discriminatory religious schools and tax exempt status

8/13/2019 Discriminatory Religious Schools and Tax Exempt Status

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DiscriminatoryReligiousSchoolsand TaxExemptStatusUn i t e dStatesCommissionon Civi l Rights December1982Clearinghouse Publication 75


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U S COMMISSION ON CIVIL RIGHTSThe U.S. Commission on Civ i lRights is atemporary independent, bipartisan agencyestablished byCongress in1957anddirected to :

Investigate complaints alleging that citizensarebeing deprivedoftheir righttovotebyreasonoftheir race, color, religion, sex, age, handicap,ornational origin,orbyreason offraudulent practices; Study and collect information concerning legal developments constitutingdiscrimination or adenial ofequal protection of the laws under th e Constitutionbecause of race, color, religion, sex, age, handicap, or national origin, or in theadministrationofjustice; Appraise Federal lawsandpolicies with respect todiscriminationordenialofequal protection of thelaws because ofrace, color, religion, sex, age, handicap, ornational origin,or in theadministration ofjustice; Serveas anational clearinghouse forinformationinrespecttodiscriminationordenial of equal protection of the laws because of race, color, religion, sex, age,handicap,ornational origin; Submit reports, findings, and recommendations to the President and theCongress.

MEMBERS OF THE COMMISSIONClarenceM.Pendleton, Jr.,ChairmanMaryLouise Smith, ViceChairmanMaryF.BerryBlandinaCardenas RamirezJillS.RuckelshausMurray Saltzman

John Hope III,ActingStaf f Director


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DiscriminatoryReligiousSchoolsand TaxExemptStatusU ni t edStatesCommissionon Civi l Rights December1982Clearinghouse Publicat ion 75


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ACKNOWLEDGMENTS

The Commission is indebted to Donald Chou,* attorney-advisor, who prepared thismonograph un der the supervision of M.Gail Gerebenics, Assistant General Counsel,and toPatricia Dunn, attorney-advisor, who provided valuable legal assistance in itspreparation.Th eCommission also appreciates the efforts ofVivian Jones an d Michele Moree fo rtheir support an d assistance in the production ofthis monograph and to Gloria Izumifor he r editorial assistance.Production of the monograph wasu n d e r th e overall supervision ofPaul Alexander,Acting General C ounsel.*N olonger with th eC ommission

111


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CONTENTS

Summary 1

Freedom of Religion and Racially DiscriminatoryPrivateReligious Schools 3


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Summary

Th e question of whether schoolsreligious ornonsectarianthat discriminate on the basis of raceshould begranted tax-exempt status ha srecently beenthesourceo fextensivepublic debate.The Commission's interestin the Federal Govern-ment's taxpolicies concerning private schools whoseoperations conflict with th e constitutionally basednational policy of eliminating segregated educationpredates th e current controversy. In a 1967 report,Southern School Desegregat ion 1966-67, th eCommis-sion reviewed the progress of Southern an d BorderState school districts incomplying with th eSupremeCourt's decision in Brown v .Board ofEducation. Inassessing school desegregation, it also examined thedevelopment of private schools tocircumvent publicschool desegregation.The 1967report concluded:Many private segregated schools attended exclusively bywhite students have been established in the South inresponse to public school desegregation. In some districtssuchschools have drained from the public schools most orall of thewhite students an dmany whitefaculty members.

The Commission noted that many of the raciallysegregated private schools established tocircumventpublic school desegregation had been granted tax-exempt status by the Internal Revenue Service, an dthat Federal ta x exemptions constituted a form ofindirect government assistance.Much has happened since th e issuance of thatreport.Against the backdrop of Brown subsequent U.S.Supreme Court school desegregation cases, and thepassage of theCivil Rights Act of 1964, the InternalR ev enue Service(IRS), in 1970, announced it could nolonger legallyjustifyallowing tax-exempt status to

private schools which practice racial discriminationnor [could] it treat gifts tosuch schools ascharitabledeductions fo r income ta x purposes an d explainedthat [a]n organization seeking exemption as beingorganizedexclusivelyfo reducational purposes, withinthemeaningofsection501(c)(3)an dsection 170, mustmeet the test ofbeing'charitable' in thecommonlawsense.

This interpretation of the Internal Revenue Codefollowed litigation to force the IRS to deny ta xexemptions to segregated private schools and re-mained in effect until 1982. It wasthen, in thecontextofdevelopingth eFederal Government's position to betaken in Bob Jones University v . United States an dGoldsboro Christ ian Schools, Inc. v . United Statespending before th e U.S. Supreme Court, that th eDepartment of Treasury, with the advice of theDepartment of Justice, reversed its interpretation ofthe law. On January 8, 1982, the Department an -nounced that itwould no longer revoke ordeny tax-exemptstatus fo rreligious, charitable, educational, orscientific organizations on the grounds of their non-conformity with fundamental policiesincluding th enational policy against racial discrimination. Theadministration maintained that th e enactment of aseparate statute, enablingthe IRS todeny tax-exemptstatus to schools that practice racial discrimination,wa srequired.Th e U.S. Commission on Civil Rights stronglydisagrees with this interpretation of the law and sotestified inhearings conducted earlier this year beforeth e SubcommitteeonCiviland Constitutional Rightsof th e House Judiciary Committee In the Commis-sion's view, th e Constitution, Title VI of the Civil

1


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Rights Act of 1964, and the IRS Code support thepolicy ofdenying tax-exempt status toprivate schools,religious or nonsectarian, that engage in racial dis-crimination. Decisions of theFederal courts interpret-in gth eConstitutionan dFederal law notonly supportthis viewbut require that the IRS initiate effectiveenforcement procedurestodeny tax-exempt status tosuch racially discriminatory schools. Recently, inresponse to arequest from Senator John Glenn (D-Ohio) for the Commission's comments on specificlegislation in this area pending before Congress, th eCommission reiterated itsviewsonthis issue.Because of thecontinuing public debateon theissueof granting tax-exempt status to private religious ornonsectarian schools thatdiscriminate on thebasisofrace, the Commission has decided to release thismonograph on the subject. Th e monograph explainsthe historical underpinnings of the fundamental na-tional policy against racial discrimination. It alsodiscussestheconstitutional conflict that arises whenasincerely held religious belief violates this fundamentalpolicy and the establishment clause problem arisingwhen onereligious institution istreated differently by

th e government than another religious institution.Finally, the monograph traces the Internal RevenueService's authorityandpolicies regardingthe grantingof tax-exempt status to schools that discriminateonthebasis ofrace.Over the course of the past several months, theCommissionhasalso been developingastatementonreligiousdiscrimination, Religion in theConstitution:A Delicate Balance that will address other majorissues arising under th e first amendment's mandatesforbidding the government from passing any lawestablishing areligionorprohibiting the free exerciseof religion. Th e common themes unitingth e subjectsdiscussed in that statementaresimilartothose raisedby the issueof granting tax-exemptstatusto privatereligiousschools that discriminateon thebasisofrace:th e freeexerciseofreligionis notabsolute an dmustb ebalanced against other competing interests and theprohibition against government establishment ofreli-gion is also not absolute and can bemodified when,and only when, the inability of persons to practicetheir religions subject to government control orjurisdictionis at stake.


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Freedom of Religion an d RaciallyDiscriminatory Private Religious Schools

In a free governmentt hesecurity fo r civil rightsmustbeth e same asthat fo rreligious rights. It consists in the onecase in themultiplicityo finterests, and in theother in themultiplicity ofsects.James Madison, Federalist Paper No. 51 , asreprinted inCharles A. Beard, Th e Enduring Federal is t (1948), pp .224,227.

On October 13, 1981, the Supreme Court of theUni ted States agreed to hear tw o cases, B ob JonesUniversity v . United States an d Goldsboro Christ ianSchools, Inc. v . United St a t e s ,1 raising the issue ofwhether the denial orrevocation oftax-exempt statusto private religious schools that engage in racialdiscrimination based on a sincerely held religiousbelief is contrary to the Internal Revenue Code of19542 an d violates th e religion clauses of the firsta m endm entto the Constitution.3Bob Jones University, though not affiliated witha nyparticular religious denomination, adheres to funda-mentalist religious beliefs in theeducation itprovidesto5,000 students inclasses rangingfrom kindergartentocollegeandgraduate school.Thesereligious beliefsstrictly prohibit interracial datingandmarriage. Theuniversity exercised this belief by first prohibiting1 Bo bJones Universityv .United States, 468 F. Supp. 890(D.S.C.1978), rev'd 63 9F.2d 1 47(4th Cir. 1980),cert,granted 50U.S.L.W.3265(U.S. Oct. 13 , 1981) (No.81-3);GoldsboroChristianSchools,Inc. v .United States, 436 F. Supp. 1314(E.D.N.C. 1977),o ff d percur iamNo.80-1473(4th Cir. Feb.24,1981) (unpublished opinion),cert,gr ant ed , 50U.S.L.W. 3265 (U.S. Oct. 1 3,1981) (No.81-1).1 I.R.C. 501(c)(3).3 Congress shall make no law respecting an establishment ofreligion,orprohibitingthe freeexercise thereof. . . . U.S. Const,amend.I.4 51 5F.2d 1082 (4th Cir. 1975), affd, 427U.S. 1 60(1976).5 529F.2d 51 4(4th Cir. 1975) (upholdinganadministrative rulingterminating all Veterans Administrationassistanceto the universitydue to itsracially discriminatory admissions policy).

black students from enrolling in the institution an dthen later admitting only married black students.Following the decisions of the U.S. Court ofAppealsfor th e Fourth Circuit in Runyon v. McCrary* an dBo b Jones University v .Johnson, Bo bJones Universi-ty again amended its admissions policy. Since M ay1975, the school has permitted black students toenroll. However, students whoadvocate or engageininterracial datingormarriagearesubjecttoexpulsionunderadisciplinary rule adoptedatthat time.6

Goldsboro Christian Schools, founded in 1963, is aprivate, fundamentalist religious school seeking toprovide a private school education in a religioussetting. It has received financial support, assistanceof personnel, and the use of the physical plant of theSecond Baptist ChurchofGoldsboro,North Carolina,withwhichit isaffiliated. Sinceitopened itsdoors, the6 Th e disciplinary rule implemented by the university reads asfollows:Thereis to be nointerracial dating.

1. Studentswho arepartnersin aninterracial marriage willb eexpelled.2. Students who aremembers of or affiliated with an ygroupor organization which holdsas one of its goalsor advocatesinterracial marriagewillb eexpelled.3. Studentsw hodate outside their ow nrace willbeexpelled.4. Students who espouse, promote, or encourage others toviolate the University's dating rules an d regulations will beexpelled.Bob JonesUniversityv.UnitedStates,639F.2d, 147,149(4th Cir.1980).


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school has absolutely prohibited the enrollment ofblackstudents.7Bob Jones University and Goldsboro ChristianSchools, Inc., assert thattheU.S. CourtofAppealsfor

the Fourth Circuit, in requiring them to meet acondition ofnondiscrimination on the basis ofrace,erroneously applied the tax-exemption provisions ofthe Internal Revenue Codeof1954, infringedon theirfirst amendment right to the free exercise of religionby imposing the nondiscrimination requirement, andviolated the establishment clause of the first amend-mentby favoringreligionsthatdo notholdareligiousbelief opposing interracial datingandmarriage.Tax Exemptions Under the InternalRevenue CodeSince 1894, the Federal income tax laws havecontained anexemption forcertain charitable organi-zations.8 The current Internal RevenueCodeprovidesfor tax-exempt status for the following organizations:Corporations, and any community chest, fund, or founda-tion, organized and operated exclusively for religious,charitable, scientific, testing for public safety, literary, oreducational purposes, or to foster national or internationalamateur sports competition. . ., or for the prevention ofcrueltytochildrenor animals, nopartof the netearningsofwhich inures to the benefit of any private shareholder orindividual, nosubstantial partof the activitiesof which is7 Goldsboro Christian Schools, Inc. v .United States, 436 F.Supp.1314-17(E.D.N.C. 1977).8 Tariff Act of1894, ch.349, 32, 28Stat. 556; Tariff Act of 1909,ch. 6,38, 36Stat. 113;RevenueAct of1916,ch.463,ll(a)(6),3 9Stat. 766; Revenue Act of 1918, ch. 18,231(6), 40 Stat. 1076;RevenueAct of1921,ch.136, 231(6),42Stat. 253; RevenueAct of1924, ch.234, 231(6), 43Stat. 282; Revenue Act of 1926, ch. 27,231(6),4 4Stat.40;RevenueAct of1928,ch.852, 103(6), 45Stat.813;Revenue Act of 1932,ch . 209, 103(6), 47Stat. 193; RevenueAct of 1934,c h.277, 103(6), 48Stat. 700, Revenue Act of1936,ch. 690, 101(6), 49 Stat. 1674; Revenue Act of 1938, ch. 289,101(6), 52 Stat. 481; Internal Revenue Code of 1939, 101(6);Internal Revenue Codeof1954,501(c)(3). I.R.C.501(a), (c)(3).10 I.R.C. 170(c).Similar deductions areprovided for gifts and forestate bequests ortransfersto501(c)(3)tax-exempt organizations.I.R.C. 2055(a)(2), 2522(a)(2).11 34 7U.S.483(1954). TheSupreme Court consolidated cases fromKansas, South Carolina, Virginia, Delaware, and the District ofColumbia. The four State cases alleged that d ejure segregationviolated the equal protection clause of the 14th amendment. Th eDistrict ofColumbia case, Boilingv .Sharpe, 347U.S. 497 (1954),allegedthat segregation violatedfifthamendmentdu e process.12 InPlessy v .Ferguson, 1 63U.S. 53 7(1896), theCourt held thatno 13th or 14th amendment violation wa screated by aLouisianastatute mandating railroad companies to provide equal butseparate passenger train accommodations for blacks an d whites.M at 543,551.For a more detailed discussion of the history of the Civil W ar

carrying on propaganda, or otherwise attempting to influ-ence legislation. . ., and which does not participate in, orintervene in. . ., any political campaign on behalf of anycandidateforpublic office.9Tax deductions are permitted for contributions to501(c)(3) tax-exempt charitable organizations, withthe exception of the testing for public safetycategory.10

Constitutionally Based PolicyAgainst Racial Discrimination inEducationOn May 17,1954,theSupremeCourtof the UnitedStates, in Brown v . Board of Educat ion,11 held thatsegregated public school systems, notwithstanding the

separate bu t equal doctrine ofPlessy v . Ferguson,1 2were violating the equal protection clauseof the 14thamendment.13 Although theSupreme Court decisionsinvalidating segregation inhigher education14 duringthe previous two decades should have signaled theresult in Brown to the segregationists, they wereunprepared for the1954 pronouncement of theCourt.Despitethe landmark decision, thesystemof segregat-ed public schools persisted. Southern legislaturesenacted numerous statutes notonlytopreserve publicschool segregation but also to construct an alterna-t iveaprivate, segregated educational system.1 5amendmentsthe 13th, 14th, an d 15th amendmentsto theConsti-tution se e U.S., Commission on Civ i l Rights, Civil Rights: ANational , Not a Special Interest(June 1981).13 Th e Court found that dual school systems were inherentlyunequal. 34 7U.S. 483, 495. In soholding, the Court specificallyfound that segregation stamped black children with a badge ofinferioritythat would followthem throughout their lifetime:To separate [black children] from others of similar age andqualificationssolely because oftheir race generates a feeling ofinferiority as totheir status in thecommunity that ma y affecttheir hearts an d minds in a way unlikely ever to beundone.347 U.S.483, 494(1954).14 See,e.g.,Missouri ex rel.Gaines v .Canada 305U.S. 33 7 (1938);Sipuel v.Board ofRegents, 33 2U.S. 63 1(1948); Sweattv .Painter,33 9 U.S. 629 (1950); McLaurin v . Oklahoma State Regents, 33 9U.S.637(1950).15 Within 6 years of the Brown decision, 1 0 States enactedlegislation either mandating or permitting the closing of localschools toavoid desegregation; four States passed lawst owithholdState funds from schools that complied with court orders todesegregate their institutions; and six States enacted legislationrelaxing oreliminating compulsory attendance laws.By I960, three States enacted legislation authorizing the sale orlease of public property to private parties toavoid desegregation;three States passed laws to facilitate the establishment ofprivateschools;threeStatesenacted legislation providing State tax creditsfor private schools, orwhere public schools were closed, topreventdesegregation; five States authorized tuition grants fo r privateschool students; an d four States enacted laws to protect th e


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The needforprivateschoolstoaccommodate whitestudents fleeing from the desegregating school systemsreally did not materialize until the late 1960s. At thattime,theSupremeCourt,realizing that Stateand localofficials were using various techniquesan d administra-tive practices such as State pupil assignment laws andlocal freedom of choice plans to frustrate thecommand of B r o w n II to desegregate the Nation'spublic schools withall deliberatespeed, 16 movedtoen d dilatory tactics preserving segregated dual schoolsystems.The Court ruled that school boards havean affirmative duty to take whatever steps might benecessary to convert to a unitary system in whichracial discrimination would be eliminated root andbranch. 17 It fur therstated that [t]he burden on aschool board today is to come forward with a planthat promises realistically to work, and promisesrealisticallytoworkn ow. 18

TheCourt's decision mandating the establishmentof unitary school systems led to a massive whitewithdrawal from the public schools and a flurry ofactivity in organizing and expanding privateones. 19Churches in many areas proved to be a naturalorganizing center fo r individuals seeking to establishsegregation academies,20 resulting in a startlinggrowth of Christian segregationist academies that canbe seen througho ut th eSouth. 21

retirement benefitso f public school teachers transferringt o privateschools as a result of desegregation. Hear ings on IRS TaxExemptions and S egr egat ed Pr iva t e School s before th eS u b c o m m . onCivi l a nd Const i tu t ional Rights of the House Comm. on theJudiciary,97th Cong., 2d Sess. (Jan. 28, 1982) (Appendix tostatement of A rthur S. Flemming, Chairman, U.S. Commission onCivi l Rights, citing Southern Education Reporting Service,Stat is t i -c a l S u m m a r y of S c h o o lSeg regat ion-Desegrega t ion in the Southerna nd B o r d e r S t a t e s (May 1961)). S e e Note, Segr egat ion A c a d e m i e sa nd State Ac t ion,82YaleL. J. 1436 (1973),a nd se egenerally , DavidNe vin an d Robert Bills, Th e Schools That F e a r Built:Segregat ionistA cademies in the S o u t h(1976) (he reafter cited asN e v i n&Bills, Th eSchools That F e a rBuilt).16 349U.S. 294 (1955).17 S e e Green v . C ounty School Board of New K ent County, 39 1U.S. 430,437^38(1968).18 Id . at 439. Th e Green ma nda te for school boards to prompt lyadopt an d effectuate a unitary school system was reiterated by theCourt in its subsequent decisions in A lexa nder v . Holmes CountyBoard of Education, 39 6 U.S. 1 9(1969), and Swa nn v . Charlotte-Mecklenburg Board of Education, 402 U.S. 1 (1971).For a more detailed discussion of Supreme Court decisions andrecent congressional and e xecutive branch actions with respect todesegregating the Nation's publicschools, se e U.S., Commission onCivi l Rights, Wi th Al l Deliberate Speed: 1954-19?? (N ovember1981).

Tax Exemptions and RaciallyDiscriminatory Private SchoolsBefore 1970, an y otherwisequalified private schoolthat engaged in racially discriminatory practices couldobtain tax-exempt status, according to IRS policy,if itdid not receive aid from a State or one of its politicalsubdivisions wherebyits operation was in violationofthe Constitution or existing Federal law.22 However , aprivate school could still be liable fo r damagesresulting from it s racially discriminatory practices.23To contest the continued Federal support of raciallydiscriminatory private schools under that the IRSpolicy, black parents and their minor children attend-in g Mississippi public schools filed a class action suiton May 21, 1969, to prohibit Federal tax exemptionsto private schools in Mississippi that refused admis-sion to black students basedon their raceor color.24They specifically sought injun ctive relief(1) to prohib-it the Secretary of the Treasury and the Commissionerfo r Internal Revenue from approving applicationssubmitted by racially discriminatory private schoolsseeking tax-exempt status and (2) to require theSecretary and the Commissioner torescind an drevokethe tax-exempt status previously granted to privateschools that excluded blacks.25 Soon after the initia-tion of the lawsuit, the court granted a motion tointervene filed by parents an d children who wererepresentative of individuals ei ther supporting orattending all-white, tax-exempt private schools that Note, Segr egat ion A c a d e m i e sand S t a t e A c t i o n , 82 YaleL. J.1436, 1441.S ee also Coffey v . State Educational Finance Commis-sion, 296 F. Supp. 1389 (S.D. Miss. 1969); Poindexter v. LouisianaFinancial Assistance Commission, 275 F. Supp. 83 3 (E.D. La .1967), affd pe r curiam, 38 9 U.S. 57 1 (1968); Brown v . SouthCarolina Board of Education, 296 F. Supp. 1 99(D.S.C.), affd pe rc u r i a m ,393U.S.222(1968);Wallacev.Un itedStates,389U.S.215(1967) (per curiam),off g Lee v. Macon County Board of Education,267 F. Supp 458 (M.D. Ala. 1967); Griffin v. State Board ofEducation, 239 F. Supp. 56 0 (E.D. V a. 1965); Hall v. St. HelenaParish School Board, 197 F. Supp. 649 (E.D. La. 1961), affd pe rcur iam, 36 8U.S. 5 15 (1962).20 N e v i n&Bills,The Schools That F e a rBuilt ,p. 7.2 1 Ibid., p. 9.2 2 IRS News Release, Aug. 2, 1967, reprinted in Hear ings onProposed IR S Revenue Procedure Affecting Tax-Exempt ion ofPrivate Schools Before th e S u b c o m m . on Oversight of the HouseC o m m .o n Ways a nd M e a n s, 96th Cong., 1 stSess.9(1979).2 3 S e eR u n y o nv .Mc C ra ry, 427 U.S. 1 60(1976).24 Green v .C o n n a ll y ,330 F. Supp. 1150(D.D.C . 1971), affd m e m .sub nom.,C oit v .Green,4 04U.S. 99 7(1971).2 5 Green v. Kenn edy, 309 F. Supp. 11 27,1129-30(D.D.C. 1970).At the time of this consideration of the request for a preliminaryinjunction, David M. K e n n e d y was the Secretary of the Treasury.He was later succeeded by John B. C onnally.


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provided an alternative educational system fo rwhitestudents seekingtoavoid integrated public schools.26OnJanuary 1 2,1970,theFederal District Court forth e District ofColumbia issued apreliminary injunc-tion restrainingth eSecretary of the Treasury and theCommissioner fo r Internal Revenue from approvingan y pending or future applications fo r tax-exemptstatus fromprivate schools inMississippi unless theyfirst affirmatively determine. . .that th e applicantschool is not a part of a system of private schoolsoperated on a racially segregated basis as an alterna-t ive to white students seeking to avoid desegregatedpublic schools. 27 Six months later, the InternalRevenue Service issued two news releases declaringthat it can no longer legally justify allowing tax-exempt statustoprivate schools which practice racialdiscrimination nor can ittreat gifts tosuch schools ascharitable deductionsforincometaxpurposes. 28Th e Greencourt held that501(c)(3)of theInternalRevenue Code must be read in light of Federal civilrights legislation and the overriding national policyagainst segregationineducation. Inissuingit sopinion,the court said that [t]he national policy againstsupport fo r segregated education emerged in provi-sions adoptedby theCongressin theCivil RightsActof 1964 (Title VI) and that the applyingofTitle V Iitselfto taxexemptionsanddeductions is anexpres-sion of Federal policy against Federal support forprivate schools that practice racial discrimination. 29The U.S. District Court for the District ofColumbiadeclared that:The Internal Revenue Code provisionson charitable exemp-tionsand deductions mustbeconstrued toavoid frustrationsofFederalpolicy. Under theconditionsof todaytheycan nolonger be construed so as to provide to private schoolsoperatingon aracially discriminatory premisethesupportofthe exemptions and deductions which Federal tax lawaffordsto charitable organizationsandtheirsponsors.302 6 330 F. Supp.1150,1 155(D.D.C. 1971).2 7 309 F. Supp. 1127, 1140(D.D.C.1970).2 8 330 F. Supp. 1150, 1156(D.D.C. 1971). IRS NewsRelease, July1 0,1970,reprinted inHearings on Proposed IRS RevenueProceduresA f f e c t i n g Tax-Exemption of Private Schools B e f o r e theSubcomm. onOversight of the House Comm. on Ways and Means, 96th Cong., 1 stSess. 10(1979).29 330 F. Supp. 1150, 1163(D.D.C. 1971).30 Id. at 1164.31 Id. at 1164-65.32 330 F. Supp. 1150, 1174(D.D.C.1971).

The court concluded that an ycontrary interpretationofth elegal obligationsof theInternal Revenue Servicewould raise serious constitutional questions :Clearly, the Federal Government could not under theConstitution give direct financialaid to schools practicingracial discrimination. But tax exemptions and deductionscertainly constitute a Federal Government benefit andsupport. While that support isindirect,and is in thenatureofa matching grant rather than an unconditional grant, itwouldbe difficult indeed to establish that such support canbe provided consistently withthe Constitution.31

Thecourt'sorderwaslimitedtoMississippi,but theopinion makes clear that the IRS could apply theprinciples nationwide.As thecourt stated:[t]o obviate any possible confusion the court is not to bemisunderstood as laying down a special rule for schoolslocated in Mississippi. The underlying principle is broader,and is applicable to schools outside Mississippi with thesame or similar badge of doubt. Our decree is limited toschools in Mississippi because this is an action inbehalf ofblack children and parents inMississippi, and confinementofthis aspectof ourrelieftoschools inMississippi applyingfor taxbenefits definesaremedyproportionateto the injurythreatened toplaintiffs an dtheir class.32In 1976, however, th e parents ofblack public schoolstudents inseveral States sought toextend applicationof the Greendecision nationwideby filingsuit againstth eInternal RevenueService,33 alleging that the IRSha d to limit tax-exempt status under 501(c)(3) toracially nondiscriminatory privateschools.TheFeder-al district court dismissed thecomplaint asnonjustici-able,34 but the court of appeals reversed that deci-sion.35 Petitions for a writ of certiorari36 weresubsequentlyfiledwitht heSupremeC ourt .37When the G r e e ncase wa sreopened in 1976, it wasconsolidated with th e Wright case. Green was re-opened because th e initial IR S regulations did notadequately ensure that ta x exemptions were n otprovided toprivate schools engaginginracial discrim-ination. The U.S. District Court for the District ofColumbia thus modifiedth eoriginal Green order an d33 Wright v. Miller, 480 F. Supp. 790 (D.D.C. 1979), rev'd subnom.,Wright v.Regan,656F.2d820(D.C. Cir.1981).34 480 F. Supp.790,793(D.D.C. 1979).A nonjusticiable complaint is one that is not appropriate for courtreview.35 656F.2d820(D.C. Cir.1981).36 An order by the Supreme Court ordering the lower court toproduce the certified recordof acase.Thewritindicatesacase thatthe SupremeC ourtchooses, at its discretion, to hear.37 50 U.S.L.W. 3353 (U.S., filedOct. 20, 1981), 3467 (U.S., filedNov. 23, 1981).


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injunction to strengthen it senforcementof thenondis-crimination requirement for tax-exempt status.38After th e Wright petitions fo r cert iorariwerefiled, th eDepartment of Justice submitted a memorandum toth e Supreme Court in the B ob Jones an d Goldsborocases on January 8, 1982,to vacate th e judgments inthose cases. It asserted that those cases should bevacated as moot since the Treasury Department hadbeguntheprocessfor revokingtheapplicablerevenueregulations an d procedures and had initiated th eprocess of reinstating the tax exemptions fo r thoseinstitutions. 39 This change in the policy of threeprevious administrations was the result of a TreasuryDepartment determination, with the advice of theJustice Department, that it lacked th e statutoryauthority to deny tax-exempt status to racially dis-criminatorypr iv ate schools.40As a result of the Justice Department's action, theG r e e n plaintiffs sought an injunction to prevent th eDepartment of Treasury from revoking, or failing toenforce, the IRS regulations and procedures denyingtax-exempt status to racially discriminatory privateschools.41 That motion was denied by the districtcourt on February 4, 1982.42 However, in the Wrightcase, th e U.S. Court of Appeals for the District ofColumbia granted a temporary order that prohibitedboth the Treasury Department and the IRS fromgranting or restoring tax-exempt status to racially38 Green v. Mil ler ,C iv. Action No . 69-1355(D.D.C. May 5, 1980)(clarified andamended June2, 1980, unpublisheddecision).39 Memora ndum for the United States, Goldsboro ChristianSchools Inc. v. Un ited States, No. 81-1, and B ob Jones Univ ersity v.Unite d States, No. 81-3 (U.S., filed Jan. 8, 1982).40 Department of Treasury News Release, Jan. 8, 1982. A publicoutcry resulted from th e change in tax-exempt policy that wouldallow racially discrim inatory priv ate schools, both 'religious an dnonsectarian, toreceive such status. OnJan. 18, 1982,the Presidentsent to Congress proposed legislation to explicitly gra nt theDepartment of the Treasury and the Interna l Rev enue Servic e theauthority to d e n yo r revok e tax-exempt status fo rracially discrimi-natory private schools (and to deny charitable an d other forms ofdeductions for contributions to such schools) that they purportedlylack und er exist ing rev enue law. That same day,t he D epa r tmento fth eTreasury ann ounced that i t had instructed the IRS not to act on any applications for tax exemptions filed in response to theInternal Rev enue Service's policy announced on Friday, January8 ,1982, until Congress has acted on the proposed legislation.Treasury News,Jan. 1 8,1 982.4 1 Motion to Vacate Stay of Proceedings, to Shorten Time forResponse thereto, and for further Injunctive Relief to EnforceDeclaratory Judgm en t and Preserve the Status Quo, Green v .Regan,C iv. Action No. 69-1355(D.D.C.Jan. 13, 1982).4 2 S e e Motionfo r Injunction Pending Appeal or in theA lterna t ivefor Injunction unde r All Writs Act to Preserve Effectiveness ofthis Court 's Mandate, Wright v. Reagan, No.80-1124 (D.C. Cir.Feb. 1 0,1982).

discriminatory private schools. This injunction appar-ently has nationwide effect.43Based on the circuit court order in the Wright case,th e Department of Justice filed tw o motions with th eSupreme Court on February 25, 1982. One motionrequested leave to file a brief on the merits out-of-time 44 since the Secretary of the Trea sury had determined not to grantorrestore tax-exemptstatusin light of the Wright order,rendering the Bob Jonesan d Goldsboro cases no longer moot.45 The secondmotion requested that the cases be heard separatelyand the appointment of counsel to argue as a m i cu scuriaeinsupportof thejudgme nts below. This requestwa s made as a result of the stance taken by the UnitedStates in the brief it sought to fileou t-of-time. In thatbrief, the United States would support the court ofappeals decision with respect to the first amendmentissues, but it would argue that the fourth circuit madean erroneous statutory interpretation in denying tax-exempt status to racially discriminatory privateschools.46 Both motions were granted by the SupremeCourt onApril 1 9, 1982.47Th e Green court was not squarely faced with th equestion of whether private religious schools thatengage in racial discrimination based upon sincerelyheld religious beliefs are outside the reach of the IRSregulations by virtue of the free exercise clause of thefirst amendment , nor was it confronted with th equestion of whether th e denial oftax-exem pt status to4 3 Wright v . Regan, No . 80-1124 (D.C. Cir. Feb. 1 8, 1982)(temporaryorder).On Mar. 24, 1982,the circuit courtofappealsissued another order under which the February 18 order wouldcontinue in effect if the plaintiffs filed a motion in the district courtfor similarinjunctive relief within20days. Uponthe filing ofsuch amotion th e February 1 8 order would remain in effect unt i l th edistrict court ruled on the motion for injunction an d pending an yappeal to the circuit court. Wright v. Regan, No. 80-1124 (D.C.Cir. Mar. 24 , 1982) (order). Th e Wright plaintiffs subsequentlyfiledsuch a motion in the district court. Motion for Order PreservingStatus Quo, Wright v. Regan, Civ. Action No. 76-1426(D.D.C.,filed Apr. 1 3,1 982).4 4 Filing out-of-t ime means filing after th e expiration of the timeallowed for filing.45 Motionf or LeavetoFile Brief Out-of-Time, Gold sboro C hristianSchools v . United States, No . 81-1, and Bob Jones Universi tyv .UnitedStates, No . 81-3 (U.S.,filedFeb. 25 ,1982).46 Motion fo r Leavet o File Motion forD ivided Argum ent Out-of-Time and Motion for Divided Argument, Goldsboro Christ ianSchools v . United States, No . 81-1, and Bob Jones Universi tyv .UnitedStates,No. 81-3 (U.S.,filedFeb.25, 1982).4 7 50 U.S.L.W. 3837 (U.S. Apr. 1 9, 1982). The Supreme Courtinvited William T. Coleman, Jr. , former Secretary of Transporta-tion, to brief and argue, as a m i c u s curiae, in support of thejudgmen ts below. The cases were argued before the Supreme C ourtoft he United States on Oct. 1 2,1 982.


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such racially discriminatory private religious schoolsviolates the establishment clause of the first amend-ment. Nevertheless, thecourt didintimatethatit wasunlikely that the first amendment would shield suchprivate religious schools from the racial nondiscrimi-nation requirement for tax-exempt status:We are persuaded that there is a declared Federal publicpolicy against support for racial discrimination in educationwhichoverridesanyassertion ofvalueinpracticing privateracial discrimination, whether ascribed to philosophicalpluralism ordivine inspirationforracialsegregation.48

Racially Discriminatory Practices ofPrivate Religious Schools andReligious FreedomCongress shall make no law respecting an estab-

lishment of religion, or prohibiting the free exercisethereof. 49 Although that language of the firstamendment seekstoerectawallofseparation betweengovernmentandreligious institutions, [n]operfectorabsolute separation is really possible; the very exis-tence of the Religion Clauses is an involvement ofsorts. . . . 50 AsChief Justice Burgernoted:The general principle deducible from theFirstAmendmentand all that has been said by the Court is this: that wewillnot tolerate either governmentally established religion orgovernmental interference with religion. Short of thoseexpressly proscribed governmental acts there is room forplayin the joints productive of a benevolent neutrality which48 Green v. C onnally, 330 F. Supp. 1150, 1163. The court furtherstated:We are not now called upon to consider th e hypotheticalinquiry whether tax-exemption or tax-deduction status may beavailable to a religious school that practices acts of racialrestriction because of the requirements of religion. Such aproblem ma y neverarise;and if itev er doesarise,i t willha vetobe considered in the light of the particular facts and issuepresented, and in light of the established rule. . .that the lawmay prohibit an individual from taking certain actions eventhough his religion commands orprescribes them. Id . at 1169(footnotes omitted).49 U.S.Const, amend. I.50 Walz v. Tax Commission, 39 7U.S. 664,670 (1970).51 Id. at669.52 Pierce v . Society of Sisters, 268U.S. 510, 53 4 (1925). S ee alsoWisconsin v. Yoder, 406U.S. 205 (1972).53 S eeNorwood v .Harrison, 41 3U.S. 455, 461-63(1973).54 Committee forPublic Education an d Religious Liberty v .Regan,444U.S.646(1980) (upholdinga New York statute providing directpaymentsto privateschoolsreligious and nonsectarianforcostsincurred in complying with State pupil evaluation and reportingrequirements); Lemon v. Kurtzman, 403 U.S. 602,614 (1971)(stating that therearesome necessaryand permissible contracts).S ee also Norwood v.Harrison, 41 3U.S. 455,465 (1973), where theCourt referred to generalized services such as police and fireprotection that States provide,and stated:

will permit religious exercise to exist without sponsorshipandwithoutinterference.51

The Constitution does not prohibit parents ofschool age children from freely choosing to enrolltheir children in a private educational institution,52even when it engages in racial discrimination byexcludingnonwhitestudents,53 nor does the Constitu-tion forbid governmental units from providing toprivate schools some forms of assistance that itprovides to public schools.54 But when a privateschool engagesinracial discrimination, theCourt hasstated clearly:[A] State's special interest in elevating the quality ofeducation in both public and private schools does not meanthat the State must grant aid to private schools withoutregard to constitutionally mandated standards forbiddingstate-supported discrimination. That the Constitution maycompel tolerationofprivate discriminationinsome circum-stances does not mean that it requires state support for suchdiscrimination.55

BothBobJones UniversityandGoldsboroChristianSchools practice racial discrimination based on asincerely held religious belief. Because of those prac-tices, the IRS determined that neither school waseligible for tax-exempt status under 501(c)(3) of theInternal Revenue Code. The two schools challengedthose adverse agency determinations by filing taxrefund suits, as suggested in a prior Supreme Courtopinion,56 allegingthatthe IRSrulingwascontraryto

W e do not suggest that a State violates its constitutional dutymerely because it has provided a ny form of state service thatbenefitspriv ate schools said to be racially discriminatory.55 Norwood v .Harrison, 41 3U.S. 455, 462-63(1973).56 Prior to1970, Bob Jones University had tax-exempt recognitionunder 501(c)(3) of the Internal Rev enue Code. In Nov ember1970,the school received notificationof the n ewInternal Rev enue Service(IRS) policy, announced in July1970,that racially discrimin atoryprivate schools would no longer be eligible for tax-exempt status.The u niv ersity was unsuccessful in its bid to obtain IRS assurance oftax-exempt status in administrative proceedings. As a result, it filedsuit in the Federal District Court for the District of South Carolinato prevent the IRS from revoking its tax-exempt status. The districtcourt granted a preliminary injunction in Bob Jones U niv ersi ty v.Connally, 341 F. Supp. 277(D.S.C. 1971), but theU.S. Court ofAppeals for the Fourth Circuit reversed, holding that th e districtcourt did not have jurisdiction to hear the case. 47 2F.2d 903, reh.denied, 47 6F.2d259(4thCir.1973). The Supreme C ourt affirmedthe circuit court decision, but noted that the university could obtainreview of the revocation of its tax-exempt status in a tax refundlawsuit:This is not a case in which an aggrieved party has no access atall to judicial review. Were that true, our conclusion might wellbe different. . ..[Petitionermay payincome taxes,or, intheirabsence, an installment ofPICA [Social Security] or FUTA[Federal une mplo yme nt] taxes, exhaust th e Service's internal


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the plain wordingof the statuteand violated both thefree exercise an d establishment clauses of the firstamendment .The U.S. Court of Appeals for the Fourth Circuitfound no violation of first amendment rights in the

IRS denialof tax exemptionsto racially discriminato-ry private religiousschools.57 As to the claim of firstamendment protections for the policies of Bob JonesUniversity, th e fourth circuit ruled that th e govern-men tal interest in eliminating all forms of racialdiscrimination[whether] governmental or private,absolute or conditional, contractual or association-al, 58 outweighs any infringe men t on the raciallydiscriminatory religious practices or beliefs that theschool might suffer from its denial of tax-exemptstatus. Moreover,the enforcementof the IRS nondis-crimination policy would not prohibit the Universityfrom adhering to its [racially discriminatory] policy. 59

Although recognizing thatthe government musttryto maintain an attitude of neutrality toward allreligions, the courtstated:But certain governmental interests are so compelling thatconflicting religious practices must yield in their fa-vor. . . .[T]he principle of neutrality embodied in theEstablishment Clause [of the First Amendment] does notprevent government from enforcing it s most fundamentalconstitutional an d societal values by means of a uniformpolicy,neutrallyapplied.60In addition, the court determined that the IRS rulerequiring racially neutral policies by all schoolsclaiming tax-exe mpt status actually minimizes gov ern-mental entanglement with religion:[T]he uniform application of the rule to all religiouslyoperated schools avoids th e necessity for a potentiallyentangling inquiry into whethera racially restrictive practiceis the result ofsincere religiousbelief.61

refund procedures, an d then bring suit for a refund. Th[is]review procedur[e] offer[s] petitioner a[n]. . .opportunity tolitigate the legality of the Service's revocation of tax-exemptstatus an d withdrawal of advance assurance ofd eductibi li ty.Bo bJones Un iversi tyv.Simon,4 1 6U.S. 725,74 6(1974).57 Bo b Jones Universi tyv . United States, 63 9 F.2d 1 47 (4th Cir.1980), rev'd 468 F. Supp. 890(D.S.C. 1 978); Goldsboro C hristianSchools, Inc. v. United States, 436 F. Supp. 1314 (E.D.N.C. 1977),

affd, No .80-1473(4th Cir. Feb. 24, 1981)percurium(unpublishedopinion).5 8 639 F.2d 147, 1 53(4th C ir. 1 980).59 Id. at 153.60 Id. at 154.

Th e free exercise clausebars th e government frominterfering with th e dissemination of religious ideas62or from the regulation of religiousbeliefs assuch. 63And from its earliest decisions in this area, theSupreme Court has frowned upon governmentalactions which force persons to elect between theadherence to a first amendment right and participa-tion in an existing public program.64 To fail onconstitutional grounds, the State statute or govern-mental action neednot specifically targeta particularreligion,for [a]regulation neutralon its face may,inits application, nonetheless offend the constitutionalrequirement fo r governmental neutral i ty if it undul yburdens th e free exercise ofreligion. 65 In a recentcasetheC ourtstated:Where thestate conditions receipt of an important benefitupon conduct proscribed by a religious faith, or where itdenies such a benefit because of conduct mandated byreligious belief, thereby putting substantial pressure on anadherent to modify his behavior and to violate his beliefs, aburden upon religion exists. While the compulsion may beindirect, th e infringement upon free exercise is nonethelesssubstantial.66

Th e free exercise clause, however, is not withoutlimitation, for [t]omaintainan organized societythatguarantees religious freedom to a great variety offaiths requires that some religious practices yield tothecommongood. 67 A neutrally drawn statute basedon avalid gov ernmental interest suchas thenondiscri-mination requirement fo r tax-exempt status for allprivate schools, whether religious or nonsectarian, isnot unconstitutional merely because its applicationresults in the differential treatment of adherents ofv arious religions or religious beliefs. The m ere factthat [a n individual's] religious practice isburdened bya governmental program does not mean that anexemption accommodating hi s practice mustbegrant-ed. 68 The governmental interest must be of the61 Id. at 155.6 S ee Fowler v . Rhode Island, 34 5 U.S. 67 (1953); Follett v .McCormick, 32 1 U.S. 57 3 (1944); Murdock v . Pennsylva nia ,3 1 9U.S. 105 (1943).6 3 Sherbert v .Verner ,3 74U.S. 398,402 (1963).C f.U nited Statesv .Lee,102S.Ct. 1051(1982).64 See , e .g ., Everson v . Board of Education, 33 0 U.S. 1 (1947);Sherbert v . Verner , 37 4U.S. 39 8(1963); Thomas v . Review Board,450 U.S.707(1981).6 5 Wisconsinv .Yoder,406U.S. 205,220(1972).66 Thomas v .Rev iew Board,450U.S. 707,717-18(1981).67 Un ited States v .Lee, 102 S. Ct. 1051, 1056 (1982).68 450 U.S.707, 718(1981 ).


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highest order to warrant encroachment upon freeexercise rights.69Where a neutral ly drawn statute based on acompelling state interest of the highestorder makesan inroad on religious liberty, a recent SupremeCourt decision held that such a statute ca n surviveconstitutional scrutiny if it meets the least restrictivemeans test.Asstatedin Th om a s\. R ev i ew Boa rd :Th e state may justify an inroad on religious liberty byshowing that it is the least restrictive means of achievingsome compellingstate interest. However, i t is sti l l true that [t]he essence of all that has been said and written on thesubject is that only those interests of the highest or-der. . .can overbalance legitimate claims to the free exerciseofreligion. 70 (footnotes omitted)

The decision of the U.S. District Court for theDistrict of Columbia in Green v . Connolly, whichenjoined the IRS from granting tax-exempt status toracially discriminatory private schools, is consistentwith this balancing test pronounced by the SupremeCourt. The eradication of racial discrimination is acompelling interest of the highestorder. As JudgeLeventhalstated in Green:There is a compelling as well as a reasonable governmentinterest in the interdiction of racial discrimination whichstands on highest constitutional gr ound , taking into accountthe provisions and penumbra of the Amendments passed inthe wake of the Civil War. That government interest isdominant over other constitutional interests to the extentthat there is complete and unav oidableconflict.71

The compell ing nature of the gov ernmen t interest ineradicating racial discrimination was reiterated by thefourth circuit in Bob Jones University v . UnitedS t a t e s .72 In fact, th e Supreme Court ha s previouslyinvalidated a State statute barring interracial mar-riage,73 a part of theracially discriminatory policiesofBob Jones Univ ersity.Bob Jones University and Goldsboro ChristianSchools additionallyassert that they would be subjectto an extreme financial burden if forced to choosebetween th e first amendment r ight to free exercise an dtax-exempt status. On this point, the case of Braunfeldv . Brown is instructive. The issue in that case waswhether Sunday closing laws violated the first amend-m e n t rights of Sabbatarians. The Supreme Court heldthat the State statute did not violate the first amend-

Wisconsin v .Yoder,40 6U.S. 205,21 5(1972).0 Thomas v .Review Board,4 50U.S. 707, 718.1 Green v .Conna l ly ,330 F. Supp. 1150, 1167(D.D.C. 1971).2 63 9 F.2d 147, 1 53(4th C ir. 1 980).3 S eeLovingv. Virginia, 388U.S. 1(1967).

m e n t , although it did note that the law made th epractice of religious beliefs of Sabbatarians moreexpensive.74Thus, the maintenance of the current IRS nondis-crimination requirement fo r tax-exempt status carriesout a valid governmental interest without infr ingingupon the first amendment r ight to free exercise.Priv ate religious schools that engage in racial discrimi-nation based on sincerely held religious beliefs are notprohibited from their right to freely exercise thosebeliefs, bu t theyare not eligiblef orFederal tax-exemptstatus. Even if the nondiscrimination requirement isconsidered a burden on the free exercise clause, it isjustified by the compell ing governmental interest ineradicating racial discrimination. Moreover, it meetsthe least restrictive means test of Th om a sv .R ev i ewBoard because it does not bar the schools fromadhering to their religious beliefs, but rather preventsthem from obtaining official Federal support fo r thosepolicies through the grant of a tax exemption. Thusexisting case law does not support the view that anondiscrimination requirementfo r Federal tax-exemptstatus violates th e free exercise clause of the firsta m e n d m e n t .The Establishment Clause and Tax-Exempt StatusThe first amendment also prohibits th e Congressfrom enacting legislation respecting an establishmentofreligion. 75 That provision, known as the establish-ment clause, was designed to prevent sponsorship,financial support, an d act ive involvement of thesovereign inreligiousactivity. 76Although it has often been stated that th e intent ofthe establishment clause is to construct a wall ofseparation 77 between gove rnmen t and rel igion, theSupreme Court has repeatedly stated that no completeseparation is possible. As the Court said in Zora ch v .Clauson:There cannot be the slightest doubt that the First Amend-me nt reflects the philosophy that Church and State shouldbe separated. And so far as interference with th e freeexercise of religion and an establishment of religion areconcerned, the separation must be complete and unequivo-cal. The First Amendment within the scope of its coveragepermits no exception; th e prohibition is absolute. Th e First7 4 Braunfeld v .Brown,3 66U.S. 599,605-06(1961).7 5 U.S. Const,a mend I.7 6 Walzv. Tax Commission, 39 7U.S. 664, 668(1970).7 7 Everson v .Board ofEducation, 330 U.S. 1 , 16(1947).

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Ame ndme nt , however , does not say that in every and allrespects there shall be a separation of Ch urch and State.Rather, it studiously defines th e manner, th e specific ways,in which there shall be no concert or union or dependencyone on the other. That is the common sense of the matter.78In a 1971 decision, th e Court , after noting that therewere necessary an d permissible contacts such as [fjire inspections, building an d zoning regulations,and state requirements under compulsory school-at-

tendancelaws, stated:Judicial caveats against entanglement must recognize thatth e line of separation, fa r from being a wall, is a blurred,indistinct, and variable barrier depending on all the circum-stances of a particularrelationship.79As a result of this construction of the establishmentclause, a number of seemingly inconsistent decisionshave been handed down by the SupremeCourt. Thisha s prompted on e recent Supreme Court majority, inupholding a State statute funding private religious an dnonsectarian schools for the costs of complying withState student evaluation an d reporting requirements,to observe:This is not to say that this case, any more than past cases,will furnish a litmus-paper test to distinguish permissiblefrom impermissible aid to religiously oriented schools. ButEstablishment Clause cases are not easy; they stir deepfeelings; and we are divided among ourselves, perhapsreflecting the different views on this subject of the people ofthis country. What is certain is that our decisions havetended to avoid categorical imperatives an d absolutistapproaches at either end of the range of possible outcomes.Thiscourse sacrifices clarityan d predictabilityfor flexibility,but this promises to be the case until the continuinginteraction betweenthe courtsand theStates. . .produces asingle, more encompassing construction of the Establish-ment Clause.807 8 Zorach v .C lauson, 343U.S. 306, 31 2(1952).7 9 Lemon v .K urtzma n,403U.S. 602,6 1 4(1971).80 Committee for Public Education v . Regan, 44 4 U.S. 646, 662(1980).8 1 Board of Education v .A l len, 39 2 U.S. 236, 243(1968); Walz v .Tax Commission, 397 U.S. 664, 674. The three-pronged test wasfirst clearly articulated by the Court in Lemon v . K urtzma n, 40 3U.S. 602,612-13(1971).Because of the seemingly ad hocapproach of the Court, this three-pronged test fo r resolving establishment of religion questions,particularly its excessive entan glem ent prong, has been criticizedby some commentators. See , e .g . , Jesse H. Choper, Th e ReligionClauseso f th eFirst A mendment: Reconcil ing the Conflict, 41 U. Pitt.L. R e v . 67 3 (1980); Philip B. K urla nd, The Irrelevance of theConst i tut ion: Th e Religion Clauses of the FirstA m e n d m e n t and theSupreme Court, 24 Villanova L. Rev. 3 (1978); James A. Serritella,Tangling withEntanglement : Toward a Cons t i tu tional Eva lua t iono fChurch-State Contacts, 44 Law & Contemp. Prob. 1 43 (Spring1981).82 Norwood v .Harrison, 41 3U.S. 455,46 7(1973).

Despite th e apparent disagreement on the Court asto where th e line should be drawn with respect topermissible and forbidden government aid to religionu n d e r th e establishment clause, a three-pronged testhas nevertheless evolved from Supreme Court deci-sions during th e last tw o decades. Constitutionallypermissible governmental actions under th e establish-ment clause requirethat th e governmental statute orpolicy has a clearly secular purpose, has a primaryeffect that does not advance or inhibit religion, an ddoes not foster excessive entanglement between thegovernment and the religious entity.81 In the case ofthe IRSstatute an d regulations requiring th edenial orrevocation of tax-exempt status for private schools,whether religious or nonsectarian, that engage inracial discrimination, the first tw o prongs of the testare satisfied. The IRS policy has a clear secularpurposethe eradication of racial discrimination ineducation. Governmental entities have a constitu-tional obligation [that] requires [them] to steer clear,not only of operating the old dual system of raciallysegregatedschools, butalsoofgiving significant aid toinstitutions that practice racial or other invidiousdiscrimination. 82Eliminating racial discrimination has been constitu-tionally mandated since the adoption of the C iv i l W aramendments, the 13th, 14th, an d 15th amendments tothe Consti tution.83 Since th e Supreme Court decisionin Brown v . Board of Education, th e FederalGovernment has enacted numerous laws85 an d devot-ed substantial resourcesto eliminate racial discrimina-tion in allareas,not m erely in education. A num ber ofExecutive orders have been issued by various Presi-dents to deter an d remedy racial discrimination,86 an dexecutive branch agencies have promulgated an d8 3 Th e 13th amendment outlawed slavery and its badges an dincidents. The 14th amendment was designed to prevent theabridgement of the privileges and immu nities of nation al citizen-ship; th e deprivation of life, liberty, an d property without dueprocess of law ; and the den ial of the equal protection of the l aws.The 15th amendm ent guaranteed black men the right to v ote. U.S.Const,a mend.XIII-XV.Though the Civ i l War amendments came into being more than acentury ago, the efforts of the Federal Government to enforce theirracial nondiscrimination command ha s been inconsistent. For amore detailed discussion of the Civil War amendments and theirhistory, se e U.S., Commission on Civ i l Rights, Civil Rights: ANational , Not a Special Interest(June1981).84 347U.S.4 83 (1954).85 S e e ,e.g., Civi l Rights Act of 1964, Pub. L. No.88-352, 78 Stat.241 (codified, as amended, at 42 U.S.C. 2000a-2000f (1976 &Supp.Ill 1979); Voting Rights Act of1 965, Pub. L. No.89-110,79Stat. 43 7 (codified at 42 U.S.C. 1971, 1973-1973bb-l (1976));Emergency School Aid Act, Pub. L. No.95-561, Tit. VI, 92 Stat.2252(1 978) (codifiedat 20U.S.C .3191-3207(Supp.Ill 1979)).

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enforced many regulations that effectively carry outthe racial nondiscrimination command of the Consti-tution an d Federal law.87 The Federal judiciary hasrepeatedly struck down racially discriminatory gov-ernmenta l actions, noting that eradication of racialdiscrimination is a compelling governmental interestof the highest order.88 In fact, the courts havesubjected racial discrimination to the strictest scruti-ny.

89This all-out effort was neither designed nor intend-ed to focus, and in actuality has not focused, solely orprimarily on private sectarian schools. Though some

private religious schools, through participation ingovernmental ly funded programs and the receipt ofgovernmenta l benefits, have come under the scrutinyof th e Federal Government in its efforts to eliminateracialdiscrimination,90 the IRSpolicyof denyingtaxexemptions to racially discriminatory private schoolshas aclearly secular purpose.The IRS policy also has neither th e principal norprimary effect of advancing or inhibiting religion. It isa neutral policy, applicable to all private schools,whether religious or nonsectarian. Its purpose, th eeradication of racial discrimination, is akin to that ofWalz v . Ta x Commiss ionin which th e Supreme Courtupheld a State statute authorizing a property taxexemption fo r property used solely fo r religiousworship, saying that it is neither the advancementnor the inhibition of religion; it is neither sponsorshipnor hostility. 91Racially discriminatory private religious schoolsand racially discriminatory nonsectarian schoolswould be ineligible fo r tax-exempt status under th e86 S e e , e.g., Exec. Order No. 10,925, 3C.F.R. 448 (1959-1963Compilation); Exec. Order No. 11,246, 3 C.F.R. 33 9(1964-1965Compilation); Exec. Order No. 11,478, 3C.F.R. 803(1966-1970Compilation); Exec.Order No. 12,067, 43 Fed. Reg. 28,967(July 5,1978).87 S e e .e.g., 34C.F.R. 100.1 (1981).88 See , e .g . , McGlotten v . Connally, 388 F. Supp. 448 (D.D.C.1972); Johnson v . Ci ty of Arcadia, 450 F. Supp. 1363 (M.D. Fla.1978); Bossier Parish School Board v . Lemon, 37 0 F.2d 847, 85 2(5th Cir. 1967).89 S e e ,e.g., Sa n Antonio Independent School District v . Rodriguez,41 1 U.S. 1, 28 (1973); Mathews v. Lucas, 42 7 U.S. 495, 504-06(1976).90 See , e .g . , Bo b Jones University v . Johnson, 396 F. Supp. 59 7(D.S.C. 1974), affd without published opinion, 52 9 F.2d 51 4 (4thCi r . 1975); Bo bJones Univ ersi tyv.U nited States, 63 9F.2d 1 47(4thCir. 1980), cert, granted, 50 U.S.L.W. 3265 (U.S. Oct. 1 3, 1981)(No.81-3);Goldsboro C hristian Schools, Inc. v .Uni tedStates,4 36F. Supp. 1314 (E.D.N.C. 1977),affd per curiam , No .80-1473 (4thCir. Feb. 24 , 1981) (unpublished opinion), cert, granted, 50U.S.L.W. 3265 (U.S. Oct. 13, 1 981) (No.81-1).9 1 397U.S. 664, 672(1970).9 2 A separate issue is whether a racially discriminatory private

IR S policy.92 Thus, it is argued that the IRS policy isan unconstitutional preferencefo r some religions overothers, i.e., it violates establishment clause neutralityby advancing racially nondiscriminatory religionsand by inhibiting religions that engage in racialdiscrimination based on sincerely held religious be-liefs.That the n eutr al policy fortuitousl y aligns itself withsome religions and notothers does not automaticallyrequire its invalidation. An otherwise neutral govern-mental policy does not violate the establishment clausesolely because it indirectly either happens to coincideor harmonize with the tenets of some or all reli-gions, 93 or adversely affects one religion more thanothers.94 Moreover, as the U.S.Court ofAppeals fo rth eFourth Circuit stated in the B ob Jones Universitycase, wherea compelling governmental interest of thehighestorder such as eradicating racial discriminationis concerned:The principle of neutrality embodied in the EstablishmentClause does not pre ve nt gove rnme ntfrom enforcing itsmostfundamental constitutional an d societal v alues by means of auniform policy, neutrallyapplied.95The court further noted that the private religiousschool would not be inhibited or prevented fromadhering to and practicing those tenets of its religionthat it maintains require racially discriminatory schoolpolicies. It stated that the gove rnment's rule wouldnot prohibit th e Univers i ty from adhering to itspolicy of opposing and penalizing students whoreligious schoolis entitled togreater governmental benefits thanaracially discriminatory private nonsectarian school. An affirmativeresponse to that question may be inferred from th e Court'sstatement inNorwood v . Harrison that:Howe ve rnarrowmay be the channelofpe rmissible state aid tosectarian schools,. . .it permits a greater degree of stateassistancethan may be given to private schools which engage indiscriminatory practices that would be unlawful in a publicschool system.41 3 U.S. 455, 47 0 (1973). But the overriding governm ental interestin eradicating racial discrimination, as discussed here, would seemto dictate a contrary conclusion. Norwood does state that such acompelling gov ernmental interest permits th e differential treatmentof discriminatory and nondiscriminatory private schools. Moreover,th e granting of tax-exempt status to racially discriminatory privatereligious schools but not to racially discriminatory private n onsecta-rian schools appears to violate the equal protection component ofth e fifth a mendment dueprocess clause and the nonestablishmentprovision of the first amen dme nt.93 McGowan v .Ma ryla nd,3 66U.S. 420,442(1961).94 Id., Se e,e.g., Reynoldsv .United States,98U.S. 1 45(1878).9 3 Bo b Jones Universi ty v . United States, 63 9 F.2d 147, 1 54(4thCir. 1980).

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either engage in or advocate interracial datingand/ormarriage.96 Bob Jones University an d GoldsboroChristian Schools, however, argue that th e impositionof a greater financial burden through th e resulting ta xliability for nonconformity with th e Federal policyagainst racial discrimination also violates first amend-m e n t neutral i ty. In effect, this argument boils down tothis: whereagov ernmen t program benefit isprovided,it must be provided to all religions.The first amendment, however, does not require agovernmenta l enti ty to provide th e same financialbenefitor burdento allreligions.In fact,the SupremeCourt, in the Sunday closing law cases, held that anotherwise neutral governmental policy that advancesan important governmental interest does not violateth e first amendment despite th e fact that a greaterfinancial cost results to some religious groupsinthose cases Sabbatarians thanothers.97

It is, however, argued that the Supreme Courtdecision in Walz v . Ta x Commiss ion, upholdingproperty ta x exemptions fo r religious organizations,supports the granting of tax exemptions to raciallydiscriminatory private sectarian schoolsas a reason-able accommodation to religion mandated by estab-lishment clause neutrality.98 Walz involved a neutralState statute which provided property tax exemptionsto a broad classof educational, religious,and charita-bl eorganizations. Th eissueinthatcase waswhetheraneutral statute indirectly benefiting religious organiza-tions was constitutional. The issue did not inv olv e aconflicting, compelling, an d constitutionally basedgovernmental interest such as the eradication ofracialdiscrimination. In arguing that Walz requires th egranting of tax-exempt status, racially discriminatoryprivate religious schools are actually seeking a taxbenefit not even available to private nonsectarianschools that engage in racial discrimination. Thiswould seem inconsistent with the neutrality principlebecause providing tax-exempt status to racially dis-criminatory private religious schools would effectivelyadvance those religionsby carvingout aspecialtaxexemption category solely fo r them. As the SupremeCourt clearly stated, indiscussing Walz in C om m i t t eefor P u b l ic E d u ca t i on Rel ig ious Liberty v . Nyquist, [s]pecialtax benefits. . .cannot be squared with the

principle of neutrality established by the decisions ofthisCourt. 99The thorniest establishment clause problems for theIRS policy come from the newest addition to thetripartite test, excessive entan gleme nt. In adoptingthat part of the test in Walz in 1970, th e SupremeCourt stated:Determining that th e legislative purposeof tax exemption isnot aimed at establishing, sponsoring, or supporting religiondoesnot end the inquiry, howeve r.W emust alsob esurethatthe end resultthe effectis not an excessive govern mententanglement with religion. Th e test is inescapably one ofdegree. Either course, taxation of churches or exemption,occasions some degree of inv olvem entwith religion. . . .Inanalyzing either alternative the questions are whether theinvolvement is excessive,a nd whether it is acont inuingo necalling for official an d continuing surveillance leading to animpermissible degreeof entanglement.1 00Answering those questions requiresthe examinationof thecharacterand purposesof theinstitutionsthatarebenefited, the nature of the aid that the State provides,and the result ing relationship between the gove rnmentand the religiousauthority. 101Private religious schools general ly have tw o pur-posesthe inculcation of religious values an d teach-ings, and the provision of a secular education. Thoughit is not true of all private religious educationalinstitutions, it isundisputed that BobJones Un iversityandGoldsboro Christian Schools emphasizetheteach-in g of religious tenets during educational instruction.Bob Jones Universityis dedicatedto the teachingandpropagation of its fundamentalist religious beliefsand wasestablished:to conduct an institution of learning for the generaleducation ofyouthin the essentials ofculture and in theartsand sciences, giving special emphasis to the Christianreligion and the ethics revealed in the Holy Scrip-tures. . . ,1 02Goldsboro Christian Schools, seeking to provide aprivate school educationin a religioussetting, statedsimilarlyin itsarticles ofincorporation that:The general nature and object of the corporation shall be toconduct an institution or institutions of learning for thegeneral education of Youth in the essentials of culture an ditsartsand sciences, givingspecial emphasisto the Christian

96 Id. at153-54.9 7 Braunfield v. Brown , 366U.S.599, 605(1961).9 8 Walzv. Tax Commission, 39 7U.S. 664.9 9 41 3U.S. 756, 793(19 73).

100 Walzv. Tax Commission,39 7U.S. 664,674-75 (1970).101 Lemonv .K urtzma n,4 03U.S. 602,6 1 5(1971).102 Bob Jones Univ ersity v. Un ited States, 468 F. Supp. 890,893-94(D.S.C.1978).

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religion and the ethics revealed in the Holy Scrip-tures. . . ,10 3Their identification as religious or religiously affiliatedinstitutions was uncontested in the lower Federalcourts adjudicating IRS denial of tax-exempt status tothem. The granting of tax-exempt status, and theability of contributors to claim charitable deductionsfor donations, to those and similar institutions wouldundoubtedly make available greater financial re -sourcestothemforcarryingout thepurposesfortheirestablishment. Thus exemption from Federal taxationwould provideaclear benefit to those institutions.Private religious schools seek tax-exempt statusunder 501(c)(3)of the Internal RevenueCode.Thegranting of such status (and of charitable deductionsfor donations by contributors) to racially discrimina-tory private schools constitutes government aid orinvolvement between church an d State that requiresfirst amendment neutrality. It has been argued thatth e Supreme Court in Walz v . Ta x Commission10*supported the proposition that tax exemptionsdo notconstitute governm ent aid or involvement withthereligious organization seeking exempt status. Walzinvolved th e constitutionality of New York Cityproperty tax exemptions extendedto religious organi-zations fo r religious properties used solely fo rreligiousworship. 1 05 In upholding th e exemption, th e C o u r tstated that [t]he grant of a tax exemption is notsponsorship since the government does not transferpart of its revenue to churches but simply abstainsfrom demanding that th e church support th estate. 106Notwithstanding that language, however, th e Courtclearly indicated that the tax-exempt status providesfinancial benefits to and creates government involve-ment with the recipient religious institution:Eithercourse,taxation ofchurchesor exemption,occasionssomedegreeofinvolv ement wi threligion. . . .10 3 Goldsboro C hristian Schools, Inc.v .Un ited States,436 F.Supp.1314, 1316(E.D.N.C. 1977).04 397 U.S. 664(1970).05 M at 666.06 Id . at615.Id . at674-75.08 41 3U .S. 756(1 973).09 M at789.10 338 F.Supp. 448,45 6 (D.D.C. 1972).1 ' In addition,t he plaintiff challengedt he exemptionfo r exemptfunction income of racially discriminatory nonprofit clubs (alltheir income, except fo r this exempt function income, istaxed atregular corporate rates). Th e court held that exemption fromtaxation ofsuch funds did not constitutea grantofFederal funds tpthe nonprofit club.As itstated:Unl ike th e deduction fo r charitable contributions, th e deduc-

Granting taxexemptionsto churchesnecessarilyoperatestoafford an indirect economic benefit and also gives rise tosome, but yet a lesser, involvement than taxing them.107That th e court considered income ta x benefitssufficient to create th e type ofchurch-state contact toraise first amendment problems can also be seen in itsdecision in Commit teefor Publ ic Educat ion Reli-gious Liberty v . Nyquist.10* In that case, th e Courtinvalidated a State statute that provided directmoney grants for maintenance and repair of thephysical plant and equipment of parochial schools andtuitionreimbursements fo r parents of parochial schoolstudents, and it also struck down a system of incometax benefits for parents of students attendin g parochialschools, variously referred to as tax credits, in-come ta x modifications, tax deductions, and, likeWalz, tax forgiveness. 1 09A similar conclusion was reached by a Federaldistrict court with respect to Federal income tax-exempt status and charitable deductions. That case,M c Gl o t t e n v . Connolly,110 involv ed the challenge oftax-exempt status for, an d deductibility of charitablecontributions to, fraternal organizations that engage inracial discrimination.1 1 1 The district court, afternotingboththerationalefordeductibility ofcharitablecontributions and the roleof the Federal Governmentin qualifying organizations an d approving their solici-tations, held that the Gov ernm ent has becomesufficiently entwined with private parties to call fortha duty to ensure compliance with the Fifth Amend-ment by the parties through whom it chooses toact. 1 1 2From these cases it is clear that the granting of taxexemptions and the allowance of tax deductions fo rcontributions to tax-exempt organizations constitutegovernment aid or involvement through the taxsystem within th e meaning of the first amendment.

tion for exemptfunction income doesn ot operate toprovidea granto ffederal funds throughthe taxsystem. . . .The fundsexempted are receivedonly from the membersand any profitwhich resultsfrom overchargingfor th e use of the facilities stillbelongs to the same members. No income of the sort usuallytaxed ha s been generated;th e money ha s simply been shiftedfrom on e pocket to another, both within the same pair ofpants. . . .[HJowever dysfunctional the state action limitation is at atime when th e nation ha s sufficiently matured that th eelimination of racial discriminationis acornerstoneofnationalpolicy, it still means that Congress does not violate theConstitution by fail ing to tax private discrimination wherethere is no other act of G o v e r n m e n tinv ol v em ent . Id . at 458(emphasisi noriginal).

1 12 McGlottenv .Connal ly ,338 F. Supp.456-57(D.D.C. 1972).14


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Programs of government aid to sectarian institu-tions violate first amendment neutral i ty ifthey involvesubstantial oversight or administrative relationshipsbetween the governmental enti ty and the rel igiousorganization. Th e excessive entanglement test wouldprohibit sustained and detailed administrative rela-tionship^] for enforcement of statutory or administra-tivestandards 113 or comprehensive, discriminating,an d continuingstatesurveillance. 114Ofcourse, the establishment clause does not prohib-it al l administrative relationships between church an dstate. Religious institutions may be subject to govern-mental regulation without creating excessive entangle-ment.1 1 5 And this can be true whether or notgovernment aid isinvolved.1 1 6 But where the degree ofentanglement resulting from a government program ofaid involves state inspection [of expenditures by areligious school on secular education and religiousactivity] and evaluation of the religious content of areligiousorganization, it is fraught with thesort ofentanglementthattheConstitution forbids. 1 1 7In Walz v . Ta x Commiss ion,th e SupremeCourt, inupholding a State statute authorizing a property taxexemption fo r property used solely fo r religiousworship, statedthat suchan exemption:creates only a minimal and remote inv olve ment betweenchurch and state and far less than taxation of churches. Itrestricts the fiscal relationship between church an d state,an d tends to complement an d reinforce th e desired separa-tion insulating each from the other.1 1 8

Although some argue that Walz bolsters the conclu-sion that the excessive entanglement test requires thegranting ofFederal income tax exemptions to raciallydiscriminatory private religious schools in the B obJones University an d Goldsboro Christ ian Schoolscases, it is distinguishable. Walz involved property taxexemptions granted to religious institutions for prop-erty used solely fo r religious purposes; Bob Jones an dGoldsboro involve the issue of whetherFederal incometax exemptions should be granted to religious institu-tions or religiously affiliated institutions performing asecular functionproviding educational instruction,11 3 Wa lzv. Tax Commission, 39 7U.S. 664, 675 (1970).11 4 Lemon v .K urtzma n,4 03 U.S. 602,61 9(1971).11 5 S e e , e.g., Pierce v . Society ofSisters, 268 U.S. 510, 53 4 (1925)( No question is raised concerning the power of the Statereasonably to regulateal lschools, to inspect, supervise an dexaminethem, their teachers and pupils; to require that all children of properage attend some school, that teachers shall be of good moralcharacter an d patriotic disposition, that certain studies plainlyessential to good citizenship must be taught, and that nothing be

though with a religious orientation. Walz involved th eissue of whether a broad-based, neutral State statutethat results in financial benefit to a number of groups,inc luding religious organizations, violates first a m end-ment neutral i ty; B ob Jones an d Goldsboro involve th eissue of whether a broad-based, neutral Federal statuteand the accompanying regulations that result infinancial benefit to a number of organizations, includ-in g some religious institutions, violate the first amend-ment neutrality principle because the same financialbenefit is not extended to all religious organizations.And finally Walz involvedn o conflicting constitution-al command other than that inherent in the firstamendment, whereasBobJones an d Goldsboroi nv o l v enot only first amendment considerations but also th ecompelling governmental interest in eradicating racialdiscrimination embodied in the 5th, 13th, and 14thamendments and in numerous Federal statutes. Thus,Walz is neither identical to nor controlling as to thequestion of Federal tax-exempt status fo r privatereligious schools that have racially discriminatorypolicies.The ad ministrative oversight required to enforce th enondiscrimination requirement of theFederalinternalrevenue statute and regulations does not constituteexcessive governmental entanglement. As the SupremeCourt has stated, the question of whether excessivegovernmental entanglement exists is inescapablyoneof degree. 119 Although the IRS would necessarilyhave to examine certain objective information to makean administrative determination as to whether aparticular organization or institution engages in racialdiscrimination, that administrative involv emen t wouldbe far less than the administrative entanglementresulting from agency judgme nts as to whether asincerely held religious belief is the basis for theracially discriminatory practices of a private religiousschool. As a North Carolina Federal district courtstated:[M]aking qualification under Section 501(c)(3) [for exemp-tion from Federal income taxation] turn upon whether theorganization maintains a policy and practice of excludingone or more races is a reasonably objective standard,taught whichi s manifestly inimical to the public welfare. ); Lemonv . Kurtzman, 403 U.S. 602, 614 (1971)( Fireinspections, buildingand zoning regulations, and state requiremen ts under compulsoryschool-attendance laws are examples of necessary and permissiblecontacts. ).11 6 S e e ,e.g.,Pierce v .Societyo fSisters,268U.S. 51 0(1925).1 1 7 Lemon v .K urtzma n,403U.S. 602, 620(1971).1 1 8 397 U.S. 664, 676(1 970).11 9 Walzv. Tax Commission, 39 7U.S. 664, 674(1970).

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whereas the standard the pla in t i f f [Goldsboro ChristianSchools, Inc.] proposes to adopt would require, at aminimum, inquiry in to the sincerity of the plaintiffsreligious beliefsas itimpactsupontheadmissions policy.1 20

The Fourth C ircuit Court o f Appeals echoed thisanalysis in Bob Jones University v . United St a t e s ,stating that the uni form application of the [nondiscri-minati on] rule to all religiously operated schoolsavoids th e necessity for a potentially entanglinginquiry into whether a racially restrictive practice isthe result ofsincere religious belief. 1 21Nor would the uniform application of the nondiscri-mination rule require th e comprehensive, discrimi-nat ing, and continuing state surveillance of thereligious content of ateacher's methodof instructionto ensure that statutory restrictions ar e obeyed an dth eFirstAm endm ent otherwise respected. 1 22An alternative course would be to prohibit the IRSfrom enforcing th e nondiscrimination requirementwith respect to private religious schools. Such acourse, however, would have dire first amendmentconsequences. It would mean that th e neutralityprinciple of the establishment clause would require allgovernmental programs that benefit a religious organi-zation, notwithstanding neutral eligibility require-ments for participation, to provide precisely the samebenefit to all religious groups. Although the recentSupreme Court decision in Larson v . Valente123 maylend some support to that proposition, that case isinapplicable to the issue of tax-exempt status fo rracially discriminatory private schools, because itinvolved a statute that expressly granted denomina-tional preferences.Th e Larson case involved the application of aMinnesota charitable contributions statute that ex-empted religious organizations from its reporting andregistration require ments if they received more than50 percent of their contributions from members oraffiliated organizations. Because the statute granted anexpress preference to certain religious organizations,th e Court stated that th e three-pronged establishmenttest announced in Lemon v .K ur tzman was inapplica-ble, fo r that test applied only to laws affording auniform benefit to a ll religions, and not to provi-sions,. . .thatdiscriminate am o n greligions. Statutes12 0 Goldsboro Christian Schools, Inc. v .Unite dStates, 436 F.Supp.1314, 1320(E.D.N.C. 1977).12 1 639 F.2d 147,1 55(4th C ir. 1 980).1 22 Lemon v .Kurtzman, 403U.S. 602, 61 9(1971).S eealsoLevittv .Committee f or Public Education&Religious Liberty,41 3U .S. 472,481-82(1973).12 3 102 S. Ct. 1673 (1982).

grant ing apreference to certain religious organizationsar e suspect an d subject to strict scrutiny ;1 24therefore, they must be justified by a compellinggovernmental interest,. . .and. . .closely fitted to fur-ther that interest. 1 25The Court, while assuming arguendo126 that theState had a sufficiently 'compelling' governmenta linterest in protecting it s citizenry from abusivesolicitation practices, held that the use of the arbitrary50 percent rule was not closely fitted to thatasserted governmental interest. 1 2 7Even ifLarson were applied, th e nondiscriminationrequirement fo r tax-exempt status under 501(c)(3)would survive constitutional scrutiny. First, it isjustified by a compelling governmental interest th e eradication of racial discriminationembodied inthe fifth amendment and the Civi l W ar amendmentsto the Constitution. Second, it is closely fitted to thatpurpose, providing a mechanism for the FederalGovernment to withhold official support of racialdiscrimination without an absolute prohibition on theexercise of first amend ment rightsi.e., while raciallydiscriminatory private schools would be prohibitedfrom receiving government ai d through the tax sys-tem, they would not be prohibited from freely adher-in g to racially discriminatory policies based on asincerelyheld religious belief.Despite th e inapplicability of Larson to the taxexemption issue, its holding clearly indicates that thefirst amendment does not require governmental ac-tions benefiting some religious organizations to equal-ly benefit al l religious organizations. Where there is a compelling governmental interest, and the govern-mental action is closely fitted to further that inter-est, th e governmental action is constitutional. Tohold otherwise would mean that first amendmentinterests outweigh al l other interests of the highestorder, such as the eradication of racial discrimination.It thus appears that th e nondiscrimination require-ment fo r tax-exempt status does n ot conflict with th ereligion clauses of the first amendment. To grant taxexemptions to racially discriminatory private religiousschools would require the IRS to violate th e constitu-tional command that th e Federal Government not aidracial discrimination. Moreover, as one constitutional12 4 102 S. Ct. 1673, 1684.12 5 102 S. Ct. 1673, 1685.1 26 In arguing, in the course of the argument ; a statement orobservation made by a judge as a matter of argument or hypotheti-cal ill ustrationissaid to bemade arguendo.12 7 102S. Ct. 1673, 1685-87.

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scholar pointed out during the 1979 congressionalhearings on tax-exempt status fo r private schools,there ar e other first an d fifth amendment problems:[T]o exempt religious private schools from th e substantivereach of antidiscrimination principles and procedures wouldviolate both th e equal protection component of the FifthAme ndme nt ' s due process clause and the anti-establishmentcomponentof theFirst Amendment's religion clauses. . . .The public choice to extend tax benefits to religious schoolsan d other institutions is constitutionally acceptable onlybecause it does not single ou t religious bodies as such forfavorable treatme nt but instead benefits them as part of abroad class of property owned by nonprofit, quasi-publiccorporations, which include hospitals, libraries, play-grounds, scientific, professional, historical, an d patrioticgroups. Walz v . Ta x Commission,39 7U.S. 664,67 3(1970).The moment church-related or otherwise religious institu-tions are bestowed with tax benefits unavailable to secularbodies similarly situated, the line delicately drawn in W a h iscrossed. To extend ta x benefitsto religious institutions freeof th e anti-discrimination requiremen ts enforced against th esecular counterparts of such institutions would amount toforbidden aid to religion, an d forbidden discriminationagainst the non-religious.1 28Statutory Construction of 501 c) 3)of the Internal Revenue Code of1954The other major question presented by the issue oftax-exempt status fo r racially discriminatory privatereligious schools is the proper construction of501(c)(3) of the Internal Revenue Code of 1954.12 9More precisely, the question is whether the nationalpolicy against Federal support fo r racial discrimina-tion is a proper limitation on the categories oforganizations to which the Internal Revenue Servicemay grant tax-exempt status, notwithstanding theabsence of explicit language within the statute as tothat requirement.The que stion of tax exem ptions for racially discrimi-natory private religious schools involves not merely anational policy of racial nondiscrimination expressed1 28 Hearings on Proposed IRS Revenue Procedure Affecting Tax-Exemption of Private Schools Before th e S u b c o m m . on Oversight ofthe House C o m m . on W ay s a nd M e a n s , 96th Cong., 1 st Sess. 365,371 (1979) (statement of Laurence H. Tribe, professor of Law,H a rva rdU niversi ty) .12 9 When dealingwith issueso f statutory construction, it is perhapshelpful to remember these wordsofJustice Frankfurter:Generalities about statutory construction help us little. Theyare not rulesof law but merelyaxiomsofexperience. . . .Theydo not solve th e special difficulties in construing a particularstatute. The variables render every problem of statutoryconstruction unique.. . .UnitedStatesv.UniversalC.I.T.Credit Corporation,344U.S. 218,221 (1952)(citations om itted).

in other Federal statutes but one that is embodied inth e fifth amendment and the Civi l War amendmentsto the Constitution. A n important rule of statutoryconstruction is that statutes should be interpreted toavoid constitutional difficulties,1 30 for there is apresumption that the legislative body acted withintegrity and with an honest purpose to keep withinconstitutional limits. 131 Thus, [a] statute mustbeconstrued, iffairly possible, so as to avoid not only theconclusion that it is unconstitutional but also gravedoubts upon that score. 132 The importance of thisprinciple is underscored by the words of Chief JusticeMarshall inM arbury v . Madison:[I]f a law be in opposition to the constitution; if both the lawand the constitution apply to a particular case, so that thecourt must either decide that case, conformableto the law,disregarding the constitution; or conformable to the consti-tution, disregarding the law; the court must determine whichofthese conflicting rules gov ernsth e case: thisis of the veryessence of judicial du ty. If then, the courts are to regard theconstitution,and theconstitutionissuperiorto any ordinaryact of the legislature, the constitution, and not such ordinaryact, must govern the case to which they both apply.Those, then, who controvert the principle, that the constitu-tion is to be considered, in court, as a paramount law, ar ereduced to the necessity of maintaining that courts mustclose their eyes on the constitution, and see only the law.This doctrine would subvert the very foundation of allwritten constitutions.1 33In interpreting statutesto avoid gravedoubts abouttheir constitutionality, the courts have historicallyexamined extrinsic materials such as the relevantagency's i

discriminatory religious schools and tax exempt status

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