our
look for savings, particularly in areas
vincing some 400 members of the Puerto
freedoms, the right of all people to
which do not deny access to students.
Rican National Guard that the Boeing 747
practice their religious beliefs without
My legislation allows the IRS. with
is a better buy than the Lockheed-Georgia
subjecting them to Government scruti-
proper notification from the Depart-
built C-5 Galaxy.
ny and making them accord with the
ment of Education, to withhold the
The Boeing Co. side, which has already
current Federal orthodoxy or face the
amount of the owing loan from their
persuaded the Senate to buy the 747 Instead
of new C-5s to be built in Marietta. faces
prospect of going out of business. Spe-
IRS refund check. It also amends the
bankruptcy code in two ways: The first
the embarrassment of having to explain to
cifically. the legislation which I am
House members how a 747 couldn't unload
proposing includes the following provi-
being to prohibit GSL's from being
the guardsmen at the Augusta airport last
sions: (1) Private, nonreligious schools
discharged under chapter 13 bankrupt-
weekend.
that are found to discriminate on the
cies. Instead it requires the borrower
Lockheed-Georgia Co. officials are already
basis of race will not be tax exempt;
to make prorated payments on those
spreading the tale around Washington of
(2) the Government would have to
loans as they do on other non-Federal
how the Military Airlift Command char-
loans.
tered a 747 from TransAmerica Corp. to
have a declaratory judgement from
move the guardsmen from San Juan to Fort
the courts in order to make a ruling;
The second way it amends the bank-
Gordon near Augusta. The 747, however,
(3) religious schools are given first
ruptcy code is to make certain student
could not fly directly to Augusta because
amendment protection. Racially dis-
loans priority loans-meaning they
the airport there has no stairway for the
criminatory policy does not include
will have to be repaid 100 percent.
747, which sits 16 feet off the ground.
policies of religious schools that (a)
Again. let me say I support the goals
"A guy could break an ankle jumping
limit their enrollment to students of
of the student loan program, but be-
from that height," a Locklieed-Georgia
their own religious organization or
lieve it is important we stop abuse and
spokesman said Monday.
look for savings. This bill will make
When the chartered 747 landed in Atlanta
only to students who adhere to their
on Saturday afternoon, it parked at the
religious belief system and (b) have
more money available for students
Lockheed terminal and was met by eight
policies or programs in the school
who need it now. Borrowers should
chartered Greyhound buses. The buses then
which are required by any sincerely
not be allowed to take advantage of
ferried the soliders on a 21/s-hour drive to
held religious belief.
3094
CONGRESSIONAL RECORD - Extensions of Remarks
June 24, 1982
Because of the fundamental impor-
students from a cross section of the
According to Skerry, none of the
tance of this matter and the complex-
community. Instead, parents who en-
schools he visited displayed the least
ity of the issues at stake, thoughtful
rolled their children in these schools
evidence that racist doctrines are
and informed debate is crucial. In my
tended to come from churches of the
taught. All had open admissions poli-
estimation, both Congress and the
sponsoring denomination or from
cies and in several schools black chil-
media have misrepresented the appli-
churches holding similar doctrinal po-
dren were enrolled. He contrasted with
cable law and the issues at stake in the
sitions. Even more significantly, the
the Christian schools the segregation
question of tax exemptions for private
percentage of students in the two fun-
academies that appeared in response
schools. Critics of reform have made
damentalist schools who were subject
to the first Southern desegregation
essentially two kinds of misrepresenta-
to busing during the current school
orders and that were supported by
tions. First, they have suggested that
term was smaller than the percentage
direct tuition grants, textbooks, and
the only religious schools threatened
of such students in the general popu-
transportation supplied by the States.
by the IRS regulations on 501(c)(3)
lation. Turner found that only one of
The Christian schools, by contrast,
were white-flight schools that use reli-
the 68 families surveyed in the Louis-
exist solely through the voluntary ef-
gion as cloak for racism. Second, they
ville fundamentalist schools was using
forts of the congregation that sup-
have asserted that both Congress and
the nonpublic schools as a haven to
ports them, and are part not of resist-
the Supreme Court had mandated ap-
avoid busing for 1 year.
ance to desegregation but of a general
plication of these regulations, and
The schools surveyed were geo-
resurgence of conservative and funda-
that the IRS regulations are a clear
graphically distant and had differing
mentalist churches throughout the
articulation of the law. I hope to set
cultural backgrounds, two in Louls-
country.
the record straight.
ville, Ky. and one in Madison, Wis. In
The unprecedented movement to
This fall, the Supreme Court will
both cities, however, fundamentalist
found religious private schools in the
have its first real chance to examine
parents gave the same reasons for
past decades has been accompanied by
the IRS regulations in the Bob Jones
withdrawing their children from
a growing number of lawsuits testing
University case. A roster of the organi-
public schools: (1) poor academic qual-
the Government's right to regulate or
zations that filed amicus curiae briefs
ity of public education; (2) lack of dis-
impose standards on religious schools
or petitions urging reversal in that
cipline in public schools and; (3) lack
in a multitude of areas including cur-
case alone is enough to dispel the
of Christian foundations.
riculum, labor relations, unemploy-
notion that only white-flight schools
In both communities the respond-
ment insurance, and zoning.
opposed the regulations the Na-
ents did oppose interracial marriage
tional Association of Evangelicals, the
Perhaps no controversy has received
but, Turner concluded, the real moti-
American Baptist Churches in the
so much attention, however, as that
vation for founding and maintaining
USA, the United Presbyterian Church
involving the proposeds guidelines
the schools appeared to be the belief
in the USA, the Church of God, the
that were supposed to determine
held by many evangelical Protestants
National Committee for Amish Rell-
"whether certain private schools have
that public schools now espouse a phi-
gious Freedom, the Church of God in
racially discriminatory policies as to
losophy that is completely secular,
Christ, Mennonite to name a
students and therefore are not quali-
perhaps even antireligious.
few. The simple truth of the matter is
fied for tax exemption under the In-
Peter Skerry, who for 17 days during
that the organizations that run reli-
ternal Revenue Code." The guidelines
February 1979, visited Christian
gious schools adversely affected by the
stated:
schools scattered across the central
IRS regulations are not the simple
Piedmont region of North Carolina,
A prime facie case of racial discrimination
white-flight schools they are so often
reached similar conclusions which he
by a school arises from evidence that the
portrayed to be. Overbroad IRS regu-
school (1) was formed or substantially ex-
set forth in an article in the fall 1980
lation has in fact threatened a huge
panded at or about the time of desegrega.
issue of Public Interest entitled,
tion of the public schools, and (2) has an in-
number of religious schools of every
"Christian Schools Versus the IRS."
significant number of minority students. In
denomination, and faith. In recent
His conclusion from his experiences
such a case, the school has the burden of
years, with the advent of what many
was that the effort to reduce the
clearly and convincingly rebutting this
parents view as conscious hostility
emergence of these schools to a matter
prima facie case of racial discrimination by
toward religion and religious values in
of racism is a gross oversimplification.
showing that it has undertaken affirmative
the public schools, religious parents, in
He described the religious orientation
steps to secure minority students. Mere
increasing numbers, have been remov-
denial of a discriminatory purpose is insuffi-
of those largely independent Baptist
ing their children from public schools
cent.
schools and how they are run by the
and placing them in newly created or
same officers of those of the sponsor-
The IRS went on to define "an insig-
expanded religious schools.
ing church. Generally. too poor to hire
nificant number of minority students"
Several articles and studies refute
sufficient outside help, they rely on
as "less than twenty percent of the
the popular equation of "Christian"
parental initiative and sacrifice to
percentage of the minority school age
schools and white-flight schools. In
keep both the church and its school
population in the community served
1979, William Lloyd Turner published
ministry functioning. Parents not only
by the school." Schools against which
a doctoral dissertation on this issue at
pay what for them is a budget-strain-
such a prima facie case had been es-
the University of Wisconsin, Madison,
ing tuition, they work in the schools
tablished would lose not only their ex-
entitled, "Reasons for Enrollment in
often serving as teacher aids, secretar-
emption from Federal taxes, but of
Religious Schools." Later, writing for
ies, cafeteria workers, or bus drivers.
more crucial importance, the right of
the February 1980 issue of Phi Delta
Skerry then summarized the reasons
individual donors to deduct charitable
Kappan, with Virginia Davis Norden,
why these parent reject the public
contributions to the schools from their
professor of Law and Higher Educa-
school system:
Federal Income taxes. With these reg-
tion, Turner summarized the results of
When asked specifically why they reject
ulations the IRS proposed to remove
his study in an article entitled, "More
the public schools, parents make it clear
tax exemption not after detailed in-
Than Segregation Academies." He
they need the Christian schools as much as
quiry and formal proceedings, but
found that while some of the Ken-
the schools need them. Most frequently
through summary administrative
tucky schools appeared to have profit-
cited is the Supreme Court's 1962 school-
action triggered by an arbitrarily es-
ed by widespread opposition to racial
prayer ban. A few parents mention a recent
tablished quota. Assuming in advance
integration, similar growth of funda-
controversy over the singing of Christmas
the guilt of these schools, the agency
mentalist schools in rural Wisconsin,
carois in public school assemblies. Many
placed the full burden on the schools
where integration was not a factor. in-
complain of the virtual disappearance of the
dicated that Christian education was a
pledge of allegiance from their public
to prove innocence of discrimination.
schools. A few are troubled by sex educa-
Small and struggling Institutions like
national, not a regional, phenomenon.
tion. Such changes are seen by fundament-
those described by Peter Skerry would
Turner noted that Christian schools in
list parents as direct assaults on God and
have been forced "not only to undergo
both States appeared not to attract
country, the pillars of their universe.
the expense of litigation, but to do so
3
June 24, 1982
CONGRESSIONAL RECORD - Extensions of Remarks
E 3095
while deprived of the special tax
salary in the schools Skerry visited
Green against Connally, black parents
status on which their existence sub-
was around $6,000 for the academic
and school children in Mississippi su-
stantially depends. In brief, these pro-
year, easily half of public school sala-
cessfully petitioned for an order en-
posals posed a mortal threat to Chris-
ries. Not only that, the schools offer
joining the IRS from granting charita-
tian schools."
their faculty no benefits such as medi-
ble nonprofit status to racially dis-
The furor these guidelines raised
cal or life insurance or retirement
criminatory schools in that State. In
compelled the IRS to hold hearings in
plans. It seems highly doubtful that
1970, the month after a three-judge
Washington in December of 1978. The
many educated minority teachers
district court granted a preliminary in-
agency received over 120,000 letters of
would consent to the stricture Chris-
junction, the IRS announced that it
protest, as one agency official put it
tian schools place on their staff or
would no longer accord tax-exempt
"more than we've ever received on any
would accept the low salaries these in-
status under section 501 to private
other proposal."
stitutions offer.
schools maintaining racially discrimi-
In response, the IRS in February
It was, however, not just the intru-
natory policies, and that it would not
1979 issued "revised proposed guide-
siveness of these regulations that so
continue to treat gifts to such schools
lines." These softened the more abra-
disturbed the many groups that pro-
as deductible contributions under sec-
sive aspects of the original guidelines,
tested the IRS's proposed regulations.
tion 170 of the Internal Revenue Code.
but the fundamental thrust remained.
The courts and the IRS justified this
In 1971, despite the change in the
The agency still assumed the guilt of
set of regulations of government
IRS's postion the district court in
schools not meeting its affirmative
power not on explicit standards set
Green granted the plaintiffs judgment
action quotas. The revised guidelines
forth in the Internal Revenue Code
on the merits, both declaratory relief
offered six examples of the kind of af-
itself, but on the grounds of a broad
and a permanent injunction. It was
firmative steps reviewable schools
public policy against racial discrimina-
the opinion the court filed at this
would need to take to regain their spe-
tion that amounted to a sort of Feder-
juncture that set out the novel public
cial tax status: first, active and vig-
al common law.
policy rationale that has raised so
orous minority recruitment programs;
Religious groups and churches, even
much controversy. In this opinion, the
second. tuition wavers, scholarships, or
those not involved in the Christian
court argued that organizations seek-
other financial assistance to minority
school movement, saw in this applica-
ing exemption as educational institu-
students; third, recruitment and em-
tion of pulic policy by a Federal
tions within the meaning of section
ployment of minority teachers and
agency an alarming right to analyze
501(c)(3) must meet the tests of being
other professional staff; fourth, mi-
religious bodies periodically in the
charitable in the common law sense.
nority members on the board or other
light of the continuously evolving
Since the common law places strict re-
governing body of the school: fifth,
standards of public policy, but as
quirements on charitable trusts, this
special minority-oriented curricular:
public morality changed it could con-
legal sleight-of-hand opened educa-
and sixth, participation with integrat-
stantly reassess the legitimacy of reli-
tional institutions to a new world of
ed schools in sports, music, and other
gious beliefs. Many churches and reli-
regulations. Under the common law,
events and activities.
gious bodies perceived that it might
courts may enforce only those charita-
Even these revised guidelines cre-
well be only a matter of time before
ble trusts that are beneficial to the
ated a program of Government over-
the right to deny exemptions to in-
community as a whole. All such trusts,
sight that burdened many more insti-
stitutions that refused to ordain
furthermore, are subject to the re-
tutions than those that were clearly
women or that refused to admit prac-
quirement that they may not be illegal
guilty of racial discrimination. Per-
ticing homosexuals or other groups
or contrary to public policy. By anal-
haps the most egregious requirement
now clamoring for recognition. Con-
was the requirement that schools give
ogy to this principle, argued the Court
gress responded to the controversy
in Green, all organizations seeking tax
financial assistance to minority stu-
over the proposed revenue procedures
dents. As Skerry pointed out in his ar-
exemptions under 501(c)(3) should be
by acting to prevent the IRS from en-
ticle, the families who send their chil-
subject to "Federal public policy." As
forcing its proposed regulations and
evidence that there existed a national
dren to Christian schools are of
from devising any additional proce-
modest means and the schools them-
public policy against support for segre-
dures for enforcing its policy of deny-
selves live a hand-to-mouth existence
gated education, the court then cited
ing tax-exempt status to racially dis-
relying on tuition payments to cover
the provisions of the Civil Rights Act
criminatory private schools. The
of 1964.
operating expenses. Requiring such
Dornan amendment to the 1980 Ap-
schools to award such financial aid
Although the principle parties to the
propriations Act, provided that the
would be tantamount to requiring
suit in Green had essentially come to
funds appropriated could not be used
them to close down. How effective
agreement, the matter was neverthe-
to formulate to carry out any
such an assistance program would be
less appealed to the Supreme Court.
procedure, guideline or measure
even if it were economically feasible,
The Supreme Court summarily af-
which would cause the loss of tax-
would moreover be open to question.
firmed the case without a written
exempt status to private, religious, or
The Nation's traditional preparatory
opinion. The law is clear that when
church-operated schools under section
schools which can afford to offer sig-
the Supreme Court makes such a sum-
501(c)(3) of the Internal Revenue
nificant amount of aid have been able
mary affirmance of a decision, it is not
Code of 1954 unless in effect prior to
to attract only enough black students
August 22, 1978. A legal analysis and
endorsing the reasoning of the lower
to account for 4 percent of their total
court.
history of the public policy rationale
enrollment.
that gave rise to all this controversy
Later, in the case of Bob Jones Uni-
Also misguided is the requirement
confirms that the courts and the IRS
versity against Simon, the Supreme
that Christian schools recruit minority
were advancing a novel and radical re-
Court itself carefully explained that it
teachers. Academic qualifications are
had affirmed the decision in Green
interpretation of existing law.
of secondary importance to the
Prior to 1970, the IRS generally
solely because the case was no longer a
schools. Their first concern is that the
granted exemptions to all private
truly adversary controversy when it
teachers believe in accordance with
schools under 26 U.S.C. section
reached the Supreme Court:
the congregation's doctrinal state-
501(c)(3) which includes among
The question of whether a segregative pri-
ment. Most of these schools further-
exempt organizations:
vate school qualified under Section 501(c)(3)
more, adopt a principle of separation
has not received plenary review in this
Corporations and any community chest,
that requires teachers to reject such
fund, or foundation. organized and operated
Court and we do not reach that question
worldly habits as tobacco, alcohol,
exclusively for religious, charitable, scientif-
today. Such schools have been held net to
qualify under Section 501(c)(3) in Green
drugs, card playing, gambling, danc-
ic, testing for public safety. literary, or edu-
against Connally the Court's affir-
ing, coed swimming, listening to rock
cational purposes.
mance in Green lacks the precedential
music, going to movies, and in some
Litigation, however, spurred the IRS
weight of a case involving a truly adversary
cases, watching television. The typical
to change this position. In the case of
controversy.
E 3096
CONGRESSIONAL RECORD - Extensions of Remarks
June 24, 1982
Although the order in Green con-
fare organizations. Otherwise, the word
by an appropriation of tax moneys,
cerned only nonreligious Mississippi
"charitable" would have been used by itself
whether an organization flourishes or
schools, the IRS in response to this
as an all-inclusive term.
fails thus depends upon its appeal to
case soon adopted nationwide proce-
This substantially contemporaneous
contributions rather than upon the
dures that began adversely to affect
construction of the tax exemption pro-
vote of legislators dispersing funds
religious institutions and that culmi-
visions of the Code accords precisely
raised by taxing the public at large.
nated in the August 1978 proposed
with the plain wording of the statute,
To argue that tax exemptions are
regulations. The holding in Green re-
and directly contradicts the construe-
Government subsidies is to assume
quiring that exempt organizations also
tion given it by the court in the Green
that all money in the country belongs
meet public policy requirements would
case.
to the Government unless the Govern-
create a broad new area for Federal
In enacting section 101(6) of the In-
ment decides to leave it in private
oversight of private organizations. As
ternal Revenue Code of 1939, Congress
hands. That assumption is a totalitar-
the Court in Green, quoting from Pro-
continued to exempt from taxation
ian one. An assumption that would un-
fessor Bogert, argued:
the identical categories of organiza-
dermine the fabric of the Constitution
The courts should be left free to apply the
tions that had been exempt from tax-
and the American concept of private
standards of the time. What is charitable in
ation under previous Revenue Acts.
property. In American jurisprudence
one generation may be noncharitable in a
During the 15 years in which the 1939
at least, tax exemptions and Govern-
later age, and vice versa. Ideas regarding
Code remained in effect, the IRS
social benefit and public good change from
ment grants are simply not the same
issued three sets of regulations, each
century to century, and vary in different
of which defined the term "charita-
thing.
communities.
ble" to mean relief of poverty.
It may well be, moreover, that Con-
This broad assertion by the Federal
Section 501(c)(3) of the Internal
gress, as a practical matter, could not
Government of its right to use public
Revenue Code of 1954 continued to
deny tax exemptions to religous orga-
good as a criteria for an ongoing anal-
exempt the same categories of organi-
nizations without violating the free ex-
ysis of all private tax-exempt organiza-
zations that had been exempt from
ercise and establishment clauses of the
tions, including churches, is what has
taxation under the 1939 Code.
first amendment. As the Supreme
alarmed so many. The legislative his-
The position advanced by the court
Court indicated, our law gives tax ex-
tory of section 501(c)(3), however, re-
in Green was thus clearly not B sub-
emptions to religious organizations be-
veals a total absence of any intent on
stantially contemporaneous construc-
cause tax exemptions provide an indis-
the part of Congress to deny tax-
tion of the statute by those presumed
pensible bulwark against official ma.
exempt status to religious institutions
to be aware of congressional intent. It
nipulation of religious practices:
that do not comply with Federal
was simply one of recent vintage
A proper respect for both the Free Exer-
policy.
which has never been endorsed by the
cise and the establishment Clauses compels
The exemptions from taxation now
Congress. It is certainly not an articu-
the State to pursue a course of 'neutrality'
contained in section 501(c)(3) originat-
lation of what the law presently is.
toward religion if taxation was regarded
ed as a part of the Tariff Act of 1894.
We in Congress need to face the
as a form of 'hostility' toward religion. 'ex-
emption constitute(d) a reasonable and bal-
That original statutory provision
question of what the law on tax ex-
anced attempt to guard against those dan-
stated:
emptions should be. Some have called
gers.'
Nothing herein contained shall apply to
for broad regulation in this area be-
The IRS regulations promulgated
corporations, companies, or associations or-
cause they argue that tax exemptions
ganized and conducted solely for charitable,
are really a form of subsidy and that,
under section 501(c)(3) violated both
religious or educational purposes.
because of tax exemptions, taxpayers
the free exercise and the establish-
There is no indication that Congress
are required to fund the unacceptable
ment clauses. They would have al-
incorporated or had reference to a
practices and beliefs of the offending
lowed the IRS to continue expanding
common law of charitable trusts in en-
tax exempt organization. In this coun-
the beliefs not only of white-flight
acting this corporate income tax stat-
try, however, we have always recog-
schools, but also of religious groups in
ute. Further, even at this beginning
nized the fundamental difference be-
the light of continuously evolving
point, Congress clearly distinguished
tween tax exemptions and direct gov-
standards of public policy. In the
religious and educational corporations
ernment exemptions, unlike subsidies,
United States against Ballard, Justice
from charitable corporations.
foster private initiative:
Douglas delineates conduct that is im-
After the ratification of the 16th
permissible under the first amend-
It has often been asserted, that to exempt
amendment, Congress passed the
an institution from taxation is the same
ment:
Tariff Act of 1913. Section II G(a)
thing as to grant it money directly from the
Man's relation to his God was made no
exempted from income tax:
public treasury. This statement is sophistl-
concern of the State. He was granted the
Any corporation or association organized
cal and fallacious the exemption
right to worship as he pleased and to answer
method fosters the public virtues of self-re-
to no man for the verity of his religious
and operated exclusively for religious, chari-
spect and reliance: the grant method leads
views. The religious views espoused by re-
table. scientific, or educational purposes, no
part of the net income of which inures to
straight to an abject dependence upon the
spondents might seem incredible, If not pre-
the benefit of any private stockholders or
superior power-Government.
posterous, to most people. But if those doc-
individual.
In our day the U.S. Supreme Court
trines are subject to trial before a jury
Again, the Congress separated reli-
in Walz against Tax Commission, the
charged with finding their truth or falsity.
then the same can be done with the reli-
glous and educational organizations
Court pointed to the true nature of
gious beliefs of any sect. When the triers of
from charitable organizations. There
tax exemption by noting that in re-
fact undertake that task, they enter a for-
is no indication that Congress had any
fraining from taxation, "Government
bidden domain. The First Amendment does
reference to a common law of charita-
does not transfer a part of its revenue
not select any one group or any one type of
ble trusts. In subsequent Revenue
to churches, but simply abstains from
religion for preferred treatment. It puts
Acts, Congress continued to broaden
demanding that the church support
them all in the same position.
the list of exempt purposes. In the
the State."
Standards like those the IRS im-
Revenue Acts of 1918, and 1921, Con-
Tax exemptions differ from subsi-
posed violate the establishment clause
gress maintained the distinction be-
dies in several fundamental respects.
in a number of ways. In the first place,
tween charitable and other types of
Tax exemption conveys no money
they require that religious bodies
organizations. The Internal Revenue
whatever to an organization. All It
adhere to a governmental standard of
Service itself was sensitive to this dis-
does is permit the full value of contri-
religious practice, or else be taxed.
tinction and, in 1923, flatly stated:
butions made to an organization to go
They create a superior regime of offi-
It seems obvious that the Intent must
to the purposes that voluntary con-
cial orthodoxy to which the doctrines
have been to use the word "charitable" in
tributors intended without diversion
of various denominations are subordi-
its more restricted and common meaning
to the Government. Further, no one is
nate and to which churches are en-
and not to include either religious, scientif-
compelled by tax exemption to sup-
couraged to conform. Second, such
ic, literary, educational, civic or social wel-
port an organization, as they would be
regulations give distinct and substan-
5
June 24, 1982
CONGR
tial official tax preference to those re.
ligions that do conform their practices
to the standard. Finally. they enmesh
the Government in excessive entangle.
ments with religious bodies unless
these bodies are willing to forego tax-
exempt status. Such regulations place
grave administrative burdens not only
on white-flight schools but on those
groups whose admission policies
accord with Federal standards. Under
the old IRS regulations various public-
ity, recordkeeping, and filing man-
dates threatened to engulf small reli-
gious institutions in administrative ex-
penses. They all had to prove their
freedom from discrimination in a wide
number of areas that included school
charters and bylaws, all publications
and advertisements. admissions, facili-
ties, programs, administration of edu-
cational policies, athletics and scholar-
ship and loan programs. The burden
of proving nondiscrimination in all
these areas overwhelmed many insti-
tutions that had no intention of prac-
ticing racism. They were faced with a
Hobson's choice: Be taxed, or become
entangled with the Government in
matters intimately related to religious
belief and practice.
Religious institutions should not be
subjected to this kind of governmental
inquisition. The IRS regulations are
not a minor affair but a grave threat
to our Constitution and laws. To quote
Madison in his memorial and remon-
strance against religious assessments:
It is proper to take alarm at the first
experiment with our liberties The free.
men of America did not wait until usurped
power had strengthened Itself by exercise,
and entangled the question in precedent.
They saw all the consequences in the princi-
ple. and they avoided the consequences by
denying the principle
DON WEST, PRESERVER OF
APPALACHIAN CULTURE
HON. CLEVE BENEDICT
OF WEST VIRGIN
IN THE HOUSE OF REPAASENTATIVES
vrsday, June C4, 1982
Mr. BE EDICT. Mr. Speaker. the
heritage on. rich :Iture thrives in
Appalachia. take .is opportunity to
commend D.A We of West Virginia
for his contribute to our heritage.
A true friend 11. the preservation of
Appalachian or are, Don West dem-
onstrates a me htaineer's deep sense
of pride in tos. smitting the Appala-
chian culture m one generation to
the next.
Not only ear-old Don an Inspi-
rational part EAC captures the emo.
tions of and rouder eople, he has also
mastered .1e skill, of sharecropper,
congrego nal minis er, and teacher.
After ars of sering, Don and his
wife Code tance purch: sed 600 acres in
Summer County. Wg."a., and began
build: with mostly W !unteer labor,
an Att alachian studios center. The
Apprechian South For like Center
today provides a 3-month summer