to encompass discrimination against faculty and administrative staff (including applicants)? If so, please describe what steps have been taken to do this. If not, please explain the rationale of IRS' determination. 8. Parochial schools, which comprise the vast majority of nonpublic schools, were established when segregation was required by law in many states. (a) How has IRS verified the elimination of the dual school system formerly required by law with respect to such schools? (b) What procedures have been adopted to enforce the Green order and IRS regulations in relation to such schools? (c) Is IRS relying on any representation by national church organizations that such schools do not discriminate? If so, identify the organization (s) and furnish copies of any assurances provided by such organizations. (d) How specifically has IRS verified such representations? 9. Does IRS have any procedures for deferring automatic deductions for contributions to private schools where rulings on the schools' tax exempt status in terms of "open admissions policy" are pending? If so, describe this procedure. If not, please explain the reasons for not establishing such a procedure. U.S. COMMISSION ON CIVIL RIGHTS-STATEMENT OF THE COMMISSIONERS ON TAX-EXEMPT STATUS OF SEGREGATED PRIVATE SCHOOLS, JAN. 29, 1970 Efforts to achieve meaningful school desegregation in the South are being threatened by an increase in the number of private segregated schools. For a number of years, the Commission has called attention to the fact that private segregated schools are able to function, largely because of the tax benefits accorded by the Internal Revenue Service. Their profits are exempt from taxation and contributions are deductible. We urge the Internal Revenue Service to withdraw these tax benefits from such schools. Since August 1967, the Commission has written six letters to the Treasury Department and the Internal Revenue Service urging them, as we do now, to deny these schools tax exemptions. For over two and one-half years we have received no substantive reply to our letters. Our most recent response was a letter of December 3, 1969 from the General Counsel of the Treasury Department which informed us that the matter was in litigation and that a further reply would be forthcoming. We are aware of the litigation to which the General Counsel refers, but cannot see why it prevents the Internal Revenue Service from changing its policy. We have repeatedly stressed the illegality of the Internal Revenue Service grant of Federal tax benefits to these schools. The charitable deduction provisions of the Internal Revenue Code require that the institutions to which deductible contributions may be made must promote the general public welfare. No longer can racially segregated private schools be seen as anything but contrary to the public interest. The granting of tax benefits so significantly involves the Federal Government in private school segregation that this involvement renders their segregated operation in derogation of constitutional rights. Although public school desegregation in the South will continue, the establishment of private segregated schools is threatening to weaken, if not destroy, support for public education. The segregated private school is the last resort of school segregationists. It is unacceptable that the policies of the Treasury Department on the tax-exempt status of private segregated schools shelter and foster the proliferation of this last bastion of segregation to the detriment of public education. The Southern Regional Council, a research and information agency, estimates that 300,000 white children attended "segregated academies" in the fall of 1969. Because of recent court rulings ordering immediate school desegregation, the Council estimates the number has now increased to at least 400,000. We have learned that in Mississippi alone, during this school year, the number of segregated private schools has almost doubled. This matter is of such serious proportions that on January 6, 1970, Robert H. Finch, the Secretary of the Department of Health, Education, and Welfare, expressed his concern over the effects of tax policies which promote the spread of segregated private schools. He called upon the Secretary of the Treasury to eliminate these benefits. This issue also is before the courts. On January 13, 1970, a three judge District Court for the District of Columbia in Green v. Kennedy preliminarily enjoined the Treasury Department and the Internal Revenue Service from granting tax benefits to private schools in Mississippi until the agencies first determine whether the schools are segregated. The Court found "that the tax benefits under the Internal Revenue Code mean a substantial and significant support by the Government to the segregated school pattern." Noting that the tax policy of the Federal Government was at odds with school desegregation principles, the Court said: "The Federal Government is not constitutionally free to frustrate the only constitutionally permissible state policy, of a unitary school system, by providing government support for endeavors to continue under private auspices the kind of racially segregated dual school system that the state formerly supported." The Court directed that before a private school was found eligible to receive tax benefits, the Treasury Department, and the Internal Revenue Service must determine, according to Court approved procedures, that the applicant school is not a part of a system of private schools operated on a racially segregated basis as an alternative to white students seeking to avoid desegregated public schools. It is clear that tax benefits lend direct support to the establishment and maintenance of segregated private schools, while defeating constitutionally required, legislatively mandated and court ordered public school desegregation. We, therefore, urge the Treasury Department and the Internal Revenue Service, on their own initiative, to implement the Court's decision in Green v. Kennedy in other states as well as in Mississippi. Further, we ask these agencies to follow the guidelines set down in Green when reviewing existing determinations as well as pending and future applications. U.S. COMMISSION ON CIVIL RIGHTS, Hon. RANDOLPH W. THROWER, DEAR MR. THROWER: This letter concerns the recent determination of the Internal Revenue Service to deny tax exempt status to private schools which practice discrimination based on race. We wish to commend you for reversing a long standing Internal Revenue Service policy. As you are aware, the Commission on a number of occasions has stated its opinion that tax exempt status for racially discriminatory private schools is illegal and has recommended that such status be denied by the Internal Revenue Service. In the Commission's view, and we believe you will agree, a statement of government policy alone, without a vigorous implementation of that policy by the responsible government agency, will not eliminate discriminatory practices. In announcing the new policy, you are quoted as saying: "[I]n most instances evidence of a nondiscriminatory policy can be supplied by reference to published statements of policy or to the racial constituency of the student body." You added that IRS will assume that the applicant's statements are "in good faith" and will later verify them. Apparently IRS will accept public statements, such as a clause in the school's charter or an advertisement in a newspaper, as evidence of a nondiscriminatory policy sufficient to justify the grant of tax benefits. In the Commission's long experience in observing the developments in school desegregation, we have found that expressions of good faith unaccompanied by positive actions are unproductive. Whether a school is racially nondiscriminatory can only be measured by the racial composition of its faculty and student body and not by assertions of nondiscrimination. We believe IRS should initiate enforcement procedures to require private schools to comply with its new policy if they wish to maintain their tax benefits and obtain the grant of benefits in the future. The Internal Revenue Service should grant tax exemptions only when schools establish their nonsegregationist policy by affirmatively hiring faculty and admitting students on a racially nondiscriminatory basis. These schools should be required to admit substantial numbers of minority group children or show why it is impossible to do so. The inability of minority students to meet the cost of enrollment should not be an acceptable basis for the failure to achieve a desegregated student body; the schools can overcome this problem through liberal scholarship programs. We noted with interest the article in the New York Times on Sunday, July 19, 1970, reporting that IRS on July 18 "had granted income tax exemptions to six southern private schools that had promised not to discriminate on the basis of race." We hope that the continued grant of tax benefits will be made in accordance with specific requirements for private school compliance as suggested above. Finally, we are aware that many problems will arise with the implementation of compliance procedures. We are certain, however, that IRS can obtain guidance from the Department of Health, Education, and Welfare, which has had extensive experience in school desegregation problems. The Commission urges the Treasury Department and the Internal Revenue Service immediately to implement procedures which will either bring about desegregation of racially segregated academies or will result in the revocation of their tax benefits. In calling for strong implementation, we wish to emphasize the significance of the new Internal Revenue Service policy and to commend IRS for its public position. We are pleased that the Internal Revenue Service stated that granting tax benefits to segregated academies is a violation of the law, and that it is willing to back up this belief by revoking tax benefits from those schools which refuse to desegregate. Sincerely, Hon. ROBERT H. FINCH, HOWARD A. GLICKSTEIN, Staff Director. U.S. COMMISSION ON CIVIL RIGHTS, Secretary, Department of Health, Education and Welfare, DEAR MR. SECRETARY: I wish to offer my personal commendation and appreciation for your statement of Tuesday asking the Internal Revenue Service to reverse its ruling granting tax exempt status to private segregated schools. For a number of years, the Commission on Civil Rights has called attention to the fact that one reason private segregated schools are able to function is because they are accorded tax exempt status and contributions to the school result in the contributor receiving a tax deduction. We have urged the Internal Revenue Service to withdraw tax exemption from such schools. Our most recent effort to secure action from the Treasury Department is evidenced by the enclosed letter and accompanying enclosures which we sent to the Secretary of the Treasury in November. We have yet to receive a substantive response in two-and-a-half years of correspondence on this subject. Eventually, I am convinced, the Treasury Department will be forced to reverse its policy and the sooner it does so the better. The chief effect of delay, as the New York Times noted Tuesday, "would be to prolong the agony and the bitterness and delay the advent of reason." I would like to assure you of the support of the Commission on this matter and if the Commission can be of any assistance to you, please contact my office. Sincerely yours, Enclosures. HOWARD A. GLICKSTEIN. THE GENERAL COUNSEL OF THE TREASURY, Honorable THEODORE M. HESBURGH, DEAR MR. HESBURGH: On behalf of the Secretary, I wish to acknowledge your letter of November 26, 1969. As you know, the issue which you raise is currently in litigation. Nevertheless, I shall check into the facts and you will have a further reply. Sincerely yours, PAUL W. EGGERS. U.S. COMMISSION ON CIVIL RIGHTS, Hon. DAVID M. KENNEDY, DEAR MR. SECRETARY: This letter is to express the deep concern of the United States Commission on Civil Rights with respect to the Internal Revenue Service's continuing policy of granting tax exempt status to segregated private schools. In July 1967, after an extensive study of Southern school desegregation for the 1966-67 school year, the Commission published a report (copy enclosed) Southern School Desegregation 1966–67. This report contained a finding on segregated private schools in the South. Specially, the Commission found: Many private segregated schools attended exclusively by white students have been established in the South in response to public school desegregation. In some districts such schools have drained from the public schools most or all of the white students and many white faculty members. Under the Internal Revenue Code of 1954, institutions organized and operated exclusively for charitable purposes and not for private benefit are exempt from paying income taxes and contributors to these institutions are entitled to deduct contributions, within certain limits, from their taxable income. Some racially segregated private school have been approved by the Internal Revenue Service for the receipt of these tax benefits, while others have applications for these benefits pending before the Internal Revenue Service. Based on this finding, the Commission recommended: The Secretary of the Treasury should request an opinion of the Attorney General as to whether Title VI of the Civil Rights Act of 1964 or the Internal Revenue Code authorizes or requires the Internal Revenue Service to withhold tax benefits presently being afforded by the Service to racially segregated private schools, or whether congressional action is necessary to assure that such benefits are withheld. The Attorney General should consider whether, because of such benefits, the Federal Government is so significantly involved in private school segregation as to justify legal action to enjoin the continued operation on a discriminatory basis of schools receiving such benefits. If the Attorney General determines that present legal authority is inadequate either to withhold tax benefits or to permit the institution of litigation, he should recommend appropriate legislation to the President. Appendix VIII to this report contained a staff paper setting forth the legal arguments against IRS continuing to grant these schools Federal tax benefits. The charitable deductions provisions of the Internal Revenue Code require that the institutions to which deductible contributions may be made must promote the general public welfare. On the basis of staff reports detailing the argument that racially segregated private schools are contrary to the public interest, and that the racial classification they entail promotes more harm than good, the Commission has repeatedly urged the Treasury Department and IRS to cease granting tax exempt status to private segregated schools. On August 2, 1967, IRS approved the applications for tax benefits of the 42 segregated private schools whose status had been under review. It ruled that tax exemptions will be denied and deductions not allowed "if the operation of the school is on a segregated basis and its involvement with the State or political subdivision is such as to make the operation unconstitutional or a violation of the laws of the United States." In explaining the ruling the Service indicated that segregated private schools would be entitled to Federal tax benefits if: (1) the schools themselves, as opposed to the pupils, do not receive direct financial aid from any governmental unit, and (2) any tuition assistance given to the pupils from governmental sources does not constitute more than 50% of the total financial support of the schools. In effect any segregated private school could thus benefit financially from Federal tax policies so long as the State money is received through State tuition grants to the students--which in most cases had been enacted for the purpose of frustrating public school desegregation-was less than half of the school's financial support. The Internal Revenue Service's ruling was contrary to the position of the Department of Justice. Court decisions since that ruling, moreover, suggest that the Service's position no longer is tenable. As a result of increased desegregation of public schools in 11 Southern States, private segregated academies have proliferated. The Southern Regional Council, a research and information agency, estimates that there are ten times as many "segregation academies" now than there were five years ago, The Council estimates that there are roughly 300,000 white children now attending private segregated schools in the South. This proliferation could not have taken place without the substantial stimulus of the tax exemption benefits accorded such private segregated schools by the Internal Revenue Service. It is ironic that the Federal Government, through the interpretation and operation of its tax laws, has frustrated public school desegregation as mandated by the Constitution and by Federal law. In many areas private segregated schools were started with the aid of unconstitutional State tuition grants and are being maintained today by tax deductible contributions. The result is that in many communities the public school system is being disrupted. The Commission is concerned that the growth of "segregation academies" will accelerate because of the very recent Supreme Court ruling in Alexander v. Holmes County Board of Education. The Court ordered in that case: .. that each of the school districts here involved may no longer operate a dual school system based on race or color and . . . that they begin immediately to operate as unitary school systems within which no person is to be effectively excluded from any school because of race or color." In an immediate response to this decision, Governor of Alabama Albert Brewer is quoted as saying, "More private schools could spring up in the State with the advent of a harder push for integration by the government." In view of the real possibility that the "segregation academy" will be used as a device to circumvent this historic decision, I strongly urge you to require the Internal Revenue Service to change its policy of granting tax exemptions to private segregated schools. The Commission has recommended such a reconsideration to the Department of the Treasury and the Internal Revenue Service in previous correspondence enclosed. I would appreciate an early response to our recommendation for a reappraisal and change in the policy of the Internal Revenue Service. Sincerely yours, THEODORE M. HESBURGH, Enclosures. Hon. HENRY H. FOWLER, (Signed) Chairman U.S. COMMISSION ON CIVIL RIGHTS, Secretary of the Treasury, Washington, D.C. DEAR MR. SECRETARY: Thank you for your letter of December 11 to Chairman Hannah. We look forward to receiving a substantive reply from your agency in the near future concerning the tax-exempt status of racially segregated private schools. Sincerely yours, (Signed) SAMUEL J. SIMMONS, Acting. THE SECRETARY OF THE TREASURY, Hon. JOHN A. HANNAH, Chairman, U.S. Commission on Civil Rights, DEAR MR. HANNAH: This will acknowledge your recent letter with regard to the tax-exempt status of racially segregated private schools. You refer to letters written to me on this subject on August 4, 1967 and July 18, 1968 by your former Staff Director William L. Taylor and point out that neither of those letters has been acknowledged. You also refer to another later letter from Mr. Taylor to the Commissioner of Internal Revenue to which no substantive reply has been received. I appreciate your concern about the fact that your letters to me have not been acknowledged and I apologize for this omission. The unfortunate fact is that my office has no record of ever having received the letter of August 4, 1967. The letter of July 18, 1968 was received and my staff has been giving the problem substantially continuous consideration since that time. I neglected to acknowledge the letter because I thought my staff had done so. I want to assure you of my deep interest in this general subject. Although no final decisions have yet been reached, we hope to be able to furnish a substantive reply to all the Commission's interrelated inquiries in the near future. Sincerely yours, HENRY H. FOWLER. |
