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Unpublicized I.R.S. Document Troubling Private Schools

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WASHINGTON--The Internal Revenue Service has quietly implemented new and more detailed guidelines for determining whether private schools seeking tax-exempt status are operating under racially nondiscriminatory policies.

The guidelines, contained in a handbook that is distributed to the agency's field offices, were designed to "tighten up'' procedures in the wake of a highly publicized case three years ago in which a school was granted a tax exemption without the proper review, an I.R.S. spokesman said.

But officials of major organizations representing private schools argue that the guidelines are unfair to the majority of such schools, which do not discriminate against minorities.

And they object to the fact that the agency changed the procedures without seeking public comments.

"The guidelines go too far and are not reflective of fair standards,'' John Sanders, a lobbyist here for the National Association of Independent Schools, said last week.

"We're all scrambling to recruit more minority students and teachers,'' he said.

Robert L. Smith, executive director of the Council for American Private Education, a group of 13 private-school associations, said the guidelines present "a very heavy-handed view of the situation.''

"The manual just simply misses the mark badly as far as making the appropriate kinds of checks into the practices of private schools,'' he said.

Mr. Smith said representatives from several private-school associations were working with lawyers to develop a response to the agency.

But Norman J. Chachkin, a lawyer for the NAACP Legal Defense and Educational Fund Inc., said the I.R.S. "is on very firm ground.''

"I don't think it's anything the schools ought to be concerned about,'' he said.

Proof of Nondiscrimination

Under the guidelines, which have gone unnoticed since they went into effect a year ago, private schools seeking federal tax-exempt status must prove that they are equally open to all racial and ethnic groups.

Those that have histories of racial discrimination and enroll few or no members of minorities must provide "clear and convincing evidence'' that they no longer discriminate, the I.R.S. document states.

The 10-page guidelines provide a detailed discussion of evidence I.R.S. investigators should look for to determine whether a school discriminates. They also include a list of U.S. Supreme Court cases on the subject.

According to the standards, evidence of nondiscrimination would include active recruitment of minority students and faculty, provision of financial aid for minorities, publication of a racially nondiscriminatory policy, and public repudiation of any previous discriminatory policies.

In addition, they say, investigators should examine such factors as the racial make-up of the local population in comparison with that of the school.

Investigators are also told to determine whether the school's tuition and fees are too expensive for most minorities, whether cash deposits are required at the time of registration, and whether children of school contributors receive priority in admissions.

"I don't remember this level of detail'' in previous I.R.S. guidelines, said Mr. Chachkin of the legal-defense fund. "It looks to me like a very good laundry list.''

"But the decision is still ultimately a judgment call,'' he added.

Prince Edward Academy

The new procedures were prompted by a controversy over an I.R.S. decision in August 1985 to grant a tax exemption to Prince Edward Academy in Farmville, Va. The school was founded in 1959 when the community closed its public schools to avoid integration.

The I.R.S. decided to restore the school's exemption after it had renounced its former policies, created a scholarship for minority students, and elected a black to the board of trustees. No minority students were attending the school at the time. (See Education Week, April 30, 1986.)

After a Congressional inquiry into the decision, the I.R.S. agreed to review the ruling, which had been made by a regional office. The agency's commissioner, Roscoe Egger, told the House Ways and Means Committee that a bureaucratic error had prevented the decision from receiving the required review from the national office.

The national office upheld the decision in April 1986, saying the school had made efforts to recruit minority students. But the controversy caused the agency to re-examine its procedures, according to Rod Young, an I.R.S. spokesman.

"The changes are an attempt to clarify our procedures and provide more detail to the field offices, to tighten up the procedures,'' Mr. Young said last week.

The new procedures, "Examination Guidelines for Educational Organizations,'' were issued to I.R.S. offices in March 1987.

Because the guidelines are part of a handbook designed to help agents gather information--rather than regulations or interpretations of federal law--the changes did not require public comment, Mr. Young said.

"The new guidelines were a step forward,'' said George Dalley, staff director for Representative Charles B. Rangel, Democrat of New York.

As a result, he said, Mr. Rangel is no longer pursuing legislation, introduced in 1986, that would have required schools with past discriminatory policies to provide hard evidence that the policies had changed.

'Stricter Standards'

But Mr. Sanders of the N.A.I.S. contends that the guidelines represent a return to overly strict standards that his organization had objected to in 1978, when such procedures were first proposed.

The guidelines "reflect a lack of understanding of the mission and environment of independent schools,'' according to a summary handed out at a presentation Mr. Sanders made at the group's annual meeting in New York last month.

"N.A.I.S. is taking the lead in trying to negotiate more equitable standards,'' the summary said.

Last week, Mr. Sanders said he had not heard of any complaints by schools arising from the new guidelines. To his knowledge, he said, no N.A.I.S. schools have been investigated under the procedures.

Mr. Smith at CAPE said private-school representatives had met last year to discuss the guidelines and draft a response to them, but that no such statement had yet been issued.

"We want to be sure our response is as thoughtful as possible, and any statement now could be easily misunderstood,'' he said.

Mr. Smith said the American Association of Christian Schools and Colleges, which claims a membership of 12,000 church-run schools, was also working with CAPE on the issue.

The Rev. Jim Lowden, a board member of the association, said the group was "concerned'' about the guidelines, but had not had any complaints on the issue from its members.

Charles J. O'Malley, Secretary of Education William J. Bennett's executive assistant for private education, said last week that the Education Department would not become involved in the issue unless "private schools had some concerns'' that were expressed to the department.

School officials who object to the guidelines, Mr. Young of the I.R.S. said, may submit statements to Robert I. Brauer, the agency's assistant commissioner for employee plans and exempt organizations.

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