Tax-Exemption Called Mistake

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Washington--The Internal Revenue Service has agreed to review a controversial decision to restore tax-exempt status to Prince Edward Academy, a private Virginia school founded in 1959 when the local community closed its public schools rather than allow black students to attend with whites.

During a House Ways and Means subcommittee hearing this month, irs Commissioner Roscoe J. Egger said a bureaucratic error prevented the decision, made in August, from receiving a required review within his agency.

Prince Edward Academy, located in Farmville, Va., lost its tax-exempt status in 1978 for violating Revenue Procedure 75-50, which requires schools to adopt and publicize a nondiscriminatory admissions policy.

The school re-applied for tax-exempt status last April after formally adopting an open-admissions policy and advertising it in local 4newspapers, although there are still no blacks among its 650 students.

Civil-rights groups and others protested the irs decision, which allows contributors to Prince Edward Academy to deduct their donations when computing their income tax.

"Our position is that the government cannot support racial discrimination, and that's exactly what granting tax-exempt status to this school does," said Chan Kendrick, director of the Virginia chapter of the American Civil Liberties Union.

No Policy Shift

Mr. Egger said during the hearing that he was unaware of the decision until he read news reports of it, and that it was not politically motivated or designed to change irs policies on tax exemption for racially discriminatory schools.

He said the adoption of an open-admissions policy by a school with a history of segregation would not by itself normally be enough to warrant the granting of tax-exempt status.

An irs spokesman said decisions on tax exemptions for schools have been made at the regional level for the last two years because of a backlog in applications at the national office.

Observers point out that this policy shift occurred shortly after the 1983 U.S. Supreme Court decision in Bob Jones University v. U.S., in which the Court criticized the Reagan Administration's attempts to revoke the irs's policy of denying tax-exempt status to discriminatory schools.

Representative Charles B. Rangel, Democrat of New York, expressed concern at the hearing that the Reagan Administration was seeking to circumvent the court decision by adopting lax oversight policies. He questioned the wisdom of allowing regional staff who might be subject to local pressures to make these decisions.--ws

Vol. 05, Issue 11

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