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Reagan Submits Legislation On Schools' Tax Exemption

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Washington--President Reagan last week submitted to Congress a bill that is intended to deny federal tax exemptions to private schools that discriminate on the basis of race, but that "is sensitive to the legitimate special needs of private religious schools."

Until the President's bill or a substitute is enacted, the government's position is that there is no official prohibition against granting tax exemptions to such schools, but the Treasury Department announced that it would not act on any new applications for tax-exempt status for schools until Congress has acted on the issue.

The Lawyers' Committee for Civil Rights Under Law has asked the U.S. District Court for the District of Columbia to preserve--and force enforcement of--the government's policy as it stood before Jan. 8. Any change of direction, the lawyers' group and other civil-rights groups contend, would violate a 1971 federal injunction barring the extension of tax privileges to segregated schools. The court has interpreted existing laws as prohibiting such tax exemptions, the lawyers' group maintains, so no new legislation is necessary.

Similarly, the U.S. Commission on Civil Rights last week urged Congress to reject the legislation, asserting that Title VI of the Civil Rights Act of 1964 already bars federal benefits to institutions that discriminate.

"Our position can be summed up in eight words," said Stephen Horn, a member of the commission. "The law is on the books. Enforce it."

Barring a new court order, however, two institutions--the Goldsboro (N.C.) Christian Schools and Bob Jones University--apparently will receive tax exemptions until legislation is passed, although their policies have been deemed racially biased. The government dropped its case against them on Jan. 8 when it revoked Internal Revenue Service (irs) rules forbidding exemptions for schools that discriminate.

The proposed legislation, an amendment to the Internal Revenue Code of 1954, is an attempt, President Reagan said, to give statutory weight to an irs policy that he believes "had no basis in law."

"We had not anticipated the reaction because we were dealing with a procedural matter," the President said at a news conference last Tuesday when asked to elaborate on the series of apparent shifts in his Administration's position on the issue. "It was interpreted by many of you [journalists] as a policy matter, reflecting a change in policy."

Mr. Reagan took full responsibility for the revocation of the irs rules and for the confusion that followed. And he said the Administration's handling of the matter led to "misinterpretations" of its motives.

But, the President asserted, he intended--even before the storm of criticism from members of Congress, journalists, education associations, and civil-rights groups--to restore the anti-discrimination policy through legislation.

"I was having talks with Senators about this," he said in explaining why he waited four days to announce that he would introduce the legislation. "Maybe we didn't act as swiftly as we could have--and, as I say, I'm not defending that we proceeded on a course that was as well planned as it might have been."

The President's bill "will, for the first time, give the Secretary of the Treasury and the Internal Revenue Service express authority to deny tax-exempt status to private, non-profit educational organizations with racially discriminatory policies," according to a summary prepared by the White House.

It would be retroactive to July 9, 1970, when the irs rules went into effect; therefore, Bob Jones University and the Goldsboro schools, if they receive temporary exemptions, might have to return to the U.S. treasury any benefits they enjoy under the exemption should the new legislation make them ineligible once again.

The draft of the bill defines a racially discriminatory policy, in part, as one that "refuses to admit students of all races to the rights, privileges, programs, and activities generally accorded or made available to students by that organization."

Religious schools would be allowed to grant preference to members of a religious organization or belief, "provided, that no such policy, program, preference, or priority is based upon race or upon a belief that requires discrimination on the basis of race."

Both the Goldsboro Christian Schools, which refuse admission to blacks, and Bob Jones University, which admits blacks but bans interracial dating or marriage, have claimed in their suits against the irs that their policies are based on their fundamentalist faith.

Both institutions apparently would fail to qualify for exemptions if the Reagan bill becomes law. Bob Jones III, president of the university, has urged supporters of the school to write letters to Congressmen expressing opposition to the bill.

In a letter to Thomas P. O'Neill Jr., speaker of the House, and to Vice-President George Bush in his capacity as president of the Senate, Mr. Reagan said: "I believe the course I have outlined is the one most consistent both with our mutual determination to eradicate all vestiges of racial discrimination in American society, and with a proper view of the powers vested in the Congress under our constitutional system."

President Reagan's proposal was termed "acceptable" by a spokesman for Senator Gary Hart, a Colorado Democrat who has been a leading critic of the Administration's position on the issue.

"There don't appear to be any major loopholes," said Paul Wattles, the Senator's press secretary. Nonetheless, Senator Hart intends to introduce a separate bill with similar goals, Mr. Wattles said.

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