Racial Policies, Religious Rights Square Off As High Court Hears Tax-Exemption Case

By Eileen White — October 20, 1982 5 min read
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A dispute over the eligibility of racially discriminatory religious schools for federal tax exemptions came before the U.S. Supreme Court last week in a lawsuit that has become the focal point of criticism of the Reagan Administration’s civil-rights policy.

In an unusual move, both the federal government’s previous position--that the irs has the authority to deny tax benefits to discriminatory schools--and its current posi-tion--that that authority has not been specifically granted by the Congress--were presented to the Justices.

The case involves appeals of rulings by the U.S. Court of Appeals for the Fourth Circuit against two educational institutions denied tax-exempt status by the Internal Revenue Service (irs). The irs in 1970 revoked the tax-exempt status of Bob Jones University of Greenville, S.C., and denied the application for tax exemption of the Goldsboro Christian Schools of Goldsboro, N.C. The university prohibits interracial dating and marriage between its black and white students; prior to 1971, blacks were banned outright from attending the university. The Goldsboro schools do not admit black students. Both institutions maintain that these policies are based on Biblical prohibitions against miscegenation.

The highly political nature of the case--which Senator Robert Dole of Kansas has called one of the Administration’s “greatest political fumbles"--produced long lines of attorneys, religious officials, and supporters of the schools seeking admission to Tuesday’s hearing. The two schools were well represented by Christian fundamentalists from around the country, who sported “I support Bob Jones” badges, and uniformed elementary-school students gathered on the steps outside the courtroom.

Declare Case Moot

William Bradford Reynolds, the assistant attorney general for civil rights, argued the case for the Reagan Administration. Because the Administration last January reversed its position against the schools and asked the Court to declare the case moot, the Court--at the request of civil-rights organizations--appointed a private advocate to argue in favor of the 1970 irs policy.

The Administration’s about-face, which President Reagan said was based on a desire to prevent federal agencies from “governing by administrative fiat” rather than on a policy of fostering racial segregation, was resoundingly criticized by members of Congress, private-school associations, and civil-rights groups.

Controversy over the President’s decision has continued since then, as the Administration’s tuition tax-credit bill became bogged down in the Congress over disputes concerning the government’s commitment to enforcing the bill’s anti-discrimination provisions. The fate of that bill is now tied to the Court’s decision in the tax-exemption case.

The disposition of the case is being carefully watched by the private-school community. Such schools depend heavily on exemption from payment of federal Social Security and unemployment taxes, as well as eligibility for tax-exempt contributions. The National Association of Independent Schools, an organization whose member schools maintain nondiscriminatory policies, filed a friend-of-the-court brief in support of the 12-year-old irs policy.

Most of the arguments in Tuesday’s hearing involved the “intent of Congress” in enacting and amending the Internal Revenue Code, because the law itself does not specifically address racial discrimination. The law authorizes the exemptions for “organizations operated exclusively for religious, charitable, or educational purposes.”

Although the irs until 1970 permitted tax exemptions for institutions such as Bob Jones University, the government changed its position by broadly interpreting the word “charitable” in its “common law” sense--that of providing for the good of society--rather than in a narrow sense of aiding the disadvantaged. Because federal laws had made racial desegregation a public-policy goal, the irs maintained at that time that providing a tax benefit to segregated schools was a means of subsidizing discrimination.

But Mr. Reynolds argued that the Reagan Administration “found no evidence that ‘charitable’ encompasses all purposes [in the statute]. Each purpose was to have an independent legal significance.”

William G. McNairy, the attorney for the Goldsboro Schools, agreed, saying that an institution should be eligible for the tax exemption if it was educational but not necessarily charitable in the broader sense.

The remark drew a question from Associate Justice John Paul Stevens: “Would a school for pickpockets qualify?”

No, because “it is not organized for educational purposes,” Mr. McNairy replied. “It would still be teaching them how to do it,” the Justice said, drawing laughter.

William Bentley Ball, representing the university, asked the Court to reject “the notion that taxation will not necessarily be determined by an act of Congress but instead by a baroque super law invoked by administrators or judges.” In citing public policy as the “ultimate criterion,” the irs was violating the schools’ First Amendment right to free exercise of religion, he maintained.

The arguments of the other three attorneys were rejected by William T. Coleman Jr., the attorney appointed by the Court to argue in favor of the 1970 irs policy. Mr. Coleman, a secretary of transportation during the Ford Administration, is chairman of the naacp Legal Defense and Education Fund.

“The Constitution places no value on private racial discrimination and affords it no protections,” he said. “When fundamental public policy is violated, a defense of religious belief is not available.”

Associate Justice Lewis F. Powell asked whether the irs should be limited in its authority over granting tax exemptions. “Could it make the same policy with respect to sex discrimination?” he asked.

“We didn’t fight a civil war over sex discrimination. ... That’s the one policy that is crystal clear,” Mr. Coleman replied.

He maintained that Congressional action to amend the irs code to forbid tax exemptions for discriminatory social clubs, overruling a 1976 court decision, indicated implicitly that the Congress was satisfied with the irs policy regarding schools. He added that the Congress has rebuffed several attempts by its members to overrule the policy on private-school exemptions.

A version of this article appeared in the October 20, 1982 edition of Education Week as Racial Policies, Religious Rights Square Off As High Court Hears Tax-Exemption Case


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