Green v. Miller Brief for Plaintiffs-Appellees
Public Court Documents
October 8, 1980

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Brief Collection, LDF Court Filings. Green v. Miller Brief for Plaintiffs-Appellees, 1980. 77564a4c-b49a-ee11-be36-6045bdeb8873. LDF Archives, Thurgood Marshall Institute. https://ldfrecollection.org/archives/archives-search/archives-item/0ed48f89-23eb-471d-b71b-1345d5c9ce30/green-v-miller-brief-for-plaintiffs-appellees. Accessed April 22, 2025.
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IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT t., 4" i No. 80-1913 WILLIAM H. GREEN, ET AL., Plaintiffs-Appellees, ‘S l V • v* v. G. WILLIAM MILLER, ET AL., Defendants-Appellees, ASSOCIATION OF CHRISTIAN SCHOOLS INTERNATIONAL, ET AL., Appellants. Appeal from the United States District Court for the District of Columbia BRIEF FOR PLAINTIFFS-APPELLEES Frank R. ParkerLawyers’ Committee for Civil Rights Under Law 720 Milner Building 210 South Lamar Street Jackson, Mississippi 39201 (601) 948-5400 William L. Robinson Norman J. Chachkin Beatrice Rosenberg Lester Goldner Lawyers' Committee for Civil Ricrhts Under Law 733 15th Street, N.W. Washington, D. C. 20005 (202) 628-6700 Attorneys for Plaintiffs-Appellees IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 80-1913 WILLIAM H. GREEN, ET AL., Plaintiffs-Appellees, v. G. WILLIAM MILLER, ET AL., Defendants-Appellees, ASSOCIATION OF CHRISTIAN SCHOOLS INTERNATIONAL ET AL., Appellants. CERTIFICATE OF COUNSEL required by Rule 8(c) of the General Rules of the United States Court of Appeals for the District of Columbia Circuit The undersigned, counsel of record for plaintiffs-appellees certifies that the following parties appeared below: Plaintiffs: William H. Green, on his own behalf and on behalf of his minor children, Connie Green, Belinda Green, Ronnie Green, and Bessie Green, Vernon Tom Griffin, on his own behalf and on behalf of his minor son, Vernon Tom Griffin, Jr., John D. Wesley, on his own behalf and on behalf of his minor children, Shirley Ann Wesley, Florence Wesley, and Jessie Lee Wesley, Warren G. Booker, on his own behalf and on behalf of his minor adopted son, Adam Wayne Gilley, and Essie Bernice Austin. Defendants: G. William Miller, as Secretary of the Treasury of the United States, and Jerome Kurtz, as Commissioner of Internal Revenue. Intervenor Defendants: Dan Coit, on his own behalf and on behalf of his minor children, Lauren Faye Coit and Linda Ann Coit. Proposed Intervenors: First Presbyterian Church, Jackson, Mississippi, Association of Christian Schools International. Joe K. Treloar, Reverend William K. Wymond, Mary Elizabeth Blanton, Theresa 0. Younce, Judy C. Hand, James L. Moore and Elizabeth r>. Moore, his wife; David T. Hagenr.an and Lynn T. Hagerman, his wife, S. Kent Dear and Janie C. Dear, his wife. These representations are made in order that Judges of this Court, inter alia, may evaluate possible disqualification or recusal. Plaintiffs-Appellees. TABLE OF CONTENTS Page 1Counter-Statement of Issue Presented Prior and Related Proceedings 2 Statutes and Rules Involved 2 Reference to Parties and Rulings 2 STATEMENT 3 A. The Original Action 4 B. The Supplementary Proceedings 6 C. The Motion to Intervene 12 ARGUMENT — THE DISTRICT COURT'S DENIAL OF ARGUMENT — THE DISTRICT COURT'S DENIAL OF THE MOTION TO INTERVENE WAS PROPER 15 A. The motion to intervene was not timely. 16 B. The proposed intervenors1 interests can be fully adjudicated in a sepa rate action under 26 U.S.C. § 7428, which would develop the particular facts of appellants' particular sit uation without the necessity of dis turbing the final judgment in this case. 27 Conclusion 31 Appendices A — Rule 24, F.R. CIV. P., and 26 U.S.C. § 7428 B — IRS News Releases of July 10, 1970 and July 19, 1970 C — IRS Commissioner Thrower's December 10, 1970 affidavit D — Plaintiffs' 1976 motion for further relief E — Excerpts from December 5, 1978 hearing on IRS proposed Revenue Procedure Cases: Page *Alaniz v. Tillie Lewis Foods, 572 F.2d 657 (9th Cir.) , cert, denied sub nom. Beaver v. Alaniz, 439 U.S. 837 (1978)............................................. 26 Bob Jones University v. Simon, 416 U.S. 725 (1974)........ 20n Brumfield v. Dodd, 425 F. Supp. 528 (E.D. La. 1976) . . . . 9n, 16n, 22n, 27, 31 Brumfield v. Dodd, 405 F. Supp. 338 (E.D. La. 1975) . . . . 9n, 22n Gilmore v. City of Montgomery, 417 U.S. 556 (1974)........ 21 Gilmore v. City of Montgomery, 337 F. Supp. 22 (M.D. Ala. 1972), rev'd in part, 473 F.2d 832 (5th Cir. 1973), rev'd in part and remanded, 417 U.S. 556 (1974)..................................... 22n Goldsboro Christian Schools v. United States, 436 F. Supp. 1314 (E.D. N.C. 1977)...................... 29n *Green v. Connally, 330 F. Supp. 1150 (D.D.C.), aff'd sub nom. Coit v. Green, 404 U.S. 997 (1971). . . . 2, 4, 5, 7n, 21, 29 Green v. Kennedy, 309 F. Supp. 1127 (D.D.C. 1970) ........ 2,4 Hodgson v. United Mine Workers, 153 U.S. App. D.C. 407, 473 F . 2d 118 (1972)..................................... 16 , 31 Moten v. Bricklayers, Masons, and Plasterers International Union, 177 U.S. App. D.C. 17, 543 F . 2d 224 (1976) ................................... 16 *NAACP v. New York, 413 U.S. 345 (1973).................... 16 , 17 , 19n, 31 Nevilles v. EEOC, 511 F.2d 303 (8th Cir. 1975)............ 26 Newman v. Piggie Park Enterprises, Inc., 256 F. Supp. 941 (D.S.C. 1966), rev'd in part, 377 F.2d 433 (4th Cir. 1967), modified and aff'd, 390 U.S. 400 (1968)................................................. 19n -11- Table of Authorities * Cases or authorities chiefly relied upon are marked by asterisks. — x x x— Cases (continued): Page Norwood v. Harrison, 413 U.S. 455 (1973)................. 6 , 21 *Norwood v. Harrison, 382 F. Supp. 921 (N.D. Miss.1974)........................................... 6,7,8, 21, 22n Prince Edward School Foundation v. Commissioner, 478 F. Supp. 107 (D.D.C. 1979), aff'd ____ U.S. App. D.C. ____, ____ F. 2d ____ (June 30, 1980), petition for cert, filed, U.S. No. 80-484 (September 25, 1980)................. 2 Stallworth v. Monsanto Co., 558 F.2d 257 (5th Cir. 1977)....................................... 17 United States v. Freedom Church, 613 F.2d 316 (1st Cir. 1979)....................................... 27 United States v. Marion County School Dist., 590 F. 2d 146 (5th Cir. 1979)........................ 31 Wright v. Miller, 480 F. Supp. 790 (D.D.C. 1979), appeal pending, No. 30-1124 (D.C. Cir.).............. 2 Statutes, Regulations and Rules: 26 U.S.C. § 7428 ....................................... 2, 16 , 27, 29 26 C.F.R. § 1.6033-2 (g) (1979).......................... 9n *F.R. CIV. P. 2 4 ......................................... 2, 16 F.R. CIV. P. 25 (d) ( 1 ) ................................... 3n Table of Authorities (continued) * Cases or authorities chiefly relied upon are marked by asterisks. -iv- Other Authorities Page Proposed Internal Revenue Procedure, 44 Fed. Reg. 9451-55 (February 9 , 1979)........................ 10 Proposed Internal Revenue Procedure, 43 Fed. Reg. 37296-98 (August 22 , 1978)........................ 10 Internal Revenue Service Regulation, 42 Fed. Reg. 767-68 (January 4, 1977).......................... 9n Internal Revenue Procedure 75-50, 1975-2 Cum. Bull. 587 . 9n Internal Revenue Ruling 75-231, 1975-1 Cum. Bull. 158 . . 9 Internal Revenue Service News Release IR-1930 .......... 23n Internal Revenue Service Technical Information Release No. 1449................................... 9n Internal Revenue Service, Hearing: Proposed Revenue Procedure on Tax Exempt Private Schools (December 5, 1978). . . I ̂ ̂ ! ! ! T Table of Authorities (continued) 2 5n IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 80-1913 WILLIAM H. GREEN, ET AL., Plaintiffs-Appellees, v. G. WILLIAM MILLER, ET AL., Defendants-Appellees, ASSOCIATION OF CHRISTIAN SCHOOLS INTERNATIONAL, ET AL., Appellants. Appeal from the United States District Court for the District of Columbia BRIEF FOR PLAINTIFFS-APPELLEES COUNTER-STATEMENT OF ISSUE PRESENTED Whether the district court properly declined in 1980 to permit appellants to intervene in a suit instituted in 1969 in which a final judgment had been entered, where appellants should have known, from the time the suit was instituted and at various stages thereafter, that their school would fall within the orbit -2- of the action, and where the intervenors can fully protect their interest by a separate action under 26 U.S.C. §7428. PRIOR AND RELATED PROCEEDINGS The instant matter was commenced in 1969. A preliminary in junction was issued in 1970 sub nom. Green v. Kennedy, 309 F. Supp. 1127. A permanent injunction was issued by a three-judge court in 1971 sub nom. Green v. Connally, 330 F. Supp. 1150; this judgment was affirmed by the Supreme Court sub nom. Coit v. Green, 404 U.S. 997 (1971). In 1976 a nationwide class action was filed seeking relief similar to that sought by plaintiffs in the instant case. The District Court's ruling dismissing that action, Wright v. Miller, 480 F. Supp. 790 (D.D.C. 1979), is presently pending before this Court on appeal, D.C. Cir. No. 80-1124. A case involving issues similar to claims which appellants v/ould seek to litigate here if granted intervention is Prince Edward School Foundation v. Commis- sioner, 478 F. Supp. 107 (D.D.C. 1979) , aff'd ___ U.S. App. D.C. ___, ___ F.2d ___ (June 30, 1980), petition for cert, filed, U.S. No. 80-484 (September 25, 1980). STATUTES AND RULES INVOLVED Rule 24 of the Federal Rules of Civil Procedure and 26 U.S.C. 7428 are set forth in Appendix A to this brief. REFERENCE TO PARTIES AND RULINGS This is an appeal from an order of Judge George L. Hart, Jr., of the United States District Court of the District of Columbia, entered July 9, 1980, denying a motion to intervene. -3- The ruling is not reported but appears at pp. 124-25 of the Ap pendix. The appellants, proposed intervenors, are the Association of Christian Schools International, the First Presbyterian Church of Jackson, Mississippi, and various members of that church. The plaintiffs in the action are black federal taxpayers and their minor children attending public schools in Mississippi. The adult plaintiffs are William H. Green, Vernon Tom Griffin, John D. Wesley, Warren G. Booker, and Essie Bernice Austin. Defendants in the action are G. William Miller as Secretary of the Treasury of the United States and Jerome Kurtz as Commis— JVsioner of Internal Revenue. Persons previously allowed to intervene are Dan Coit and his minor children, Lauren and Linda Coit. STATEMENT Appellants (Association of Christian Schools International, the First Presbyterian Church, Jackson, Mississippi, and some of its members) appeal from an order entered July 9, 1980 denying their motion to intervene in this case, which had been commenced in 1969. The District Court held that the motion was untimely, that the movants lacked a protectable interest, and that allow ance of intervention would delay and prejudice the rights of the original plaintiffs. (A. 124.) 1/ The current defendants have been substituted for their pred ecessors pursuant to F.R. CIV. P. 25(d)(1). -4- A. The Original Action The action in which appellants sought to intervene is a class action, commenced in 1969, by which black taxpayers and their minor children attending public schools in Mississippi sought to enjoin the Secretary of the Treasury and the Commis sioner of Internal Revenue from according tax-exempt status to private schools in Mississippi which exclude students on the basis of race. See Green v. Connally, 330 F. Supp. 1150 (D.D.C.), aff'd VTithout opinion sub nom. Coit v. Green, 404 U.S. 997 (1971) . Permitted to intervene in that action on January 21, 1970, were representatives of the class of parents and children who support or attend private nonprofit, hitherto tax-exempt schools in Mis- _2/sissippi having an all-white enrollment,established as a means of enabling white students to avoid desegregated public schools. See 330 F. Supp. at 1155. In January, 1970, the District Court enjoined the IRS from approving any pending or future application for tax-exempt status unless it "first affirmatively determine[s] pursuant to appropriate directives and procedures satisfactory to this Court that the applicant school is not part of a system of private schools oper ated on a racially segregated basis as an alternative to white students seeking to avoid desegregated public schools." Green v. Kennedy, 309 F. Supp. 1127, 1140 (D.D.C. 1970). 2/ Applications to intervene by persons and schools outside the "state of Mississippi were denied. -5- On June 30, 1971, the District Court issued an injunction restraining the Secretary of the Treasury and the Commissioner of Internal Revenue from approving tax-exempt status under Sec tion 501(c)(3) of the Internal Revenue Code for any private school located in the State of Mississippi unless such school made a showing that it had adopted and publicized, in a manner reasonably effective to bring the matter to the attention of minority students and parents, a racially non-discriminatory admissions policy; and unless the school supplied to the IRS in formation concerning the organization of the school and the ra cial composition of its student body (see 330 F. Supp. at 1179- 80) . As the District Court noted in its 1971 opinion, while the case was pending before it the Internal Revenue Service, on July 10, 1970, had itself announced in a press release that it would grant tax exemption only to schools having "racially non- discriminatory admission policies." See 330 F. Supp. at 1172. In a press release of July 19, 1970 explaining its earlier state ment, the IRS added that its "statement of position on racially nondiscriminatory admissions policies would be applicable to all _3/private schools, whether church related or not." In an affidavit filed in this case on December 10, 1970, 3/ Both press releases are attached to the August 21, 1970 affi davit of IRS Commissioner Randolph Thrower, filed in this case along with the government's Motion to Dismiss of that date, and contained in that portion of the record which has not been trans mitted to this Court. For the convenience of the Court, we have reproduced the news releases in Appendix B infra. -6- _£/ before issuance of the permanent injunction, the Commissioner of Internal Revenue stated that the Service had mailed letters to approximately 5,000 private schools in the United States which had previously received favorable rulings on tax exemption. He also said: It is estimated that there are, in addi tion, more than 10,000 private schools which are covered by group rulings, as through a ruling given to a church cover ing all of the church-owned private schools. Similar information is being obtained as to the admission policies of such schools. B . The Supplementary Proceedings In 1976, the plaintiffs, contending that the IRS had failed to comply with the 1971 orders of the District Court, moved for _5/additional relief. The motion arose in part out of develop ments in the case of Norwood v. Harrison, 413 U.S. 455 (1973), in which the Supreme Court had held that Mississippi schools which discriminated on the basis of race were ineligible to re ceive state-loaned textbooks. On remand of that case (see 382 F. Supp. 921 [N.D. Miss. 1974]), the District Court for the Northern District of Missis sippi ordered the establishment of a certification procedure 4/ The affidavit was attached to the government's Memorandum of Points and Authorities in Opposition to Plaintiffs' Motion for Summary Judgment and Intervenors1 Motion for Summary Judg ment. It is reprinted in Appendix C infra. 5/ That motion, which was also not included in the portions of the record transmitted to this Court, is reproduced in Appendix D infra. -7- whereby schools applying for textbooks were required to give in formation as to their organization and student body, including answers to questions about whether and how they had publicized a policy of nondiscrimination. (The form is attached as an appen dix to the District Court's opinion, 382 F. Supp. at 936-39.) Thereafter, in reviewing evidence as to schools whose eligibility was disputed, Chief Judge Ready held that a prima facie case of racial discrimination was shown by evidence that a "school's existence began close upon the heels of" public school desegrega tion in the area, and that the school had never enrolled a black _6/ student nor employed a black teacher or administrator. (382 F. Supp. at 924-925.) He then listed illustrative factors which could overcome the presumption, including publicity of a nondiscriminatory policy, communication with black community 6/ In 1971, the three-judge court had held (330 F. Supp. at 1173-74) (emphasis supplied): The history of state-established seg regation in Mississippi, coupled with the founding of new private schools there at times reasonably proximate to public school desegregation litigation, leaves private schools in Mississippi carrying a badge of doubt. The finding in the Coffey case, supra, which has not been controverted and which we accept, that the new schools were established as segregated schools leads us to declare that it is the duty of the Internal Revenue Service to seek out sup plementary information, whether or not required for schools elsewhere, before granting final rulings of tax-exempt~status and deductibility of contributions to those private Mississippi schools applying for such benefits. The same condition of rea sonable proximity to desegregation litiga tion applies not only to schools organized in contemplation of litigation about to start, but also to schools subsequently organized in the wake of a decree. -8- leaders, etc. (See 382 F. Supp. at 926.) Judge Ready's opinion dealt specifically with a number of religious schools, i.e., the South Haven Mennonite School, which --- J Jhe held ineligible for textbook loans (382 F. Supp. at 927-28); the Christ Episcopal Day School, which he found nondiscriminatory even though the step of adopting a nondiscriminatory policy was "taken as a direct result of Green v. Connally" (i.e. , this case) , (382 F. Supp. at 931-32); and the Presbyterian Day School of Cleveland, which was approved only conditionally because, al though the church itself did not discriminate, the school had failed to publicize its willingness to accept black students (382 F. Supp. at 932-35). Plaintiffs discovered that a number of schools, including several specifically attacked in the earlier phase of this, the Green litigation, were still enjoying federal tax-exempt status although they had been found ineligible to receive textbook loans from the State of Mississippi because of their racially discrim inatory policies. The IRS had failed to act against schools 7/ Judge Ready's conclusion about this school was as follows: T382 F. Supp. at 928): Admittedly the factors for a prima facie case are here present. The only question is whether this school, sponsored by a close-knit Christian membership, has successfully rebut ted the inference of a racially discriminatory admissions policy. The school's reluctance, if not disdain, in presenting evidence to this court has not facilitated our task. Neverthe less, this court has undertaken to give this school utmost, careful consideration in view of its status as a church-sponsored school emphasizing religion. Despite contrary claims, however, we are driven to the conclusion that the South Haven school exists as a haven for perpetuating white, segregated education. -9- adiudicated discriminatory under the Norwood standards in both _8/Mississippi and Louisiana, apparently because there were no _9/ IRS announcements setting forth such standards. However, the IRS had, on May 22, 1975, issued Revenue Ruling 75-231, 1975-1 Cum. Bull. 158, which proclaimed explicitly that organizations "including churches, that conduct schools with a policy of re fusing to accept children from certain racial and ethnic groups 10/ will not be recognized as tax-exempt." In response to the plaintiffs' motion, the government orig inally moved to dismiss the action (this request was denied by Judge Waddy on May 25, 1977); subsequently, the IRS advised the District Court, inter alia, that Plaintiffs' 1976 motion reopening this lawsuit prompted the Service to review its procedures for determining whether private schools seeking 8/ See Brumfield v. Dodd, 405 F. Supp. 338 (E.D. La. 1975); Td., 425 FT Supp. 528 (E.D. La. 1976). 9/ Thus, for example, Rev. Proc. 75-50, adopted November 6, T9 75 , contained no reference to the relationship between a pri vate school's establishment or expansion and public school deseg regation . 10/ Rev. Rul. 75-231 was appended to the February 6, 1976 letter from IRS Chief Counsel Meade Whitaker to Green plaintiffs' counsel Frank Parker which is Exhibit 8 to the 1976 motion for further relief (see note 5 supra). It appears in Appendix D to this brief, pp. 40d- 41d infra. Subsequently, on November 6, 1975, the IRS issued Rev. Proc. 75-50, 1975-2 Cum. Bull. 587, setting forth the showing that had to be made to establish a school's nondiscriminatory policy. (But see note 9 supra.) On March 19, 1976, the IRS issued Technical Information Release No. 1449, an nouncing that the annual certification of nondiscrimination re quired by Rev. Proc. 75—50 should be filed along with a school's Form 990 information return; and that for schools which did not file Form 990 [such as church schools, see 26 C.F.R. §1.6033-2(g) (1979); 42 Fed. Reg. 767-68 (.Jan. 4 , 1977)], "a separate certifi cation form is being developed . . . ." -10- or maintaining Section 501(c)(3) tax exemp tion have racially nondiscriminatory admis sions policies as to students. After review ing the Service's existing guidelines and the judicial authority in racial discrimina tion cases, the Service concluded that its existing procedures do not provide adequate guidance with respect to certain schools formed or substantially expanded at the time of public school desegregation in the commu nity. Defendants believe that the Service's existing procedures are ineffective in iden tifying such schools whose formation or ex pansion raise substantial doubts concerning their practices, even though the schools may profess an open enrollment policy and comply with the yearly publication requirement of Rev. Proc. 75-50. 11/ It therefore published, for comment, a proposed Revenue Procedure providing additional guidelines to be used in reviewing private schools' eligibility for tax-exempt status. 43 Fed. Reg. 37296- 98 (August 22, 1978). These clearly applied to church-operated schools. In hearings on the proposed Revenue Procedure held in Washington on December 5-8, 1978, testimony was given by a num ber of representatives of religious organizations, including counsel for the Association of Christian Schools International, asserting conflict with religious freedom. After receiving and reviewing numerous comments, the Service made substantial revi sions and reissued the guidelines for comment on February 9, 1979, 44 Fed. Reg. 9451-55. The proposed Procedure has never 12/ been implemented. 11/ Memorandum of Defendants in Response to Plaintiffs' Submis- sTon on the Merits, filed November 27, 1979, at 20-21. 12/ In 1979 and 1980, the Congress approved riders to Treasury Department appropriations measures prohibiting the use of funds to carry out the guidelines. - 11- On cross-motions for summary judgment, the District Court held that the IRS had not violated the order of June 30, 1971, but that the order required supplementation and modification. (A. 9.) Paragraph (1) of the 1980 ruling expanded the injunction to prohibit the grant of tax-exempt status to Mississippi private schools which have been determined in adversary or administrative proceedings to be racially discriminatory; or [which] were established or expanded at or about the time the public school districts in which they are located or which they serve were desegregating, and which cannot demonstrate that they do not racially discriminate in admissions, employ ment, scholarships, loan programs, athletics, and extra-curricular programs. Paragraph (2) explained that the existence of the conditions set forth in paragraph (1) raises an inference of discrimination which can be overcome "by evidence which clearly and convincingly reveals objective acts and declarations establishing that such is not proximately caused by such school's policies and practices," and set forth non-exclusively the type of evidence which would tend to establish nondiscrimination. (A. 10.) The Court also modified the prior decree to require greater regularity in the schools' publicizing of nondiscriminatory poli cies and to require the IRS to collect additional information with respect to the organization and status of the school. (A. 11-12.) The IRS was directed to take all reasonable steps to determine which, if any, church-related schools in Mississippi would come under the definition of Paragraph (1), and with re spect to such schools to collect the information required by the -12- permanent injunction. (A. 13.) Finally, the Service was ordered to deny tax exemption unless the showing and information required by the permanent injunction, as amended, was made within specific times. (A. 12.) The order was amended on June 2, 1980, to make clear that it was intended to apply only to schools which have in the past been determined to be racially discriminatory, or which were established or expanded at or about the time the pub lic school districts in which they are located or serve were desegregated. (A. 14-16.) C. The Motion to Intervene In June, 1980, after entry of the final decree in this case, the Association of Christian Schools International, the First Presbyterian Church of Jackson, Mississippi, and some of its members moved to intervene in this action (A. 17-29). The Association alleaed that it represented the interests of more than 1400 Bible-oriented Christian elementary and secondary schools in the United States (A. 17); the First Presbyterian Church that it ran a school for children whose parents desire instruction in the Biblical faith and who abide by the religious and moral principles of the church (A. 18). The Church averred that it enrolls children who reside in public school districts in Mississippi which have been desegregated, and that none of the students or teachers at the school are black (A. 21). The proposed intervenors alleged that the order of May 5, 1980, as amended, unduly burdened the right of a wholly religious enter prise to conduct its religious ministry in education free from government direction, supervision, investigation, and evaluation, -13- in violation of the First Amendment (A. 21). The application to intervene also alleged that the motion was timely because no church schools were implicated in the original complaint or in the motion of the plaintiffs filed in July, 1976, to enforce the original (June 10, 1971) decree (A. 28). Annexed to the motion to intervene was a proposed answer to the complaint in which the proposed intervenors challenged the status of the plaintiffs to maintain this action and asserted that the Internal Revenue Code of 1954 does not require that religious schools adopt or publicize a policy of racial nondis crimination as a condition of being accorded recognition of tax exemption (A. 57). They also annexed a proposed response to the July 1976 motion to modify the original decree in which they al leged that, if the decree were extended to include churches and other religious entities, it would violate the First Amendment (A. 59). In a subsequent response to the contention of the plain tiffs that the motion to intervene was untimely, proposed inter venors offered the affidavit of their attorney that he was first contacted by the First Presbyterian Church about this case on May 21, 1980, after the district court order of May 5, 1980; that he was unaware of the order prior to that time; and that he was retained to seek intervention only on June 2, 1980. (A. 122—23.) The District Court denied the motion to intervene on July 9, 1980. It ruled that the motion was untimely; that the movants lacked any protectable interest; that to allow intervention would delay and prejudice the rights of the original parties. It also noted that the Association of Christian Schools International -14- sought to represent the interest of religious schools located outside the State of Mississippi (A. 124-25). This appeal followed. -15- ARGUMENT THE DISTRICT COURT'S DENIAL OF THE MOTION TO INTERVENE WAS PROPER Although the Association of Christian Schools International is a nominal appellant on this appeal, the Brief for Appellants, by concentrating on the position of the First Presbyterian Church Day School [hereinafter referred to as the "Day School"], virtu ally concedes that the Association has no independent interest that would give it standing to intervene in this case, which is limited to schools in Mississippi. Aside from the fact that the Day School is a member of the Association, the only other basis for an independent interest which the Association suggests is that it stands ready to represent other Mississippi schools (App. Br. at 24). Since it does not even suggest that any other school desires representation, this obviously does not give the Association standing to intervene in this case. As to the Day School and its patrons or employees, they allege an interest affected by the decrees issued in this case, since the school has an all-white enrollment and was started after a desegregation order in its district. Our primary con tention in this Court is that the denial of their motion to intervene was nevertheless proper because the motion was untimely (the school having slept on its rights after it knew or should have been aware that it might be affected by the orders in this case). The judgment below should also be sustained since the interest which the school asserts may be fully litigated, if -16- exemption is denied (either because the school declines to fur nish the IRS with the information it is required by the Green decree to collect or because the IRS concludes, based upon ap plication of the Green decree to the Day School, that it has failed to establish nondiscrimination), in an action under 26 U.S.C. §7428. Such an action would concentrate on the partic ular facts relating to this school's claims without the neces sity of opening the final judgment in this long-standing action. A. The motion to intervene was not timely. It is well-established that, in accord with the language of Rule 24 of the Federal Rules of Civil Procedure, before granting a motion to intervene, the court "must first be satisfied as to timeliness." NAACP v. New York, 413 U.S. 345, 365 (1973). See also Moten v. Bricklayers, Masons and Plasterers International Union, 177 U.S. App. D.C. 77, 81, 543 F.2d 224, 228 (1976). Timeli ness is a flexible concept, to be determined from all the circum stances of the case. Hodcrson v. United Mine Workers, 153 U.S. ---- ------------TV App. D.C. 407, 473 F.2d 118 (1972). As a result, the question of timeliness is largely committed to the discretion of the dis trict court, whose determination will not be overturned on appeal unless an abuse of discretion has been shown. NAACP v. New York, supra, 413 U.S. at 366. While the point to which the suit has progressed is not solely dispositive, it is an appropriate factor 13/ Accord, Brumfield v. Dodd, supra, 425 F. Supp. at 531 (post- judgment motion of Grawood Christian School to intervene in Lou isiana textbook-aid case denied as untimely). -17- to be considered. NAACP v. New York, supra, 413 U.S. at 366 . Even more significant is the length of time during which the would-be intervenor actually knew or reasonably should have known of his interest in the case before he petitioned for leave to intervene. Stallworth v. Monsanto Co., 558 F.2d 257, 264 (5th Cir. 1977). Appellants are disingenuous in their assertion that their motion was timely because they moved to intervene immediately after they realized they would be affected by the May 5, 1980 order of the District Court. Of course, appellants did not know the exact terms of the order until it was entered. But if they did not know -- long before that time -- that all-white, church- related schools in Mississippi, established after desegregation orders in their localities, could be affected by the Green liti gation (at least to the extent of being asked to provide the IRS with information), that could be only because they deliberately chose to ignore what they had to know. 1. It is inconceivable that any white, private school in Mississippi was unaware of the Green litigation. When t_he first order for a temporary injunction in January, 1970 barred the IRS from approving an application for tax exemption unless it determined that the school was not part of a system of private schools "operated on a racially segregated basis as an alterna tive to white students seeking to avoid desegregated public schools," the Day School had to be put on notice that, as a racially segregated school established after a desegregation order, it was potentially subject to being affected by an order in the Green case. -18- Any possible doubt on that score would have had to be dis sipated by the IRS press releases of July, 1970 making clear that its "statement of position on racially nondiscriminatory admis sions policies would be app?icable to all private schools, whether church related or not." (See Statement, supra, at 5.) It does not appear whether the Presbyterian Day School received the kind of letter which the Commissioner said, in December 10, 1970, he would send to church-owned private schools (see Statement, supra, at 6), but, in view of the wide dissemination indicated by the Commissioner, it is difficult to believe that any private school interested in its tax-exempt status would not be aware of the IRS rulings. When, therefore, the district court in this case issued its first permanent injunction in June, 1971, prohib iting the Internal Revenue Service from approving tax-exempt status for any private school in Mississippi unless the school had a racially nondiscriminatory policy and supplied information concerning its organization and racial composition, the proposed intervenors had to be aware that all-white religious schools in Mississippi would fall within the orbit of that order. Appellants stress that the initial opinion on the permanent injunction reserved (as not before the Court then) the question whether a school could be granted exemption if discrimination was dictated by the religion itself (see 330 F. Supp. at 1169). The point is a curious one, for it suggests that appellants not only 11/were aware of the Green litigation as early as 1971 but also 14/ Nowhere in their pleadings before the District Court nor in their brief in this Court do appellants ever state that they had [footnote continued on next page] -19- were aware that tax exemptions for religious schools could become 15/an issue in the case. Yet they chose to remain outside the litigation, after it was reopened in 1976, until a final judgment 16/was entered. Even though appellants' reading of 17/the 1971 opinion is fundamentally in error, therefore, their [continuation of footnote no. 14] no knowledge of this litigation before May 5, 1980. They focus only on the provisions of the May 5, 1980 judgment itself — but if prescience as to the contents of a yet unwritten ruling were the only basis for a finding of untimeliness, there would be lit tle finality of judgments in American law. Cf. NAACP v. New York supra. 15/ Appellants admit that the language of the 1971 District Court opinion concerning the issue which the Court was pretermit- ting can be interpreted in two different ways (App. Br. at 14-15) See also A. 115 ("plainly susceptible of two possible meanings . . . equally plausible . . . .") 16/ Had appellants not slept on their rights, by deliberately seeking to ignore this litigation so long as no order had been entered which they viewed as objectionable, they would have noted the discussion of religious schools in the plaintiffs' 1976 mo tion for further relief, in the cases cited by plaintiffs in that motion, in the correspondence appended to the motion as exhibits, and in the IRS Revenue Procedures attached to that document. (See Appendix D infra.) These indications would have motivated a responsible party to intervene on a timely basis. 17/ Appellants propose a tortured interpretation of the words, ""acts of racial restriction," from the 1971 opinion — which they claim indicate that the District Court did not mean to include within the ambit of its decree private sectarian schools, formed in the wake of public school desegregation, which limited their enrollment on a religious basis and had all-white enrollments. (App. Br. at 14-15.) This construction of the opinion is plainly inconsistent with the District Court's statement, in the same part of its 1971 opinion, that the issue it pretermittea "may never arise . . . ," a statement which obviously refers to the expectedly unusual case in which there is a claim that racial discrimination is a tenet of religious belief. Cf. Newman v. Piggie Park Enterprises, Inc., 256 F. Supp. 941, 944, 945 (D.S.C. 1966), rev'd in part on other grounds, 377 F.2d 433 (4th Cir. 1967), modified on other grounds and aff'd, 390 U.S. 400 (1968) . Appellants1 reading of the opinion also contradicts [footnote continued on next page] -20- heavy emphasis on that reading virtually compels the conclusion that they knew of the potential reach of this lawsuit long before they ultimately decided to intervene, and it supports the common- sense notion that the widely publicized 1971 Green ruling put the Day School on notice that it might be within the scope of the litigation. This is particularly so in light of the IRS July, 1970, announcements, discussed above. [continuation of footnote no. 17] the IRS' consistent interpretation of its application to sectar ian schools since 1970. See Statement, supra, at 5-6; n.10 and accompanying text. It is hardly unreasonable to expect that, if the District Court had intended its 1971 decree to bind the IRS only with respect to private, nonsectarian schools in Mississippi, it would have said so in its order or opinion. Appellants also imply that they were entitled to ignore the Green litigation because the 1971 opinion and decree "did not constitute a ruling even with respect to whether a segregative private secular school qualifies for tax exemption under Section 501(c)(3)." (App. Br. at 15 n.*.) This is a drastic misreading of the Supreme Court's comment about this case in Bob Jones Uni- versity v. Simon, 416 U.S. 725, 740 n.ll (1974) . All that the Supreme Court indicated was that its own summary affirmance of the 1971 Green ruling by the District Court (which is certainly the law of the land as well as the law of this case until over ruled) was not entitled to as much precedential weight in another case as a decision reached with full written opinions after ple nary consideration by the Supreme Court. Furthermore, since the Bob Jones ruling was not announced until three years after Green, it could have had nothing at all to do with the Day School's decision not to seek post-judgment intervention in this case be tween 1971 and 1974. We maintain that the District Court in 1971 reserved only the question whether a school claiming that racial discrimination in its operations was required as a matter of religious principle would be entitled to an exemption. This should have put the Day School, which states that none of its religious principles "re quires or implies exclusion on the basis of race" (A. 21 13; see also App. Br. at 13), on notice of the potential impact of this case upon its status. -21- 2. Even assuming that, in 1971, there could have been some doubt as to the inclusion of all-white church schools, founded after desegregation orders in their locales, within the class of schools which would be affected by a suit designed to prohibit tax exemption for private schools serving as an alternative to desegregated public schools, there could be absolutely no ques tion as to such inclusion after the developments in Norwood v. Harrison, supra, particularly on the remand in the trial court. See Statement, supra, at 6-8. The opinion on remand made it absolutely clear that church schools could come within a judicial definition of a prima facie racially discriminatory school. As noted in the Statement, the opinion of Judge Ready specifically dealt with three church schools, including a Presbyterian Day School in Cleveland, Mississippi. It is inconceivable that a private church school in Mississippi could have been unaware of the Norwood opinion. And since that opinion several times re ferred to the opinion in Green v. Connally (see 382 F. Supp. at 929, 932, 934), the close relationship between the two cases in defining what constitutes a prima facie racially segregated school had to be apparent to school administrators, whether or 18/ not they are lawyers. 18/ Cases arising in states adjacent to Mississippi during this time also subjected church-related and non-sectarian schools to the same standards of racial nondiscrimination. In Gilmore v. City of Montgomery, 417 U.S. 556, 569 (1974), the Supreme Court unanimously upheld a district court injunction prohibiting city authorities from allowing private schools (and affiliated groups) to use public recreational facilities because the city's actions significantly enhanced the attractiveness of segregated private schools, formed in reaction against the [footnote continued on next page] -2 2- Moreover, the IRS had announced explicitly, in May, 1975 , that organizations, "including churches", which conduct schools with a policy of refusing to accept children of certain racial and ethnic groups would not be recognized as tax-exempt. As noted in the Statement, this announcement was supplemented by one which set forth the showing that had to be made to establish a nondiscriminatory policy — a showing substantially in accord with the terms of the Green injunction, if lacking its focus on "badge of doubt" schools. If the Day School knew, as it had to know, that the Green litigation involved tax exemption for pri vate white schools in Mississippi, it had to know that a white church school established after a desegregation order was poten tially affected by that litigation. [continuation of footnote no. 18] federal court school order, by enabling them to offer complete athletic programs. That injunction applied to church-related as well as nonsectarian schools in Montgomery, Alabama. Gilmore v. City of Montgomery, 337 F. Su p p . 22; 24 (M.D. Ala. 1972) (St. James School), rev d in part on' other grounds, 473 F.2d 832 (5th Cir. 1973) , rev d in part and remanded on other grounds, 417 U.S. 556 (1974). In Brumfield v. Dodd, supra, 405 F. Supp. 338, the federal district court in Louisiana established a certification procedure similar to that developed in Norwood, to be administered by the state Board of Elementary and Secondary Education in connection with loaning state-owned textbooks to private schools. In that case, as in^Norwood, religious as well as secular schools^ were subjected to the same standards for determining whether they had nondiscriminatory policies. See 405 F. Supp. at 346 [Del^a Christian Academy); 425 F. Supp. at 534-35 (Grawooa Christian School). -23- 3. Proposed intervenors were under a duty to keep abreast of developments in the Green case since they had to know that tax-exempt church schools were potentially concerned. They thus had to realize that, if they wanted to assert an interest in their alleged right to be free of all inquiry as to their tax-exempt status, they had to move to intervene, at the very latest, when 19/ plaintiffs made the motion for additional relief in 1976. That obligation became even clearer in the face of the IRS Aug ust 22, 1978 proposed guidelines for determining whether a school should be deemed racially discriminatory. Those proposed guide lines clearly concerned church schools. A number of religious organizations, including the Association of Christian Schools International, to which the Day School belongs, testified at the December, 1978, hearings held by the IRS on the proposal. Since the guidelines related to tax exemption, their relationship to the Green case had to be self-evident to any interested person, 20/ layman or lawyer. 19/ Plaintiffs' motion, together with its attachments, is part of the District Court record which was not transmitted to this Court. It is reproduced in Appendix D, infra. 20/ The IRS itself consistently made clear that development of the proposed guidelines was undertaken because of the Green case. For example, in a January 9, 1978 address to the PLI Seventh Biennial Conference on Tax Planning for Foundations (the text of which was issued as News Release IR-1930 by the Service), Commis sioner Kurtz stated (at 8-10) (emphasis supplied): . . . As I will relate in a moment, the Service has taken significant steps in recent years to improve compliance with its private school policy. We expect further guidance from the court since we are presently involved in litigation [footnote continued on next page] -24- 4. The Day School does not explain why it became aware of the May 5, 1980 order in this case in time to contact counsel on [continuation of footnote no. 20] about our enforcement program. . . . Service ruling policy is found in Revenue Rulings 71-447 and 75-231. Guide lines and procedures are found in Revenue Procedure 75-50. Essentially, these three documents deny tax exemption to private schools that discriminate in their admis sions policy on the basis of race or eth nic origin. Church-related private schools are covered within this policy as well as the churches that operate and control them. . . . One question is how we should evaluate the bona fides of the admission policy of schools located in communities subject to desegregation orders that operate over a long period of time without actually enroll ing any minority students. Does that fact create a presumption calling for more careful scrutiny? Might a similar rule be applicable even in the absence of local desegregation orders? And, on the other side of that ques tion, what steps can an exempt school take in such a situation to establish that it, in fact, has been open to children of all races and ethnic groups? Similarly, Commissioner Kurtz opened the December, 1978 hearings on the proposed guidelines by stating: The plaintiffs in the original Green case I mentioned earlier have reopened the case and at aoproximately the same time a nation-wide class action was filed challenging the ade quacy of the Service's enforcement in this area. The Civil Rights Division in the Department of Justice and the Commission on Civil Rights also have been critical of the Service's rules in this area. We have re viewed our current rules and have concluded that more objective rules may be necessary to identify those schools which, while [footnote continued on next page] -25- May 21, 1980 (see A. 122), but was unaware of the case before that time. From the papers that are attached to appellants' brief, it appears that the Internal Revenue Service did not con tact the Day School until June 30 , 19 8 0 (see App. Br. at 45) . It is a reasonable inference that the IRS, which seemed to have dif ficulty in identifying tax-exempt church schools in Mississippi, had not reached the Day School with any inquiry before the May 5, 1980 order, and it may be that the Day School was not interested in making the IRS aware of its exempt status by moving to inter vene in the action until it became clear from the May 5 order that the school would be a subject of inquiry. Be that as it may, it is abundantly clear, from the court opinions and the IRS releases, that no minimally responsible Mississippi school admin istrator could have been unaware, before 1976 at the very latest, that the Green litigation potentially involved white church schools established after desegregation orders in their areas. The proposed intervenors, if they cared about their tax-exempt status at all, had to know that such status could be implicated [continuation of footnote no. 20] claiming a nondiscriminatory policy, are operated in a manner excluding minority students. The Court has deferred any action on the two cases at this time, pending resolution of the Service's final action with regard to the proposed revenue procedure. Internal Revenue Service, Hearing: Proposed Revenue Procedure on Tax Exempt Private Schools (December 5, 1978) at 9-10 (empha sis supplied). Excerpts from the hearings, including the remarks of Commissioner Kurtz and ACSI Attorney Ball, are reproduced in Appendix E, infra. -26- in the Green case. If they wanted to represent their interest, vis-a-vis the controversy between the Green plaintiffs and the IRS, they should have moved to intervene much earlier than they did. At the very latest, they should have so moved at the time of the motion to modify the injunction order in 1976. They could not ignore the potential effect and wait for certainty in the outcome before moving to intervene. The burden is on the movants to show why they should be allowed to come into this case at this late date. Nevilles v. EEOC, 511 F.2d 303, 305 (8th Cir. 1975). The fact that the pro posed intervenors did not know with certainty the terms that would be imposed by the final order (although in view of the IRS proposed guidelines, they could have fairly anticipated what the ultimate ruling would be) does not excuse their delay since they surely knew the risks. See Alaniz v. Tillie Lewis Foods, 572 F.2d 657, 659 (9th Cir.), cert, denied sub nom. Beaver v. Alaniz, 439 U.S. 837 (1978). The motion to intervene was thus properly denied as un- 21/ timely. 21/ The District Court also ruled (A. 124) that the morion to Intervene should be denied because "The movants lack any protec- tible interest under the modified permanent injunction entered by this court on May 5, 1980 and clarified on June 2, 1980 be cause they do not come within the description contained in Para graph 1 of that order." Appellants also challenge this ruling, but this Court need not consider the question since the alterna tive ground of untimeliness is clearly adequate to sustain the District Court's disposition of the motion to intervene. -27- B. The proposed intervenors' interests can be fully adjudi cated in a separate action under 26 U.S.C.§7428, which would develop the particular facts of appellants' particu lar situation without the necessity of disturbing the final judgment in this case. While, as we discussed above, we believe that the motion to intervene could properly be denied on the basis of untimeliness alone, the denial of the motion in this case was particularly appropriate because the School's interests can be protected and the claims which it wishes to assert adjudicated in an individual action under 26 U.S.C.§7428. It is thus unnecessary to reopen the judgment in this long-pending case. Cf. Brumfield v. Dodd, supra, 425 F. Supp. at 531 (post-judgment intervention in text book aid case unnecessary since school will have opportunity for judicial review of administrative determination of ineligibility). All that the District Court order of May 5, 1980, requires in relation to church schools is that the IRS obtain information about the organization and status of the school (see Question naire attached as an Appendix, App. Br. at 47). Appellants do not and could not reasonably contend that the mere furnishing of such neutral information would in any way impinge upon their freedom of religion. See United States v. Freedom Church, 2 2? 613 F .2d 316, 320 (1st Cir. 1979). Their claimed objection to the injunction in this case stems from the fact that the District Court adopted the view that an all-white school established after a desegregation order would be deemed presumptively discrimina tory and required to show by objective means that it did not in fact discriminate on the basis of race. Appellants assert that 22/ But see App. Br. at 38-39 1! (f) ; 40 «! (j) . -28- their religious mission precludes the kind of showing suggested by the District Court. While the order of the District Court suggests some of the types of evidence by which the presumption could be overcome, it does not, however, direct that nondiscrim ination can be shown only by these means. The order directs the IRS to consider "any other similar evidence calculated to show that the doors of the private school and all facilities and pro grams therein are indeed open to students or teachers of both the black and white races upon the same standard of admission or employment" (A. 10). Appellants are therefore free to bring be fore the IRS any and all evidence which they believe would tend to show that the Day School does not discriminate on the basis of race, despite the time of the school's foundation and its 23/ all-white enrollment. Whether or not the school is racially discriminatory will be determined by the IRS on the basis of all the facts before it. If, because the school declines to answer certain questions which it deems improper, or because its answers do not convince the IRS that it is nondiscriminatory, and the IRS declines to accord tax- exempt status, the school will have the opportunity, in an action 23/ The District Court's decree thus does not inexorably burden the exercise of the Day School's religious mission even if one accepts appellants' far-fetched interpretation of what the Dis trict Court meant when it identified "active and vigorous recruit ment programs to secure black students or teachers," "meaningful public advertisements stressing the school's open admissions pol icy," and "meaningful communication between the school and black groups . . . " (A. 10) as evidence tending to rebut the inference of discrimination which attaches to "Paragraph 1" schools. See App. Br. at 36-38. -29- under 26 U.S.C. § 7428, to assert whatever claims it has, under the First Amendment or otherwise, as to why it should be accorded tax-exempt status without having to make the showing suggested by 24/ the District Court. An action under 26 U.S.C. § 7428 will have the advantage of focusing on the particular facts relating to this school's partic ular situation. Such a concentration on the facts of an individ ual case is, as the district court initially held in this case, desirable when passing on religious claims. See 330 F. Supp. at 1169. In moving for an advanced hearing on this appeal, appel lants have asserted that an action under 26 U.S.C. § 7428 would not be as expeditious as intervention because, under the statute, they must first exhaust administrative remedies. This merely serves to emphasize that the District Court's order in this case does not affect appellant's interest to the point of requiring denial of exemption, and that appellants do have an opportunity to present their claims: first administratively, and then, if necessary, judicially. The right to seek a declaratory judgment under 26 U.S.C. § 7428 to review an IRS denial of tax exemption to a church orga nization existed before appellants made their motion to intervene 24/ While the merits of appellants' claims are not before the Court in this proceeding, it should be noted that what is at is sue here is, not the rxght of the school to conduct its affairs and limit its students as it sees fit, but its right to receive aid from the government in the form of tax exemptions even if the school follows a policy of racial discrimination. See Green v. Connally, supra, 330 F. Supp. at 1166; Goldsboro Christian Schools, Inc. v. United States, 436 F. Supp. 1314, 1318-19 (E.D. N.C. 1977) . -30- in this case. Intervention was thus not then, and is not now, necessary to enable appellants to assert whatever claims they may have that a decision to deny their tax exemption based upon the IRS' application of the District Court's decree would violate their First Amendment rights. On the other hand, opening this case now would greatly de lay the already long-deferred enforcement of plaintiffs' rights. The proposed intervenors tried to come into this case only after final judgment; they sought, not only to press their own particu lar interest, but to open up the whole judgment, including the 25/ issue of plaintiffs' standing to bring suit. Manifestly, they were not entitled to intervene to seek such broad relief. But even if their application could be deemed limited to the narrower question of whether the IRS should be directed to make a deter mination as to the tax-exempt status of church schools, the in tervention would go far beyond the Day School's particular inter est and interfere with the ability of the IRS to make determina tions as to other schools which might not contest the right of the IRS to make a determination as to their status. Since appellants have a full and complete remedy without intervention, while intervention would prejudice the rights of the plaintiffs, the motion to intervene was properly denied. The existence of other means by which a late intervenor's rights can be determined is an important factor, closely related to the con cept of practical timeliness, by which the propriety of the 25/ The government moved to dismiss the action after the filing of the plaintiffs' motion for further relief (see Statement, supra, at 9), on the ground, inter alia, that plaintiffs lacked standing. The motion to dismiss was denied May 25, 1977. -31- denial of a motion to intervene is to be judged. See Hodgson v. United Mine Workers, supra, 153 U.S. App. D.C. at 418, 473 F.2d at 129-30; Brumfield v. Dodd, supra, 425 F. Supp. at 531. Indeed, in United States v. Marion County School Dist., 590 F.2d 146 (5th Cir. 1979) , the court considered the relative prejudice to the existing parties and the would-be intervenor to be a function of timeliness. In NAACP v. New York, supra, 413 U.S. at 368, the Supreme Court noted, as a factor supporting the denial of late intervention, that proposed intervenors were free to attack, in a separate suit, the redistricting plan, rejection of which was the main object of their proposed intervention. Here, the grant of intervention would hamper and delay the implementation of an order already too lone delayed. Since the proposed intervenors have a full and complete remedy if the IRS decides that the Day School is not entitled to tax exemption, a remedy which was in existence at the time it sought to intervene 2_6/ here, its late motion to intervene was properly denied. CONCLUSION The judgment of the District Court should be affirmed. 26/ Even if the Court should conclude that untimeliness is not established on this record, the matter should be remanded to the trial court for an evidentiary hearing on intervention, at which the extent of the wide publicity given in Mississippi to the pro ceedings in the Green case could be even more fully documented. Respectfully submitted, William L. Robinson Norman J. Chachkin Beatrice Rosenberg Lester Goldner Lawyers' Committee for Civil Rights Under Law 733 15th Street, N.W. Washinaton, D. C. 20005 (202) 628-6700 Frank R. Parker Lawyers' Committee for Civil Rights Under Law 720 Milner Building 210 South Lamar Street Jackson, Mississippi 39201 (601) 948-5400 Attorneys for Plaintiffs-Appellees CERTIFICATE OF SERVICE I hereby certify that, on this 3th day of October, 1980, I served two copies of the foregoing Brief for Plaintiffs- Appellees upon counsel for the other parties to this appeal, by depositing same in the United States mail, first-class postage prepaid, addressed as follows: Charles J. Steele, Esq. Whiteford, Hart, Carmody and Wilson 1828 L Street, N.W. Washington, D. C. 20036 William Bentley Ball, Esq. 511 North 2nd Street Post Office Box 1108 Harrisburg, Pennsylvania 17108 (1 copy) (1 copy) Michael L. Paup, Esq. Chief, Appellate Section Tax Division U.S. Department of Justice Washington, D. C. 20530 (2 copies) APPENDIX A APPENDIX A Rule 24 of the Federal Rules of Civil Procedure provides, in pertinent part: (a) Intervention of Right. Upon timely application anyone shall be permitted to inter vene in an action: . . . (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties. (b) Permissive Intervention. Upon timely application anyone may be permitted to intervene in an action: . . . (2) when an applicant's claim or defense and the main action have a question of law or fact in common. . . . In exercising its discretion the court shall con sider whether the intervention will unduly de lay or prejudice the adjudication of the rights of the original parties. . . . Section 7428 of the Internal Revenue Code of 1954, as amended in 1976 (90 Stat. 1717) and 1978 (92 Stat. 2924) pro vides, in pertinent part: (a) Creation of remedy. In a case of actual controversy involving — (1) a determination by the Secretary — (A) with respect to the initial qualification or continuing quali fication of an organization as an organization described in section 501(c)(3) which is exempt from tax under section 501(a) . . . upon the filing of an appropriate plead ing, the United States Tax Court, the United States Court of Claims, or the district court of the United States for the District of Columbia may make a declaration with respect to such initial qualification or -la- or continuing qualification . . . . For purposes of this section, a determination with respect to a con tinuing qualification or continuing classification includes any revoca tion of or other change in a quali fication or classification. (b) Limitations. (2) Exhaustion of administrative remedies. A declaratory judgment or decree under this section shall not be issued in any proceed ing unless the Tax Court, the Court of Claims, or the district court of the United States for the District of Columbia determines that the organization involved has exhausted ad ministrative remedies available to it within the Internal Revenue Service. . . . -lb- APPENDIX B Attachment 1 to MS (ll)6G-58 News a Internal R evenue S e rv ic e For Release: U : 00 PM ,ED'5 Fri . July 10, 1970 Tel. (202) WO 4-4021 IRS Announces Fosition on Private Schools Washington, D.C. — The Internal Revenue Service announced today that it has been concluded it can no longer legally justify allowing tax-exempt status to private schools which practice racial discrimination nor can it treat gift* to such schools as charitable deductions for income tax purposes. The Internal Revenue Service will proceed without delay to make favorable rulings of exemption immediately available to private schools announcing racially nondiscriminatory admissions policies and to deny the benefit of tax-exempt status and deductibility of contributions to racially discriminatory private schools. The Service said that favorable rulings given to private schools in the past will remain outstanding where the school is able to show that it has racially nondiscriminatory admissions policies. All private schools with favorable rulings outstanding will receive a written inquiry from the District Director of Internal Revenue and it is anticipated that in 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. Where a school fails to establish that it has a racially nondiscriminatory admissions policy, an outstanding ruling of exemption will be withdrawn. However, a school seeking to clarify or change its policies and practices will be given a reasonable opportunity to do so in order to retain its ruling of federal tax exemption. In any event, full opportunity to present evidence and be heard will be provided in accordance with usual revenue procedures and the right to appeal to the courts will be available. Similar principles will be followed in acting upon requests made by new schools for rulings. # # # U:00 PM, EDT 7/10/70 Manual Supplement O f f ic ia l U s e O n ly Attachment 2 to MS (ll)6G-58 News For RaieoMe SundayJuly 19, 1970 Internal Revenue Service W®sODflra@S®mo g®gg4} Tol. (202) WO 4-402X IR-1052 Washington, D. G. — The Internal Revenue Service today announced it has issued favorable rulings of exemption to six private schools that have an nounced racially nondiscriminatory admissions policies. The schools are located in five different southern states. The rulings were the first to be issued under the statement of position announced by the IRS on July 10 concerning the tax status of private schools. Other applications for exempt ruling^ pending at the time of the announcement, which meet the stated standards will be processed expeditiously, the IRS said. The IRS said the written inquiry on admissions policies to be sent to all private schools that currently hold favorable tax exemption rulings is now being developed. Inquiry letters are expected to be sent out by the 58 IRS district directors within a few weeks. The six schools to which new favorable rulings of exemption were issued had provided the IRS complete information that they had a racially nondiscri minatory admissions policy announced within their respective communities. The schools are: Nathanael Green Academy, Inc. Siloam, Georgia The Heritage School, Inc. Newnan, Georgia The Gaffney Day School Gaffney, South Carolina Desoto School, Inc. Helena, Arkansas Southeast Education, Inc. Dothan, Alabama Pamlico Community School Washington, North Carolina (More) Manual Supplement O f f ic ia l U s e O n ly Attachment 2— Cont. to MS (ll)6G-58 In response to questions it has received, the IRS also issued a more detailed explanation of its July 10 statement of position on the tax status of private schools. In that statement the IRS said, in the future, favorable rulings of tax exemption would be available where schools announced racially* nendiscriminatory admissions policies. The IRS said its July 10 statement does not affect a school's ordinary admissions policies which have no relation to race. The IRS specifically added that a school's ordinary academic standards will not be affected. The IRS explained that its July 10 statement is applicable to all pri vate schools throughout.the United States, except as limited by the order of a three judge Federal District Court in the District of Columbia, in Green v. Kennedy and Thrower. That court has ordered that rulings be issued in .Mississippi only under terms and conditions approved by the court. In its initial nationwide review of the present status of private schools, the IRS said that where a school has adopted and publicly announced a racially nor.discriminatory admissions policy, it will assume, in accord with normal procedures in requests for rulings, that such policy has been adopted and will be maintained in good faith. If subsequent examination by an IRS field office indicates that a school has not administered such a policy in good faith, the tax exempt status of the school will be challenged. The IRS also said that, should an existing ruling of a private school be revoked as the result of such a challenge, persons contributing to the school will be allowed to deduct contributions made prior to the date of the public announcement by the IRS of the revocation. This follows the usual IRS rules and procedures cn contributions. The IRS added that its statement of position on racially nondiscriminatory admissions policies would be applicable to all private schools, whether church related or not. Selectivity of students, as by a religious seminary, having no relation to racial discrimination would not be inconsistent with the IRS statement of position. . *§?•'' # # # 7/19/70 - 2 - Manual Supplement O f f ic ia l U s e O n ly APPENDIX C ____J IN IKE UNITED STATES DISTRICT COURT FCR THE DISTRICT OF COLUMBIA WILLIAM H. GREEN, et al., Plaintiffs >ri° v. DAVID M. KENNEDY, Secretary of the Treasury of the United States of Ameri and RANDOLPH W. THROWER, Commissioner of Internal Revenue, Defendants ca} Civil No. L. Action .355-69 AFFIDAVIT Randolph W. Thrower, Commissioner of Internal Revenue, being duly sworn deposes and says r I. After receiving copies of affidavits filed by the plaintiffs with, the Court on or about November 12, 1970, the Internal Revenue Service conducted an inquiry with respect to various allegations contained in such affidavits. Representatives cf the schools referred to in the affidavits were provided copies of such, affidavits and were given an opportunity to respond. The sane opportunity was provided to officials of Macon, Mississippi, referred to in one of plaintiffs1 affidavits. Thera are attached hereto, marked Exhibits A-l to 6, affidavits received from representatives of che following schools: A-l A-2 A-3 Central Holmes Academy, Lexington Affidavit dated December 7, 1970 of S. W. Hooker, J. 3. Yates and Frank A. Jones Copiah Educational Foundation, Hazelhurst .Affidavit dated December 5, 1970 of Hardy W. Graves Indianola Educational Foundation, Indianola .Affidavits dated December 7, 1970 of Glenn A. Cain, James C. Robertson and Henry Paris Latter from Richard M. Allan dated December 7, 1970 A-4 Lula-Rich Educational Foundation, Clarksdale Affidavit dated December 5, 1970 of Leon C. 3rasb!acc A-5 Noxubee Educational Foundation (Central Academy), Macon Affidavit •dated December 3, 1970 of Polk Farrar Affidavit dated December 4, 1970 of John L. Barrett Affidavit dated December 5, 1970 of Jesse ?. 3tennis "A-6 Quitman County Educational Foundation, '.-larks Affidavits dated Decemoer 4 and 5, 1970 of R. A. Carsot -Ac* i .4 rh<= al1 e^ations contained in the ? In response to tne . 10 7 0__~ ._ - , Tnhn w Hunter dated Novemoer 3, 1970,aftidavat or ^ - ^ t ^ r s concerning a meeting held on svbmitced 07 the plaint , ves 0f t’ne black and white January 13, 1970, between - ? the Internal Revenue Service coranrunities -n , ' * nxs, co interview the Mayor and Chief dispatched two “ niCf *fi3sipoi and the affiant, Rev. Hunter. Attac.hed*hereto is’a memorandum dated Dece^er 4,^1970j y ^ ^ 1* T “ ^7orV“ .d RicSLd Adaas, Chl.f : f ? S S so°-%i=o;; «***« »-*«* »-* «.?«=-u™w • Ho further inquiry was made with respect to Saints^ - ̂ ,nd Literary School, Lexington, Decause piaint^-sindustrial an- W .a s ny ^ oroQOSed conCinuance or ecvar.ce raises no objection Co C .. p Schools, Crenshaw,assurance co that school,or to Nortn uei ffidavl-s. because it was net mentioned in plair.ti— s 4 Based upon the roregeing, a..d the yar-ner . • , a^-idavit dated Octooer 14, 197-, wnac-set torth chis court, the affiant reaffirms the v“ S t a i «o reason co £*«,f * oTornSlrindnacion adopced « 4 inscicncions vas noc adopted o . ^ i=s dace— ina- good faith, and thererore, -- - Jeduc.-dbilitv of contributions cion that the advance « « « “ £• ^ f ^ u i d S he susoer.dad made to the above-stated astiw- . h h field examinationbut should be approved subje-t to a t^o-ougn Revenue which will be «ad. Jr 13 months as statedService at some time during c.-e in the affidavit of October 14, s.9/0. 5 During the course of the inquiry_by -he _ntê .. Revenue Service described abov^ inrormation^e attention rrem sources -ecul-ing clarification with respect which raisec questions -equ^-ingf internal Revenueto the Deer Creek Educational ?nst - a i-e_i ‘• ^ a V - h S S S S advance assurance c fC deduc rib ill ty for this school will depend upon the resu-s of this inquiry. „u„ ,-vf --#> affidavit of Octooer 1-*,6. Subsequent to the date o£ -•* a_---ica3 of 1 9 -TQ ---e Internal Revenue Service, -hrou*., -ts os --i*/U, utr^rs to approximately o,Juu l-3Crlc= ^ reic°^thi- the Uni-ad States which had previously orivate senoo-s witnii- ca __ - -n,e ia-car asas received favorable rulings o -_ , . policies of admissioneach school to state whether or not it* polio esc-discriminatory or nondiscriminatory and, -f the -a.---, are aiscru— n 3^7 that the policy is xnowr. co -he puolic.submit evidence showing chat -ne ^ J 10,000 t- is estimated that tnere are, m addit-on more > private schools which are coverec =7 group rul-ngs^ -s_ ^ - a rul_ng »i'—1 __ f i r m i s beinz obtainec as -oprivate schools. Simi-ar s“dools. The advance assurance the admissions pol-<--3 - *-vnrable ’-ulin^s will oeof deductibility proviced by these -tvoraole_rul;ngs^^^_ withdrawn for any school rail-ng -o 3 -3,0- APPENDIX D / in t h e u n i t e d s t a t e s d i s t r i c t c o u r t FOR THE DISTRICT OF COLUMBIA WILLIAM H. GREEN, at al. Plaintiffs CIVIL ACTION NO v 1355-69 Judge Waddy JOHN B. CONNALLY, et al Defendants MOTION FOR AN ORDER SUBSTITUTING PARTIES DEFENDANT, TO ENFORCE DECREE AND FOR FURTHER DECLARATORY AND INJUNCTIVE RELIEF Plaintiffs move che Court, pursuant to Rule 25(d)(1), Fed. R.Civ.P., to enter an order substituting William Simon and Donald C. Alexander for the previously named defendants herein. Plaintiffs additionally move the Court, pursuant to 23 U.S.C. §52201 and 2202 and Rules 34(c) and 63(d), Fed.R.Civ.P., for an order enforcing the prior judgment herein and for further -e lief, as specified in the prayer to this motion. In support of this motion, plaintiffs show as follows: 1. Plaintiffs, black taxpayers and their minor children attending Mississippi public schools, commenced this class action by complaint filed May 21, 1969 seeking declaratory and injunc tive relief against the Secretary of the Treasury and the com missioner of Internal Revenue with respect to granting tax-exempt status to racially discriminatory private schools in Mississippi. 2. By opinion and order entered January 12, 1970, tne three-judge Court preliminarily enjoined the Secretary and the Commissioner from according tax-exempt status to any Mississippi private school that "is . . . a part of a system of private 2 schools operated on a racially segregated basis as an alterna tive to white students seeking to avoid desegregated public schools." Green v. Kennedy, 3C9 F. Supp. 1127, 1140 i.D.D.C. X9 7 0), appeal dismissed sub nom. Cannon v. Green, 398 U.S. 956 (1970), appeal from subsequent orders dismissed sub nom. Coit v. Green, 400 U.S. 986 (1971). 3. On June 30, 1971, the three-judge Co-art entered a deci sion on the merits and an order? (1) declaring that tax exemptions for, and deductions for contributions to, racially discriminatory educational organizations are impermissible under §§501(c)(3) and 170(a)-(c) of the Internal Revenue Code of 1954, and (2) permanently enjoining the Secretary and the Commissioner to ad here to specified procedures designed to ensure that tax-exempt status would not be accorded to such racially discriminatory educational organizations and that tax-exempt status previously accorded such organizations would be terminated. Green v. Connally, 330 ?. Supp. 1150, 1179-30 (D.D.C.), aff'd sub torn. ------- 1/ Coit v. Green, 404 U.S. 997 (1971) . With respect to nine specific Mississippi private schools which IRS had accorded tax- exempt status, the Court declined to grant injunctive relief be cause of the sworn assurances of the Commissioner, which the Court received "as a good faith representation that will be honored," that the IRS would conduct audit examinations of those nine schools within 18 months of October 14, 1970 and, as to such schools, would "take into consideration ail factors raised in the present litigation as well as any material matters raided i/ Subsequent developments in the law of three-judge courts in- dicate that this Court's nonconstitutional decision and order of June 30, 1971 should have been made and entered by a single ?udge. See Hacans v. lavine, 415 U.S. 528, 543 -45 (1974) ; Phi1brook v. Glodaett, 421 U.S. 707, 712-13 n. 8 (1975). 3 in the future." See 330 F. Supp. at 1176 n. 53 and accompany ing text; October 14, 1970 Affidavit of Randolph W. Thrower, 3 1 1 . The nine schools subject to this commitment were the following (Thrower Affidavit, q 7): Central Holmes Academy Copiah Educational Foundation Deer Creek Education Institution Indianoia Educational Foundation Lula-Rich Educational Foundation North Delta Schools Noxubee Educational Foundation Quitman County Educational Foundation Saints Industrial & Literary School 4. On June 25, 1973 the Supreme Court decided Norwood v. Harrison, 413 O.S., 455 (1973), holding that Mississippi-owned textbooks could not constitutionally be loaned to racially dis criminatory private schools. On remand from the Supreme Court, c^tef District Judge Ready established a certirication proce dure and engaged in a school-by-school examination to determine whether each Mississippi private school was a racially discrim inatory institution and thereby ineligible fcr state-loaned textbooks. Norwood v. Harrison, 382 F. Supp. 921 (M.D. Miss. 1974). 5. Pursuant to the certification procedure ar.d school-by school examination conducted in Norwood, counsel for plaintiffs learned that a number of racially discriminatory private schools in Mississippi, including some of the nine schools referred to in i 3 above, had been accorded tax-exempt status, or had not had their tax exemptions revoked, by IRS. By letters dated March 11, 1974 and July 17, 1974 (Exhibits 1 and 2, respectively, hereto) counsel for plaintiffs brought these matters to deren- dants' attention, as did counsel fcr the Norwood plaintiffs by letter dated April 19, 1974 (Exhibit 3 hereto). Plaintiffs' counsel identified the following 12 private schools as having 3a - 4 - __ _ 1 r- . , - L ■: ^ J tax-exeir.pt status notwithstanding the Norwood determination that they were ineligible for state-loaned textbooks: Columbia Academy Copiah Educational Foundation, Inc. Deer Creek Educational Institute, Inc. Clinton Educational Foundation, Inc. Marshall County Educational Founda tion, Inc. Lucedale Education Foundation, Inc. Lula-Rich Educational Foundation, Inc. Indianola Educational Foundation, Inc. Killcrest (Baptist) Academy West Panola Schools, Inc. North Delta School, Inc. Quitman County Educational Founda tion, Inc. (County Day School) Six of these schools are among the nine schools subject to IRS' 1370 commitment to audit within IS months and to re-examine in response to future information (see *! 3 above). Defendants re plied to counsel for plaintiffs herein by pro forma letter dated August 16. 1974, stating: "While we cannot reveal spe cific actions concerning the individual schools involved, we assure you that your information is being considered." (Ex hibit 4 hereto.) 6. During this time plaintiffs' counsel also, by letter dared April 15, 1974 (Exhibit 5 hereto), requested a meeting with defendants and their representatives for the purpose of attempting to work out a mutually agreeable procedure, without further formal proceedings herein, for implementing this Court’s 1971 decree in light of the developments in Norwood■ Defendants responded affirmatively by letter of May 17, 1974 (Exhibit 6 hereto), indicating that they were looking into these matters and were re-examining their practices in light of Norwood. 7. In June 1974 counsel for plaintiffs herein and counsel for the Norwood plaintiffs met with representatives of the Civil Rights Division of the Department of Justice for the purpose 5 . 4rV - r-» i of recommending appropriate standards to govern tax-exemptions and tax-deductibility determinations vis-a-vis private schools. 3. On December 13, 1974 plaintiffs' counsel again met with IRS and Civil Rights Division representatives to request, among ether things, that defendants promptly terminate the tax- exempt status of the previously-identified Mississippi private schools which the Norwood court had judicially determined to be ineligible for stnte-lcaned textbooks. Defendants responded, inter alia, by s-ating that they were devising a new Revenue Pro cedure co deal with the problem on a nationwide basis, and that, notwithstanding this Court’s decree, they did not wish to take any action against Mississippi private schools until the new pro cedure was finalized. (New regulations were finally issued on November 18, 1975, 40 Fed. Reg. 53409.) 9. Between December 1974 and January 1976 plaintiffs re ceived no information indicating what action, if any, defendants had taken with respect to the Mississippi private schools in question. By letter dated January 21, 1976 (Exhibit 7 hereto), plaintiffs' counsel requested to be informed of defendants' ac tion on plaintiffs' numerous prior requests. By letter of Feb ruary 6, 1975 (Exhibit 3 hereto), defendants responded, stating that one of the subject schools had failed to establish tax-exempt status, that one school had ceased operations, that one school did not exist according to defendants' records, and that one school continued to enjoy tax-exempt status. As to six other schools, including some of tne nine schools referred tc in 1 3 above, defendants stated that such schools had been "contacted.” Moreover, and notwithstanding this Court's decree, defendants stated: “The suspension of advance assurance issue is presently before the National Office of the Service." (Plaintiffs have heard nothing further, and have received no additional information, from defendants.) <cs■■J •"S J • • . ' - '5 - ■ ' : iO Defendants have 1 treated "bosh’the letter and the spirit of this Court's 1971 decree with conteir.pt. They have appar ently not even lived up to their sworn commitment to this Court to investigate nine specific Mississippi private schools (see 1 3, supra); and their new regulations are net adequate tc comply with the law of this case. Defendants have, in short, substituted their will, their judgment and their preferences for the binding judgment of this Court. The need for a specific detailed permanent injunction is apparent. 11. The need for further relief is also apparent. The inadequacy of the present decree and the procedures being em ployed by IRS is illustrated by defendant's treatment of the County Day School (Quitman County Educational Foundation, Inc.) which has been and continues to be tax exempt. This is one of the nine schools subject tc defendants' 1970 commitment (*! 3, supra) , and it is one of tne 12 schools aoout which po.ainwi.fs have Complained to defendants'over the'past 'two years. Not withstanding the tax-exempt status accorded this school by IRS, the Norwood Court determined it to be ineligible for state- loaned textbooks (see 3 82 F. Supp. at 923-2 9) . The Ncrweed court found (id. at 929): In this case, where it appears that an open admissions policy was obviously stated per functorily, at isolated intervals, and only to obtain tax advantages, we are unconvinced that the school has a position other than one taken to procure the benefits but without sacrificing the goal of white segegated edu cation. The prior decree of this Court must thus be broadened as it has proved inadequate to accomplish the broad purpose of prohibit ing tax exemptions to racially discriminatory educational or ganizations. WHEREFORE, for the foregoing reasons, this Court to set this matter for hearing convenience and, upon such hearing, to * y N plaintiffs pray at the Court's early (a) Enter an order substituting William Simon and Donald C. Alexander as defendants herein; (b) Enter a supplemental declaratory judgment pursuant to 23 u.S.C. §§2201 and 2202 that defendants are bound by adversary judicial and administrative determinations with respect to the racial policies and practices of Mississippi educational organiza tions which have or which seek tax-exempt status pursuant to §§501(0(3) and 170(a)-(c) of the Internal Revenue Code; (c) Enter a detailed, permanent decree (with the details to be determined upon the hearing of this motion), modifying and superseding the Court's prior decree, enjoining derendants frcm according tax-exempt status to, ana from continuing the tax-exempt status r.ow enjoyea oy, all Miosissip-i pr*va-e schools or the organizations'which operate them, which: (1 ) have been determined in adversary judi cial or administrative proceedings to be racially discriminatory; or (2 ) which have insubstantial minority enroll ments, which are located in or serve desegre gating public school districts, and which either (i) were established or expanded at or about the time the public school districts in which they are located or which they serve were desegregating, or (ii) cannot demonstrate that they do not provide racially segregated educational opportunities for white children avoiding attendance in desegregating public school systems. ROBERT A. MURPHY WILLIAM S. CALDWELL NORMAN J. CHACHKIN Lawyers' Committee for Civil Under Law Suite 520, 733 15th Street, N.W. Washington, D.C. 20005 Attorneys for Plaintiffs Dated: July «?3, 1976. J . : \ \ \ \ v :• ••• >' •’ y. r s c tii I’VDl’V Vv* f * s i r w c r p. 2 ̂t « JACKSON. MiSSIS-SVPf3 r> Vi O N F. (KOI) 2 Raich l-T ,• j 5 / ̂ Mr. Donald Alexander Commissioner of Internal Revenue n. 3 . Internal Revenue Service Washington, D. C. 20214 Ra: Enforcement of Injunction, Green r\- -ti =>1 1 v 330 F. Sup?. USo'tD.D.C. 1371!, affd, <04 u.s. 997. { fi vH 1 Nc„ A . ,7' — * ■ *— 13 5 5-JaI Da ar M r . %A1 axancer: 4-0 rail vour attention to recent developments i. am V, itx-.Cj to -all (19 72), on remand, Civil No. j !?: & cU . h o U l W thit State if Mississippi nay net loan p^lic te:tttooKS ^ ^ " ' r e o l . t atter,ding racially 4i»en®inatesi -t/ice to revolte anddevelopnenrs require tne ^ ^ - a x ^ e v e n a e .Mississippi 4-orTnin aJ'p tne tax exempt status o- - vpreviously recognized as exempt, and to disallow deauc-io.3 - contributions to such schools. In Norwood the Supreme Court c rdered that a certification r~cc*u-o -ya"e¥cablished to determine th. , . - .î rwct— — - . qu’in’ i-d textocoxs . anuMississippi private schools cor o at« «uyp— ...u .established that rulings under this procecuif o e s 0 0,0 0, -iudi^ai review. The standards or eligibility — — — L-' ^ eligibility of c-.r.-ono rp'ivr v®re made with full knowledge of the cri w£h.a N N A I s I I D b y t £ e c o u r t i n ^ G r e ^ * “ “ “ U*7p̂ er-- standards. Hence it follows that if a^choo^has been^ determined to be ineligible f o r _ t e x t b c o r s nier -- application of the same standards it should intx-^ tax benefits under Green. A cte- Chief 'J. S. District Judge William C. Keany es tab linnet the certification criteria in Norwood on o„^ Mississippi private schools failed to ap^iy ~fw jl under the'non-discriminatory standards -and/or J u e supplied textbooks in their possession. /uf‘* . * a^ s3;0r: concession that thev do net have a non-aucr-unarf - ̂ ^ V-- -v“and that thev would fail to meet certification s.anoa-u.,. Schools which are shill recognized as ta:t ere^.p. oy - 5 -4t ..7;v:ch 4n effect have conceded discrimination in ho..wcoc a— . EXH IBIT 1 Mr. Donald Ale!^v)der Commassioner oiT'intemal Revenue Page 2 March 11, 1974 Columbia Academy (did not apply ror certincation) ?. 0. Box 189 Columbia, Ms. 39429 Cooiah Educational Foundation, Inc. (returned booxs} 317 Gallatin Street Hazelhurst, Ms. 39033 Deer Creek Educational Institute, Inc. (returned book-0 Hollandale, Ms. 38743 Educational Foundation, Inc., 106 East Cynthia Road Clinton, Ms. 39205 Educational Foundation, Inc., Holly Springs, Ms. 38635 of Clinton (did not apply; of Marshall County (did not apply Education Foundation, Inc., of Lucedale (dad not apply) P. 0. Box 65 Lucedale, Ms. 39452 Lula Rich Educational Foundation, Inc. (returned books) (Lula Rich Academy) F. 0. Bex 338 Lula, Ms. 38644 tax thei Accordingly, the eligibility of deductible contributions should r exempt status revoked. these institutions to receive be immediately suspended, and In other instances, certain schools applied ror certification to receive state textbooks, but after objections were filed b y ^ counsel for the plaintiffs, in effect conceceu discrim-na ^ an order was entered by Judge Ready vacating their certuica^or. ard o^de^ing them to return their state textbooks. A copy Oi Judge*"Ready^s Order of March 1, 19 74 is enclosed. These schools are : Indianola Educational Foundation, Inc. 305 East Gresham Street Indianola, Ms. 38751 (presently recognized as tax exempt) Hillcrest (Baptist) A.cademy Route 1 Senatobia, Ms. (presently recognized as tax exemot under the umbrella exemp tion* of the Baptist Church) West Panola Schools, Inc. Box 713 Eatesville, Ms. 38606 (application for tax exempt status currently pending before IRS) — f 0 ci ■— Mr. Donald Aic^)nder Commissioner of Internal Revenue 'Page ■ 3 • • ■ - * ' : March 1 1 , 19 74 f ...... ,• • Aftax a hearing-.civ- plaintiffs ' objections , an additional -. .... . . school,' currently, recognized by IRS, as., tax. exempt,, vo _ed_ to returo its"te;ttfccoks7 latter frb’i Viliam f ' Corr, ' Jr .attorney for the North Delta School, Inc., to District Judge Wxl.icir, C. Ready, March 4, 1974 (copy enclosed). This school is: North Delta School, Inc. P. 0. Box D Crenshaw, Ms. 38621 - Accordingly, the eligibility of these four schools to receive d deductible contributions should be immediately suspended, and their tax exempt status revoked. One school, which currently is recognized as tax exempt, has'been certified, but its eligibility has been objected to and a contest to its eligibility currently is pending be-ore Judge Ready. This school is: Quitman County Educational Foundation, Inc. P. 0. Box 56 Marks, Mississippi 33646 ■m-i ■; s corporation operates the "County Day School" in Marks , Mississippi, and was one of the original segregation academies in the state, having, opened its 'doors simultaneously wi xi tie - desegregation of the Quitman County public schools coun^_ Day School was cited as a segregationist acacemy by tne Districu rrxr" in Coffev v. State Educational Finance Ccmm s,uP-r ‘, 13 89 , 1393 '(STD. Mu s s . 1959")". Its xcuncers have oeen aligns^ wi.n, and attended meetings sponsored by, the Citizens Council, â uhi^ segregationist organization. All students, faculty members, fcSSIrs, and board members are, and have been since inception, white. I understand that forms filed with the iRo omit po maxcat- whether the school has ever formally adopted a written °?®n - admissions policy (see Question 15(a) of Certification anc Bac..grc 1 - Information Form and attachments tnerstc). Pending Judge Ready's ruling, the eligibility of the Quitmari County Educational Foundation, Inc., to receive tax deductible contributions should be suspended. I wil_ notify you of Juage •Readv's ruling when it comes down. As counsel for the plaintiffs in Greer., I am. concerned that the procedures of IRS for ruling on the tax exempt status o_ private schools in Mississippi appear to^ne mere permissive =nd more lax than the judicial standards applied oy tne j . =>. Court for the Northern District or Mississippi. _The evidence in Non-rood suggests that schools have been certified by IRS as eligible for tax exempt status and tax decuctioxe contribution On ~ [ \ d - Mr. Donald Alexander Commissioner of Internal Revenue Page - 4 ■ •. March’11# 19 74 as the basis of professed open admissions policies wnen in j.act they have been formed and operaue as racially segregated institutions designed to provide an alternative to public integrated education. These tax exempt schools in erfê -u. have"admitted their true colors when they voluntarily have returned their state textbooks and do not contest objector.^ to their certification to receive such textbooks. Given these developments, I request that IBS review its certification and auditing procedures and me<e such changes are necessary ro tighten its standards. Perhaps a public ^ adversarv administrative hearing, in which the private scnool nas the burden of proof, and with notice permitting public participa tior. or judicial review of IBS decisions, may be required uO close this present tax loophole._ As to these tax exempt schools which virtually have admiuued discrimination in Norwood", you may want to determine whether . criminal prosecutions are warranted. Since these matters nay involve the continuing jurisdiction of the~*District Court in Green regarding enforcement of its _ decree, I would appreciate a response from you to this additional information, indicating what action you have taken with regard to each of these identified segregated private schools, and whan changes in your procedures you have adopted to insure^ tdia u private schools which profess a non-discriminatory poxicy c u ^ ^ which are in fact discriminatory do not receive the tax oenent- which have been granted, but to which they are not in ract entitled under the Green decision. Thank you very much for your consideration of my requests. Yours very truly, Frank R. Parker FRP:1jh Enclosures cc: Meiwn R. Leventhal, Esq. Clerk, U.S. District Court for the District of Columbia Assistant Attorney General, Tax Division, U.S. Department of Justice Staff Director, U.S. Commission on Civil Rights C D C O R R A N D CARLSON ATTOPNEVB AT LAW P. O. BOX ABO S A F t O i d . N ' I S S f S B I P P ! a f J « 3 t J G .. . qiftois < «-Q4 > . 417. 2»2f • BATRSViUV-f ';.eo; > r«2.£53ii W'L'Jam a. rcnn..jR. GEonCE c.- 'tAhtaoN. wh.. ■March /i ■'0 7 4 ■ - c \ D 1 c t c t a d Ms '*■ "5*»ai t«ii ̂ , 1974) lr, * ►A j* r , i •. r*; t. 0 •a / 4 >* «J« LATA C. UGHTSEY f D )IT Judge William C. Keady United States District Court P. 0. Drawer 190 Greenville, Mississippi 38701 'Re: Norwood vs. Harrison No. WC 70-5 3 - K * * Dear Judge Keady: The Board of Directors of North Delta School, Inc. met this morning and unanimously voted to return to the State of Mississippi all State owned textbooks presently in the possession of the school and children attending the school. Arrangements have been made with the Superin tendent of Education of Panola County to return the State owned books Wednesday, March 6, 1974. A copy of the tex t book inventory of the return books will be filed with.the clerk of the Court in Oxford and copies mailed to you and Mr, Leventhal. I appreciate the courtesies extended to mo and my clients by you, the Court officials and by Mr. Leventhal. Very truly yours , William E. Corr , J r . WECimtf cc: Mr. Melvyn Leventbal^/^ Mr. Bill Slssell - County Superintendent of Education Mr. Lawrence Meeks Mr. Otis Jenkins Mr. Bill A11 a 1n i - l i d - IN .THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF MISSISSIPPI WESTERN DIVISION DELORES NORWOOD, ET AL, Plaintiffs V. NO. WC 70-53-K ». L. HARRISON, SR., ET AL, Defendants ORDER y It appearing that Indianola Academy, Hillcreot Academy and West Panola Schools, Inc., three of the private schools against whom plaintiffs have filed objections as to eligibility for the receipt of free state-owned textbooks, have represented that they do not desire to contest the appeals and are deliver ing to the state all state-owned textbooks in their possession or under their control; it is ORDERED That the certification of eligibility heretofore granted by the Mississippi Textbook Purchasing Board be set aside ana rescinded and the state-owned textbooks in the possession or under the control of the three said schools be, not later than March 8, 1974, delivered to agents,of said Board. This, 1st day of March, 1974. C .n—A'-*— ̂ • ‘-1 Chief Judge United States District Court / l L A - o * J ' »__j _sJLĴ <2. { &&*- •fc'C /}M4y£&*̂&£a LAW YERS' COMM!'r TEE F O R C I V I L K I G H T G L N' DER L AW SOUTH P A R I S H S T R E E T JACKSON M I S 3 I S S i P 3 2 0 1 S ( s o 9 4 8-040 a ’ July 17, 1974 Honorable Donald C. Alexander Commissioner of Internal Revenue U. S. Internal Revenue Service Washington, D. C. 20224 Re: Green v. Connally Dear Mr. Alexander: I am writing to follow up my letter to you of_March 11, 1974, regarding the IRS enforcement of the injunction entered in Green v. Connally, and to inform you of subsequent de velopments in Norwood v. Harrison, the Mississippi case en joining state textbook assistance to segregated private schools. District Judge William C. Keady on July 1a., 19 /■*, issued his ruling in Norwood and specifically found that four private schools in Mississippi, the Svlva Bay Academy (formerly Sylva- rena Academy), Bay Springs, Jasper County, Mississippi, the U1 A C1 rWest Tallahatchie Academy, Tutwiler, Tallanatcnie Mississippi, South Haven Menncnite School, Prairie roint, Noxubee County, Macon, Mississippi, and the Quitman County _ Educational Foundation (County Day School), Marks, Mississippi, were racially searegated private schools with racially discrim inatory admissions policies formed to perpetuate white, segre-^ 'gated education. Of these four, the Quitman County Educational Foundation currently has tax exempt status. However, the_South Haven Mennonite School indicated m its textbook application form that it is in the process of being included umbrella exemption provided the Church of God in nonite Church (Opinion, Exhibit "3", p. 1). within the Christ Men- Honoirabi.e Donald. C. Alexander-.. 'July' 17/19-74. ' • Page 2 • 'Judge Keady- noted 'that the fact that the Quitman County Educational Foundation had been certified by IRS as eligible fcr tax benefits was not determinative of the question or its admissions policy, holding: "Recognition by Internal Revenue Service that a school is entitled to tax exempt status and its donors may have their gifts deducted for income tax purposes is, of course, seme indication that a school has an open admissions policy, but it is not alone determinative. In this case, where it appears chat an open admissions policy was obviously stated perfunctorily, at isolated intervals, and only to obtain tax advantages, we are unconvinced that the school has a position ocher than one taken to procure tax benefits but without sacri ficing the goal of white, segregated education. We conclude that the absence of substantial, convincing evidence presented by the Quitman County Educational Foundation to offset its history of segregation re quires us to hold that it fails to qualify for state textbooks." (Opinion, p. 14) This judicial determination that the Quitman County Edu cational Foundation continues to pursue the goal of white, segregated education, plus the failure or four other schools to challenge objections to their eligibility to receive state textbooks ""(Indianola .Academy, a/k/a Indianola Educational Foundation, Inc.; Hillcrest Academy; West Panola School; and North Delta School) (Norwood Opinion, p. 28) clearly raises "serious doubt concerning uhe continued qualification of [these organisations] to receive deductible contributions," which should require IRS to suspend the advance assurance of ductitility of contributions to these five schools pursuant t Rev. Proc. 68-17, Sec. 4.05. ce- I have been informed that .IRS is currently reviewing its oolicies and procedures relative to its enforcement or its policy to deny tax exempt status and deductibility of contri butions to schools with discriminatory admissions policies. However, the clear evidence of the discriminatory admissions policies of these five schools provided in the July 12 Norwcod decision indicates at least that suspension of advance as surance of deductibility of contributions regarding these five schools need not await this policy review, but should be t-j. Honorable Dcnal.d- C* .Alexander, uly.17, 1974 age 3'. effectuated "ilmediately -to 'Implement' presently existing - . • ____j___ — ____j-u v-■; = r'.-f +-}Ka cir-opn v. Connail y ineirpolicies and to insure the tights cf tne ~sn y - __ Diaintiff class. In Mississippi, many schools begin school year in August, and it is important that immediate_ action be taken prior to the opening of these scnoois to in sure that whatever action IRS may ultimately take regarding the eligibility of these schools will be effective. I am enclosing copies of the decision and order recently handed down in the Nor-wood case. Please inform me at your earliest convenience or IRS action taken with regard to these five schools. I hope to receive a response from you within 30 days. Again, thank you for your early consideration of and attention to this urgent matter. Yours very truly, Frank R. Parker FRP:eg cc: Melvyn R. Leventhal, Esquire Assistant Attorney General, Tax Division, U. S. Department of Justice Brian Landsberg, Section Chief, education Section, Civil Rights Division, U.S. Department of Justice J. Harold Flannery, Director Lawyers’ Committee for-Civil Rights Under Law - H A - A n d e r s o n , Ba n k s , N ic h o l s &. l e v e n t h a l Attorneys at Law B3a'/1 north parish STREET JACKSON. MISSISatRRf 39303 f J U R C U R C N v . A N O E R R O N T R E O L . R A N K S . J R . J O H N A . N IC H O L S M C L V Y N R . L E V E N T H A L N A U R E A O R T E W A R T April 19, 1974 P O S T O F F IC E D R A W E R 290 A R E A C O O E 6Q 1 9A 8-7301 Mr, Donald Alexander Commissioner of Internal Revenue United States Internal Revenue Service Washington, D. C. 20224 Re* Green v. Conallv & Norwood v. Harrison, ' 37 L,Eel. xd m t & T T ) Tax exemption for Mississippi segregationist academies Dear Mr. Alexander: I have Mr. Flannery's letter to you of April 15, 1974. Perspective on the question before us (the adequacy of_pres ent Srtification a2d auditing standards) is best obtained ̂ through an examination of the Indianola Academy. I enclose. 1 A copy of the certification and background in formation’ form completed by the Academy ^response to Judge Kpadv's order on remand in Norwood v. Harrison. it demon traces that the school is all white both aTTo students and faculty, and was formed and enlarged at^critical moments m the hi story of public school desegregation m Inaianola. This f o m was filed with the Mississippi Textocok Board and the Academy certified as eligible for textbook assistance. Thereafter, I filed in the district court, in behalr or plain tiffs a motion to deny textbook assistance. Upon the filing of objections the Indianola Academy witndrew its- request for ?ex?biok assistance and returned its inventory to state de positories. 2 A copy of page IS of my Norwood briei. ̂ in the ^un-eme Court. This excerpt provides a capsule history or desegregation events in Indialoia and the role or the Acadeoix in frustrating public school desegregation. Notwithstanding the overwhelming evidence that the Indianola Academy is a slgregationist institution your agency has de termined to approve it for tax-exempt status. This nas been EXHIBIT 3 IJ ■Mr..-Donald - Alexander April 19, 1974 Page 2 thS wake of public.school desegrega^on ^ e r the F « k s s ^ - s ^ s sstgs t£vice adoption of an open admissions pol-cy and i P lication in a local newspaper. I remind you that the Indianola Academy is but one example in a category of schools approved by your a g e n c y and is viewed ablvFto illuminate the issues not exhaust the sub j ect. I look forward to discussions with.you and representatives of the Green plaintiffs. MRLimsc Enclosures cc: J. Harold Flannery, Esquire J. Stanley Pottinger, Esquire Brian K. Landsberg, Esquire Frank R. Parker, Esquire - „ 5 nf rnurse the Indianola Academy is a member of t.-= Athletic^Conference. ̂ Not^a^singie^blac^peEson^is involved in any activity or program of these organizations. schedule in a post season game. .. £itn L Acacemy Prince Edward Academy of Farmville, M r g i m a . m e a y principal was then quoted as follows. Mr. Donald Alexander April 1 9 JL9-74. . .• >;.: .Page 3 ; Very close ties exist between these two schools and this event should be the highlight o: our athletic year. Several local citizens visited Farmville prior to the founding of the Academy to observe their operation and to secure information the Virginians had gained from their experience in building a school. These contacts have been kept and there have been several exchange visits - A o J ' 18 enrollments of 597 and 426 white students respectively- virtually the entire white student population of the school district. (Henderson Deposition, Exhibit 9 ; Chart, Interdependence of Public School Desegregation and Formation and Growth of Private Academies; Nowell Deposition, pp. 5-6; Home Deposition, p. 5.) The Amite County Private School houses grade one in the local Mormon Church, grades two and three in the Methodist and Presbyterian Churches, grades four and five in the “Old Baptist Parsonage,” and grades seven through 12 in the Baptist Church. 5. Indianola Municipal Separate School District Indianola Academy, serving grades 1-2 and enrolling 79 pupils, opened in September, 1965 concurrently with integration of grades 1-4 of the public schools under freedom of choice. As additional grades of the public schools were desegregated the academy added grades to its curriculum and students to its rolls so that by September, 1969, it housed 578 students in grades 1-12. During the first semester of the 1969-70 school year the public school district enrolled 991 white students. However, in February, 1970, the district was required to implement a terminal plan of pupil assignment pursuant to Green and Alexander; and at that precise moment all white students and 30 white teachers of the district withdrew to the security of the segregated Indianola Academy. Accordingly, the Indianola Academy s enroll ment surged from 578 white students in December, 1969 to 1,504 such students by February 9, 1970. (Cain Deposition, pp. 5. 9; Floyd Deposition, p. 13; Henderson Deposition. Exhibit 9: Chart, Interdependence of Public School Desegregation and the Growth of Private Academies.) 19 6. Grenada Municipal Separate School District The failure of HEW to obtain voluntary desegregation of the Grenada public schools (luring the 1965-66 and 1966-67 school year resulted in the termination of all federal financial support for this district as of September 22, 1966. However, a court order was subsequently entered requiring freedom of choice desegregation for grades 1-12 effective September, 1967. Enter the Kirk Academy, in September, 1967, serving grades 1-12 and enrolling 133 students. This academy grew to an enroll ment of 412 white students by September of 1969, to 511 by February of 1970, and to 639 by September, 1970. 1 Effective March 1, 1970, the public school district was - required to implement a terminal plan of pupil y assignment. On the same day a second private academy, Grenada Lake Academy, opened in an abandoned public school building for 180 white students formerly enrolled in Grenada public schools. (Jaudon Deposition, pp. 3, 5.) The histories reviewed above are not exceptional. The pattern-public school desegregation followed by the withdrawal of a substantial number of white students to private academies and the rcsegregation of public schools—was repeated in school district after school district throughout the state. III. THE STATE’S TEXTBOOK PROGRAM A. The Program Generally Sections 6634-6659.5 of the Miss. Code of 1Q42 (Appendix B, Jurisdictional Statement) piuvide the framework for the selection, purchase and distribution of roES THE SCU 0 MAINTAIN EDUCATIONAL STT JMDS ESTABLISHED S li?STATE DEPAR^F-NT'or EDUCATION? ...r- A — - t •• ' — \'A&sa^snx?s ^ c w u r i P S - A T ^ O T c y / ^ ^ . SCHOOL? No — _ — -— — --;— ;— — -------- ' ' . ,.f Y eS state the ttaber. or such s c h o l a r s h i p s , offered during - " ■ ̂ ri^-73-. school yeair toiv a);.; whi.t̂ : students : , • •.— >•• , -• and.-is).:bia-cx.students— .. ■,-.■>•;.•♦•• ; .; • . • v M SCHOLARSHIPS AWARDED BV PRIVATE INDIVIDUALS TO STUDENTS OF YOUR SCHOOL? YES __----. N ------- ,u=h scholarship aaaiata„=a Ouri» ’ t. 3t,dents _____ a> black students----------- ■* HAS ANY TUITION W E THE SCHOOL BEEN WAIVED? _ J ° ------------ If yes, then state the number of students. by .^ 9 , _ a-uo. 1Q72-73 school year: wnireauch waiver during the 1972 s ^ students ______ ____ students n/a _j.---------311 ■ s sjsrjsr.ssfjrxsss 3 tc _ If yes, state the number of such students for the 1972-73 school year __2/2------ *. DOES THE SCHOOL HAVE A WRITTEN AFFIRMATIVE POLICE OF ADNXTTINO STUDENTS IRRESPECTIVE OF RACE.------ ------ - “ - mat ~,iicv and state the date of itsIf yes, attach a copy of that pol ■ Y ̂ 9/7/71______adoption by the governing board or th ... • j tv;c toi u-v in a manner that is >• w a s ? . . - ...■ it- to the attention o- persons. - - i, _ .. non— 4 fr> «r ~wnites? ________ * - w.fainmies or printedin all newspapers, brochures, -v,,, time the schooladvertisements appearing or prepared at the was first opened and aunng the pas. scho V c. Has any member of the school’s % S 5 S , * S T ^ 2 . S T « " ^ — — — Mo------ ---- ------------------------- 16. s t a t e toe NAMES AND ADDRESSES AND RACE OF THE SCHOOL'S: a) Incorporators: j. A. n v. Jr.. P 17 n ■ c;haw- Miss- - 2 - - Z 3 J - ■ I = < : - V - -1 - . ? : ■'•#&§£ ' jatSo’- ' * a ■ -■■ - _- — - ’ ^ f - -■ -"-- -•--«•••= ' ....... .—‘ - !>'■••■ "| ■ ' *=, 5̂. - W ■**...< , * . ••*• • • • / . V 1 . ") ., - & • # • • v . > » J - ,* i e x e b y . , , « * « * & J o e ; a f f i ^ r . . , « n ^ ^ - a 5 n a I . t ; i e B , . o £ . p e r j u r y ^ ^ V. • I • . ;: ' the foregoing information is true and accurate to toe best or '™y;< -••■'. • r-^ s^ L g ^ :•* ; 3 * ta b * le d g e . :. i *?; . • - “ ^•.^fidkvit i» ■executed'is^a'^ditibh-for-supplying Mississippi ..,.; :,>.y....ii?i; u\*;- • ♦ . f r S ' - s ] -V- vi il State-owned textbooks to toe above named private school, and chat full and accurate answers are required by order of the United States District Court for the Northern District of Mississippi dated July 25, 1973, in civil action No. WC 70-53-K. styled Norwood, et al, v. Harrison, et al, on the docket or the court. This, 10th day of _______ August-------- •' 197-----' y)e.CL - S i f e - v ( j . A. E ly , J r . \ ' ’> Title: Sworn and subscribed to before me this /r'/*day of L-v-u-*? 197&- . P res iden t. Indiano la Educational Foundation, Inc. fo r Ind iano la Academy (Name of School) -So. JXNotary Public My Commission Expires': ^ r W, (SEAL) -4 - T he guvorninR body of In dlan ola A cad em y , at it s r e g u la r m ectia g . T u estlov a ffirm e d the A ca d e m y 's r a c ia l ly n o n -d iac r im .n a to ry po licy a s >o tu den ts'an d that It a d m it , the stu d en t, of any race to a ll the t u H . n r iv ile e c s , p ro g ra m s and a c t iv it ie s g e n e ra lly acco rd ed o r m ade a v a il to stu den ts accep ted at the A cadem y; that i t s p o licy i s to m a *c no d i a ~ * -nation on the b a s i s o f r a c e in a d m in istra tio n of ed u cation al p o l ic ie s , ^ ^ i c a t i o n fo r a d m is s io n , and ath le tic and e x tr a - c u r r ic u la r p r o g r a m s . X ce rtify the above and foregoin g to be an ac tu a l, c o rre c t and l ite r a l excerp t of the m inutes of Indianola E d u c iio n a l Foundation , Inc. , of its re g u la r Septem ber 7 , 1971, m eeting. ^ W itness my sign atu re th is the 8th day of A ugust, A. D. , 1973. S e c re ta ry I C / S . TR EA SU R Y DEPARTM Ei J I N T E R N A L R E V E N U E S E R V I C E ' D I S T R I C T D I R E C T O R .Jackson,.Mississippi : September 2,' 1964 IM MC» LY R I *r r» * r *j F 'orrn 2954 434:WCE:emo JAC-SCT-64-38 Indiauola Educational Foundation, Inc* 303 East Gresham Street Indianola, Mississippi Gentlemen; PURPOSE Educational FORM 390 A REQUIRED □ YES £] NO ACCOUNTING PERIOO ENtVIMG May 31 > Based upon the evidence submitted, it is held that you axe exempt from Federal income tax as an organization described in section 501(c)(3) of the Internal Revenue Code, a s it is shown that you are organized and operated exclusively for the purpose shown above. Any questions concerning texes levied under other subtitles of the oode should oe submitted to us. You are not required to file Federal income tax returns so long as you retain an exempt status, un- le ss you are subject to the tax on unrelated business income imposed by section 511 of the Lode and are required to file Form 990-7 for the purpose of reporting unrelated business taxcoie income. Any changes in your character, purposes or method of operation should be reported immediately to this office foe consideration of their effect upon your exempt status. You should also report any change in your name or address. Your liability for filing the annual information return, Form 99UA, is set forth above. That return, if required, must be filed after the d o se of your annual accounting period indicated above. Contributions mode to you are deductible by donors aa provided in section 170 of the Code. Be quests. legacies, devises, transfers or gifts to or for your use are deducting .or Federal estate ' and gift tax purposes.under tht provisions of section 2055, 21Go and of the- Loae. You are not liable for the taxes imposed under the Federal Insurance Contributions Act (social security taxes) unless you file a waiver of exemption certificate as provided in such Ac You are not liable for the tax imposed under the Federal Unemployment i ax Act. .nquines aPout .he waiver of exemption certificate for so c id security taxes should ne addressed to this office. This is a determination letter. Very truly yours, L. ^ . Cf \ ^ Jj. G. Martin, Jr. District Diractor 9 0 t l l l l l 1 7 A- ro e * 2954 iftv . *-«n / iJ.y hot*-'- I vr-r.ov̂ K lOiUTUK *r r n !„ • ,k< a • •• m (• . • 4 •«•••«•• * . I . I.TrfiJUVoli ?UtuC*tionaI Foundation, Inc. 305 S.»#t Jreahnr* St* t/. UJc'‘. /OO Indianolc, “ iaa# !• ■ ... eiJ ( , lotenc1 V«»em.t Vrv it '<■' • •' „ . . l,m ’4T «4i.c*- »•« ,• «.f <?«» *"*» ••' * '■ " 5 p ^ - - *,3,ed 'nm • "• ,, *r *-- <■>r - '••*in-•-*u'" ”•' f;;X' .... : x ; : x r : v.v x.a - - - - - - ... - ’ ....-- ~ L ft. /-*' P!ae# Olilf C' L»ii»cior cl :j« tku».tiohi 1 y r ?1,»S AT PM * M K**.? h « n *Ho h i ! I'U '[ ?*■•».sly secured ail i A c n t . l ».» » at. . • , . n * '* * * ' » r .1 * *e ee« 4 't - 11 K a iif .! '<1 m «« m nviabtr lot iAc'«s.»n ane itru.a. tfairtci'i of oOi«r« , ■ lnlv ..o- . r r ,.<.iH I • no I.^m i.f4i:, n ooi.l-o. -Husl.J o» til. I. raganll.us „( r(.< nu.ni.-t of r j- .l lnl-ii.-ntr. Thu it ... -i.» I - ...- I .u i I JU.Hf i.f .( r»..l lu i.n tu * . . . J , n«n«< hack crryuMtlirn .( <11 tttii 4I«.| fimip an..u- • r : ' r « r ■ • -i a<cr:< >»• a •• 1. ».<i *:.< • a m - w t a. pl.aa .jo I. a I at.nrii , . * .1 1 ... l-aoulr-r.i ,n d n-» -an ,. .U.,, ■ «.i ha-- . . o.i -■ -••JJt ;ie iS .u .1 . u rha umulicaiiua n « i aaji(0<.t o tk» p , . r , o u t .soar. toil ;mn» h i t as •f^.UrttuA r » J . /.:j •%*'— I f >t a i»#<* a jend/u 4L-»n aura -ee. •Ill Pf '*» 7 I Mv \ M l UtM' j»* 1 '! I’l .* ®.ib,HeM.S Puffifi P i it c io i *1 iaterntl HfT#n«c *itf» • ! %n tUt I e»ie «i \ • r. ir l ’ * * .in'- S I K *T. ''N M )• ff ’ l>* Mr ( h o t * wIk* p#r w m jt * >»n c» cĥ d« v «|ttr tli- u «tr »« •♦ »** ••• .. »»• . h . 1. » '«**'• i-««* iui *« • i*,fnr ficjiicnt iUMiifi !•< mciu 'rti 10 return, much. r»», k.*/ rr 1m r» » i i n r i ; * • . f •• ■ f i f »?. .!»• • • mi m i i » v b«»i k If ullt •• •«« <•*# All Aii.tvers si miiu ‘*e f ̂ e^nMro .< p infe-t j,.' «m,f ••»*» l.mln m«i n *•>*«; 7 r . 't e t 1 • fs^.- p.if.t̂er Uf tl*4"| .* ’<• t 1I4 4IIK loMI T f l ie 4 • *.*e l i e * ».t«: esifer ,a fi -.n . trail* p«m* if mt •.lopte I Ijr 7 i.mmv i. y» lin u«l epntW', « rr̂ rautani <t Min he rr«dc r«*nr w/ 'iIm i ̂m liJ t>* (ninrJ .it iir.n l *rd '’ cf InMuisnt" ... lce-» ^ i'l00 M O rr - It i(» a .» r f h-, . . . s a , , n-im „ • lat o. J » r r a « i « i n . m i | « a t i l t tp i f . m o . * .H a sc la .a l , j r o . Iruai. .t , iS a , • 'tr»j»»nf f iff in i.na I the ft... rtjg» . **c* iui/c«J (hereunder If • cufpo'tr ewer ir. f»e*n J (Me mm, me !»•. »♦ mm «et forth .0 its .Htttrr f»# » ‘irt iek-l i... . *»■» it|u * | uy ?h; Corem-« itt ireaufg «t ’n ire cite f • d i*f. .he u -me of •he (riM e%»0fe % h m ,iJ n# e ,c » « the n a m e the uustee m Urn. l.« .he c u r „f «n eata e «l • ue-e.lent, ins..t*ett« etc the name .1 uir m .ir .1 j he en-e'eJ m It-w 1 «n«i »t.e n« e h- «.jnimstn tw« 01 jth-* fi^i.^.err .n Ireei : If .he »r.e eu-,. .no*-..,;* U , «t ^ id Ne sho^n in a statew .1 .ait I .rm If. surl «ae • .. 0 * *era««" ./ the ear. * tu-auto >*e »>e .ted lc- nee* of cn«n form tad em*r«d L« lira STATE OF Mississrrri COUNTY OF SUNFLOWER CITY OF 1NDIANOLA: 77,;<7zPersonally appeared before me, a ....... In and for said County and State, ^ ~ ....... of ; Enterprise-Tocsin, a newspaper published In said City, County and State, who upon *. being duly sworn, deposes and says: The notice, of which a true copy Is hereunto annexed, was published In Anri I further certify that I have examined the several copies of the *7 EnterptSe-TocsIn, above referred to, and find that the said notice has been ¥ -- published as stated. to, before me, this r.^S^day of .^ J s r .iC iU .: .: ^ . T9 Academy affirms racially ̂ non-discriminatory Ihe governing body of Indla- nola Academy, at Its regular meeting, Tuesday affirmed the Academy’ s racially non-discri minatory policy as to students and that It admits the students of any race to all the rights, privileges, programs and acti vities generally accorded or made available to students aj cepted at the Academy. The board also affirmed i policy is to make no disci mlnation on the basis of ra In administration of educatic at policies, application for ? mission, and athletic and exli curricular programs. Subscribed and sworn Cost: $..........- .............. My Cctimission Cxpirei July 23. 1975 - , .A v . . B O A R D OF DIRECTORS * ' . • ' " ‘ I HE INDIANOLA EDUCATIONAL FOUNDATION, INC. J; A: E l y , Pres. . . Shaw;, Miss. 33773 . Turner Arant Blaine, Miss. George Baird Inverness, Miss. Tom Barron Woodbine Dr., Indianola, Ms. Mrs. C. E. Dunlap 1410 Maple, Cleveland, Ms. 33732 Mrs. Hugh Gayden Fisher Rt. 3, Box 23, Indianola Mrs. Leslie Fletcher E. Percy, Indianola W. W. 'jresham, Jr. Gresham Petroleum Co., Indianola Max Hodges Rt. 2, Box 135, Indianola John Hough, Jr. Louis Ingold Seymour Johnson 501 Alexander, Indianola 210 E. Percy, Indianola 3 Seymour Dr., Indianola 'Wayne King Inverness, Mi ss. George Lice Rt. 2, Box 55, Indianola John McPherson Gresham Service StationIndianola N. H. McMath P.O.Box 195, Isola, Ms. 3375<l Hoe1 Morgan Box 38, Sunflower, Ms. 33778 T. A. Murtagh Moorhead, Ms. 38761 Henry Paris Lewis Grocer Co., Indianola Mrs. W. M. Pitts 202 E. Parkway, Indianola Scott Poindexter Irwerness, Ms. James Robertson Holly Ridge, Miss. Bobby Shepard 310 Clover Dr., Indianola Mrs. Guy Robinson- ' 603 E. Percy, Indianola Bill Toler Inverness, Miss. All are members of the white race. internal Revenue Service AUG 1974 j........... ----- CPjA jE:? Mr. Frank R. Parker Lawyers' Committee for Civil Rights Under Law 233 North Farish Street Jackson, Mississippi 39201 Dear Mr. Parked On behalf of the Commissioner, I would like to thank you for your July 17 letter in which you informed us of additional developments in Norwood v. Harrison. While we cannot reveal specific actions concerning the Individual schools involved, wa assure you that your information is being considered. We appreciate your continued interest in the private school area. Sincerely yours, (Signed)_S.3. Woifa S. B. Wolfe Director, Audit Division EXHIBIT 4 1 • •' V April 15, 1974 Mr. Donald Alexander Commissioner of Internal Revenue U. S. Internal Revenue Service Washington, D. C. 20224 Dear Mr. Alexander: This refers to Frank R. Parker's letter to you of March 11, 1974, concerning your Service's enforcement responsibilities with respect to Green v. Connally, 330 F. Supp. 1150 (D. D. C. 1971), aff'd, 404 F.2d 997 (D. C. Cir. 1972), in light of the Supreme Court's decision in Norwood v. Harrison, 37 L. Ed. 2d 723 (1974). As Mr. Parker's letter indicates, post-Norwood proceedings have disclosed that a number of ineligible Mississippi private schools continue to enjoy tax exempt and deductible contribution status. We would like to try to resolve, as economically and expeditiously as possible, the question which this raises about your certification standards and auditiog procedures of these and similarly situated schools. Therefore, I request an opportunity for representatives of the plaintiffs, including Mr. Leventhal, Mr. Parker, and myself, to meet with you, Assistant Attorneys General Crampton and Pottinger, and any other officials whom you may identify as appropriate to explore ways of securing our clients' rights short of further proceedings in Green. We would like to meet at your convenience during the period .April j30 through May 9, 1974* and I shall appreciate hearing from you m sufficient time for us to coordinate our arrangements. ly yours, Mr. Donate Alexander April 10, 1974 T'prrp Tv;a Thank you for your consideration. yT rs’yrt v Ci J ~~ J . Harold Flannery Director cc: Honorable J . Stanley Fottinrjcr Honorable Scott P. Crumpton Brian K. Landcbcrg, Esq. Melvyn R. Leventhni, Esq. Rrank P.. Parker, Esq. Department of the Treasury / Internal Revcnu . Service Washington, D C. 20 2 24 C o m m is s io n e r MAY 171974 Mr. J. Harold Flannery, Director Lawyers' .Committee for Civil Rights Under Lav/ 733 Fifteenth Street, K Washington, D. C. 20005 Dear Mr. Flannery: ■ W. , Suite 520 m ’hank you for your letter of April 15, 1974, concerning the sitle impact.of the decision in Wcrwood v. 413 455 on the Internal Revenue Service's certification standards and auditing procedures relating to tan exemptions for private schools. As Mr. Pottinger and I told you in our telephone con versation, I met Monday with Assistant Attorneys General Crampton :o discuss the matters raised by your letter and by »r's letter of March 11, 1974, or. this same subject. The purpose of this letter is to provide written confirmation and Pottinger Mr. Frank Park' The purpe of 'what I told off ice to look the Department Seivice in sue. che s tandards end our expert l j «C • Cramntcn a you, Fir: we have already advised our field :a:: exemptions in light vil Riga, fcs 'ith the Int' te. We are of the Norv/' ■oerier.ee under Rev. Proc 72-54 , nd Mr. Pottinger will assi: 1972-2, in that wo would be oleased to have your vrev/s a: may oe ■ranted Appropriate personnel iron to w Division will be in touch with, you scon co obtain Sincerely yours, C.3. 334. re-evaluatJ hat changes Civil Rights such views. i of : venue .uatir.g .sion .on, Donald C. Alexander EXt 31T 6 r : \i A LA WY E R S ' C O M M ITT" K F O R C I V I L R I G H T S U N D E R LAV. 3 "> N a P T H F A P I S H S T . R E E J A C K S O N . M I S S I S S I P P I 3 3 2 0 1 • P H O N E ( S O I ) 9 4 8 - 5 4 0 3 January 21, 19 / a Meade Whitaker, Zsquire Chief Counsel Internal Revenue Service 1111 Constitution Avenue, N.W. Washington, D. C. 20224 Re : Green v. Cor.rally Dear Mr. Whitaker: On December 13, 1974, we met with vou and other offici consider to d by the Dis the Internal Revenue Service regarding what we laxity in IRS enforcement cf the decree renders Court in the above-styled case. In particular, we were concerned that in proceedings in District Courts in the South racial!' segregated private schools were being cut off assistance (tuition grants, textbooks, etc.) b discriminatory admissions policies, while at the same time these same schools were continuing to enjoy Federal tax benefits (tax exemption and deductibility cf contributions) under IRS rulings. th rgp i -3 1 1 \ - m stats did and use cf 4- U ̂ 4 ̂ "We specifically brought to your attentic ■1 V,- -o scncois in Mississippi which either had been determined by tine District Court in Norwood v. Harrison, Civil Me. MC-70-53-K (M.D. Miss.), to have discriminatory admissions policies or had admitte 1 their ineligibility for state textbooks under the Norwood guidelines b returning their textbooks or by failing list of those'schools is enclosed. :o reaepiv ror thorn. We would like to know (1) what steos the Internal Revenue 1 r o conform its policies and enforcementService has taken, if an to the guidelines and requirements announced in Norwood, and (2) wnat steps, if any, has IRS taken U v .ulne uistr; p. 3 ̂ rl “OO r* .q . >— u U) wnat Stecs , urar.ee c f Clcduct ax exempt status me n t ? rm four' ^ .3 n .-iu* o -■ ‘ ■ f the 10 schools ontrioutions to or m a *• ma . — o ^ This matter final resolution nas draggea on for several vears without ar.v arout which we n a v e o CIC.* 2.. ;rmed. u e c a u s e t m e -3 S'd- rf tr »VI Meade v\hitaker, Esquire January 21, 1976 Page 2 is an urgent natter deserving expedited consideration, I would appreciate hearing fron you within 20 days of your receipt of letter. Thank you for your speedy attention to and consideration this important matter. Yours very truly, Frank R. Parker Chief Counsel FR?:1jh Enclosure bcc: Paul R. Dimond Larry Newton -3 ltd* this of Norwood Action ‘Columbia Academy P. C. Box 139 Columbia, Ms. 39429 ■Segregated Private School Copiah Educ- Edtr.. , Inc. 317 Gallatin Street Hazlehurst, Ms. 39033 Deer Creek■Educational Inst., Inc. Ho liar, dale, Ms. 2 2743 Clinton Educ. Edtr.., Inc. 10 6 E. Cynthia Road Clinton, Ms. 33205 Marshall County Educ. Edtr.. , Inc. Holly Springs, Ms. 22535 ^Educational Foundation, Inc. P. 0. Bo x 6 5 Lucedaie, Ms. 39452 India.oola Educ. Fdtn., Inc. 30 5 East Gresham. St. Indiana la., Ms. 3S75I ila Rich Fr3 ■ ̂ T r*— v_« W * * • / « » » u ■ ?. 0. Box 233 Lula, Ms. 33544 0. Box D Admitted ineligibility in Comood by failing to apply for state textbooks under new non-ciscnm: na requirements; returned stare rexrc Same Same Same (may be defunct) S ame Same Entered no contest plea after textbook eligibility was challenge-: in Norwood, and ruled non eligible to receive snane textbooks by order of 3/1/74 tea ineiigiai.iry; apply; returned snare ns School, Inc. Entered no con.t textbook align 3 25 21 and after avids Norwood, and re textbooks by le r-. . ** u : nLea efne . ty was on a rr.ed snan-e Quit mar. County Educ. Eden. , Inc. P. 0. Box 55 Marks, Ms. 32545 a/k/a County Day School After onaflange ana near_ng . Morwcod, he id to have a racr ci s c r im in a co ry and ordered to by c o m ion and JL — O 3__ « re-urn s - 3 1 A - s f J J <•»1 * 1 \ t t i, .' 1 1 vL.wUI c : \ m rv->. ̂t a ;"0*0! .* \j •- > ;m.7i i •v' or. uo 3 a r vice shine] ton, p.C. 20224 r:rrr»* 6 D?5 n 1 3; Mr. Frank R. Parker Lawyers1 Co mil: Lee for Civil Rights Under Law 233 North Parish Street Jackson, Mississippi 392U1 Dea: Mr. Parker; In reply to your January 21 letter concerning the Service's private* school program, we are providing the_ following information. As we informed you in our meeting on December 13, 1974, the Service has been giving priority to a review of the entire private school program, he arĉ still working on certain portions of it, but we believe that we have already strengthened the program with the puolication of Revenue Ruling 75-231 on church-related schools and_ Revenue Procedure 75-50 with guidelines and recordkeeping requirements for private schools. Copies are enclosed. For a fuller discussion of our progress, we are also enciosin a copy of a recent letter we sent to the U. S. Commission on Civil Rights in which we provided updated information on our private school program. We :e finalizing private school examination guidelines to conform our audit instructions to the requi: Revenue Procedure 75-50. We will, of course, cons: comments or suggestions for items you oelieve should be included in these guidelines. As the examination guidelines will be part of the Internal Revenue Manual, they will be available for public inspection when adopted. You asked for a status report on ten specific Mississiop private schools. Columbia Academy naileci to cstablisn. t̂ -x- exempt status. Clinton Educational Foundation, Inc., has b e e n terminated because it ceased operations. We have deter mined that there is no organization called Educational Foundation, Inc., of Lucedale; we had such an entry on our Exempt Organization Master Fi. entry for another organization. Foundation, Inc., is exempt. DUt It W Marshall is an erroneous County Education 3 2 Mr. Frank R. Parker The six remaining schools have been contacted concernin the continuation of their tax-exempt status and the advance assurance of deductibility of contributions. The suspension of advance assurance issue is presently before the National Office of the Servj.ce. Any change to a specific school's right to advance assurance of deductibility or tax-exempt status will be published in the Internal Revenue Bulletin. Sincerely, MEADE WHITAKER Chief Counsel t 1-- Enclosures•(3) Rev. Rul. 75-231 Rev. Proc. 75-50 1/5/76 letter- to U on Civil Rights S. Commission l Section 501 of business or principal afccc ^ e ornar.t/uuori. Sen setuens IrjO^-l xa) a n d :l.o 0 l ( a ) - l of tlmregulutions. 2 5 c r /t’ J . h 4 ft ’* t* * tZm f t | O ̂ * * * ‘,crnrir.i. " ’bnc to r j '^ h c uurcry % h lr e n or er.ur.als.crrrrr.irun o! c. . n . , i » r • (.11 tySection uO, I .l/J- l " J C h a r ita b le ccm liilsi'tions; church operated schools with discrim ina tory policies. O rganizations, inc. tid ing churches, that conduct se .iuois with a policy of refusing to a cce p . children from certain raoia. ana ethnic croups will not b a recog nized a s tax-exempt cn aru ies un ^ ^ r section s 1 /0 <-nd 5QI(Cj U ) ^ n e Code. Rev. Rul- 75*2311 Advice has been r^ i.ft ic d whether the organizations described below, wMrh otherwise qualify (or exemption from Federal income tax mu-rr sec tion 301 (c )(3 ) of the Internal fi nite Code of 193!. me opera wd ex clusively lor charitable purposes. devotion of other amounts of tune to religious -.hemes and sublets, the school complies with r e la w r ; cuiremenw for public education, i school has a policy of rclusmg to erept anv children from certain rr.ci.it and ethnic -roups. Situation t. , i i <eoaratcv v i s orr-nm-tu a -<-i corporate entity under the auspices of an organization q ta .u u n m •; . • :^r .},/% express nuipo - c 1 I a 'school ‘ for the children } of the local community in ciu.rch ^ " ^ v e 'm i s i s bodyrencimis set. a . s. i l c a . of 'the church is a council whose t -o selected from die members are r r q church's congregation. The cou . ■ selected the original members of A board of directors and oia.m.nns fu l control over all aspects ot us op-rat in- program. -v-.nt x »» "<* °?m r "Ior— am that corresponds with P VI; - school urogram tor the samepublic SCIICOI , - grades. Although us prcgr.mi me. i 1 0 -minute rclupous service at start of each school t.av ana released a, T1R-137P. dated May 22. 1075. Situation 2. \ n organization qualifying as a ch'arth. t a i n s * M active religious functions u *ec supervises and co n tro l as part ot u s overall operations, Y scr.ool. i « * scoaratcly incerporatcti. V s operations do not (lifter in any matenal respect from those carried on ay A • w * ::on /, including. as a matter of *h o Policy, the exclusion of student f.orn certain racial and ethnic groups. Situation 3. _ 7 -in organization qualifying as eh ,lid ., oporacc. a ichaol V in S i t a - t a S- 2 * • controls as a separate corporate a.lny a school identical to A m .5du«t«o« • Z U r u that the policy ooserva-d by the two schools of e x c l u d i n g clu.c.rcn : , r -.Vn mcial and ethnic group*from ccitn.n —ct-t . , -ti. is squ ired by the tenet* M ..k cion it embraces. . , Section 170 of the ^ c ? r c ^ in part, that mere sha.t -e_.il. a 5 a deduction r.nv char.tao.e Tax Regulations specifies the r.q mc- ir.cnts which an orymuzr.. m ■ mu inc,n to ho “organized aim m , m.u exclusively" for one , . more exempti>u;SV ..5o i ^ m - i ; :; ) m ^ 'c ) (3 ) of the Code m it. .-> • * Accepted legal sense and is. thcictc.e, “notTo'bc construed -as Umttcu ny the separate enumeration m action - * / V ( 3 ) of other tax exempt p u ^ c s vc * thc bread out-which may fan witmn me ore |';ncs of “ charity" as deve.op -1 by judicial decisions. Such mctio i » * J . . ...... r*-m nidutio tribution, as c‘^‘"17.~. • , vvl.h;n arc earned c (c ) , payment of w in- ;• hc rCa;onab' v id a , ill P " ~ m!U ? ar'" "• table contribution meam a L tier, or gift to or for the u>. * poration, trust, or community c..c fund or foundation organiwu . •• operated exclusively for religious, charitable, scientific, literary o r - - tioil of cra-ily . 0 c»l.or.n Section 501 (cU31 o:. i.__ .OF .liC fined section 170 : h it such t-rin n:r.mer prov.u-s -'.t. advancement of education. , _ . t feU 3 ''- l (d l ( j (n) CiSection t.o01(c) vJ J ‘ v .. . nfi. the regulations provtoes v nl a or - c - ^ inntgularly emouud bo-> f attendance at a p l a « w n - r c ^ 5v ^ cational activttir • *■ ^ m :.(ion as ried on may qualify -of ‘ • . an cducat.on.u or u... _ < character eor.tcmp.uteu ^ 301(c) 1 3 1 cf tnc t-ccc .t - - wi*e meets the rcom reu-m i u. - KCl':on'p t ____ lr,7<l.2t..P.7.30, Rev. Rut. u / v r ti.c Code, conciu -■ . • f »ii»»» “ ■ Rgfiituia charitable p u :p -v * • “ ,.;i. c, ,n arc carried or. m * : ; — ‘l ' ........... .;,'v clasuii”1 VI uties, among other • | . i i o r *.nc c » *.ncoir*C!exemption from hcdcml,Sr''"'iu/cd r.r»u î3of orgamzruion* o. i t erated CNclui.iv.-ly for_ren ’•otis, c.i.in- contu1 1 7 he rca;ona.j..« ......— , , .-.-.qiV'icd 'r"del.'-, pu...to wcil-es.aU..■ ■ tea roliev. Rev Rul. / l-b -w .)- , cipally on Proton ^ ^ Hen. 317 U.S. ah- later judicial c y.s.mu u _ efTv-t. and Ccrm infpr:.v i ,, . .s Civil Uignts A-t , , - ; . . ■ . .. cu .r. ;.:i’ .;sh.;u t c v —there is a ••c.- . , • v . I■ ̂ .• against t.i.i.i .-Ci.i* i*nuohc po... > . ■ ,.<:•■ c r ; o'i, wu in- r • private._ K c .. _u;cnl :v holds, ni'.-reiori.. '••••■ ' ; . - having a ra* •* < .;,v j-,. policy as to Vl‘ C c : - 1 T '.n . ! ‘ conin''to be charitable with.n the c table . . • or cuum Section 1.501(c)(3)- ̂ »f .̂ N ’ye cr*ui ........... cJw ruxn U p'.irpo'd- £ * c ; „ : c:,:p lr= J SCCf.t ~ < l o J I/O and 5 0 1 (c )(3 ) a,id. other rele v a n t Federal swumes.. ■ •••I;' t . *■ • ’ ’ *” y ; * T-git educational programs a- ‘coj?« ducted h>: A* and Y (tourist of -secular subjects of- the sansr sdope'ansi • tvpel commonly dealt with- in .die.puhjiq schools or in private schools tiiat arc not religiously oriented. There is no basis for treating separately incorpo rated schools that, although church- related, teach secular subjects and generally comply with State law re quirements for public education for the grades for which instruction is provided, any differently than private schools that arc not church-affiliated. Accordingly, in Situation, i, because A” fails to maintain a racially or ethnically nor.discriminatory policy as ‘̂ fcffidents, A* is not operated cxciu- ssTOy for charitable purposes and docs not, tiicrefore, qualify as a charity for Federal income tax deduction and exemption nurposcs under sections 170 and 501(c) (3) of die Code. The dis qualification of A’ will not affect the exempt status of the organization qual.fying as a church solely as a result of the organization and control of A", as set tortii in Situation 7, prior to die effective date of the disqualifi cation. Situation 2 differs from Situation 1 only in that Y is not separately incor porated, and is directly supervised and (■ ^rolled within ‘die same legal orga- nlotion as the clturch. A racially or ethnically discriminatory policy as to students is as contrary’ to Federal public policy under these circum stances as it is when the educational institution is separately incornoratcd. An analysis of the historical develop ment of this fundamental expression of national policy reaffirms the con clusion that the form of the educa tional organization is not relevant for these purposes. See. H or wood v. lia r : t- IC>rTi -113 U .S. 455 (1973), in which the Supreme Court Held tiiat a state may not provide free textbooks to a private school if their availability would have a "significant tendency to facilitate, reinforce, and support pri- ' .‘vatc di5CHfp;iiac:'o;i.’*. In tins: ease iiie Court made no. exception for tiic sclioois that were not separate legal : organizations but were din-rdy op erated by churches'that were receiv ing free textbooks. It follows that die legal organization operating Y is frus trating Federal public policy bv 'lav ing a racially or ethnically discrimina tory policy as to students. Under these circumstances, tiiat organization is not operated exclusively for chari table purposes within the meaning of section 501 (c )(3 ) of the Code and the regulations thereunder. Accord ingly, the organization does not quali fy as a charity for Federal income tax deduction and exemption puqioses under sections 170 and 5 0 1 (c )(3 ). Situation 3 differs from Situation 1 and 2 only in that A asserts tiiat a tenet of the religion which it embraces requires that the schools maintain a racially discriminatory policy as to students. It is well-settled that a reli gious basis for an activity will not serve to preclude governmental inter ference with that activity if it is otiierwi.se clearly contrary to Federal public policy. Thus, for example, the Supreme Court in Mormon Church £■’. United States, 136 U.S. 1 (1950), upheld the constitutional validity of a series of Federal statutes that, among other tilings, had abrogated the cor porate charter previously granted to the members of a specific church by.-.- a special act of die territorial legisla ture of Utah and had directed the institution of judicial proceedings for a complete winding up of its affairs, all because of its persistent promotion and defense of polygamy in direct vio lation of Federal statutory-law. T iiat th osc responsible for a given course of conduct may sincerely be lieve that they nave a religious duty to act in a certain manner docs not alter the situation. The First Amend ment, which provides in part that Congress shall make no law prohibit ing the free exercise of religion, docs mere rcngiom • >oi :cfs anc ■ •pi n'or.s, bar government..! .in:~r:Vre::c<; with. hiit ft .cices not ,;, „ t # t . j, con- sequences otherwise a: tend:: . '.vcn practice or action thru is-iHAt in!: front- !y religions. See Hcysmlds t*. 7' Mite d States, 56 U.S. 1 r5. 165-iGV (i.f;73); Mitchell o. Pilgrim Holiness Ch nr eh Cot ̂ oration, 2 1 0 F. 2d 679 (7;h Cir. 1954), errL denied, 317 U.S 1013 (1954) : U.S. it. Craft, 423 F. 2d 329, 333 (9th Cir. 1970:; and I.insentt v. Millers Calls Co., 440 F. 2d 14 (1st Cir. 1971). 'ITie important distinction between religious belief, on the one hand, and die legal consequences that may validly be attached to action induced by religious belief, on die ojiicr, is well illustrated by one recent lin- of eases interpreting die Federal drug laws. The courts have repeatedly re fused to engraft a religious excel don on any criminal statute outlawing the transportation of heroin. n.ariju: -fun, and peyote ii::io the Unii ie* 1 St.n-s, notwithstnndin fT :in .*.]pp.-.n . juci:cud rccog nition til«lt a give *“> r.cc ■ red niigli : sincere! y Fciic c 1. .u »J t »• of such drugs has prop er pi!ac c . n -rr- tain religious err•ctr.o*»• C j v ;,i:h are prmc ribed in both the Kor■an a:.a th.e Hible,. See U.S u S'<car., i j i . 2 d 395 ((5th Cir. 1 0 /‘ I)! and Ol.(tor cUZCS therein cited. Accordingly, in SillMotion > M : • i. , - the separately i.accrpo rated sc!, or ! nor A itself is operated ;si vri for charitable purpores and r.ui: ,- .’.ii- fies as a chnritv lor Fettera! it.»< > c, 1C tax deduction and exei ntuit.iIt "W : ,*u<i under sections 179 and 501 f-\ ( 3 . of the Code. The conclusions rcache d ini the Revenue Ruling woulc1 be : !nj s*: tit'.’ if a convention or associa tit... of elm iv lies were substituted for d .0 . pnn ix. t.-r-.s qualifying as cmirchc-r ic:. . V. U :c in Situations 7, 2, and 3. - 2o c m 1.5011c) C )- !: Or. orr„r.i;e.-i cr.d ofi, i tilt’d / : ’ r, tai/ir, icientitle. U.Unf ;.ir literary, or p-r*o: a f t H I. A d m in i s t r a t i v e , P r o c e d u r a l , a n d I V iS s c .e i 'a n e c u s :'f£*3 tfQn;.’J0 r:tcr•• Ne.v-.l S3 . .’•/ tcf.sUidem* -nor:v^»l ify. a * •• ajt or.- tr ie five • 'ft ovinriidr ‘.14, ‘1-3T3)' / ' gdmzatioa Fcdcrar attenwicle Authority to M .t:« p e r • rmisuttiSfis ;otv, CsrjJpri ,-G A Related.. su« • -.d a 7 • Pursuant to authority vested in the omnusssnner ot Internal Revenue by 1C 7fT2, :G CI-'Is 1.4112 and Trcas- •v Department Order .No. IuQ-o7t ;c nationwide auihoruv to determine > A. Intercompany nnd.-intracomnaay ■ amfer prices of foftmm-pfoduced rude oil and products refuted there* otn, and j ]J. The acccptr.n/e of the average rcight rate assessment (A.F.R.A.) as n intercompany/charge for shipping f fJfcign-prcdyiced crude oil and r o u lK j i hereby delegated to the Regional lorr.tnissiontjf, Southwest Region. This delegation decs not extend to oses pcr.dihg before the United States Pax Couy(, tier inosc witr.in the juris- lictien of the Department of Justice. This authority may net be rcccle- '.ated. same meaning it-.has in section j • 0 •i i b‘) ( LJ I Ai) (ii'- of the Dace. ■ come tax. Res*. Rul. 71-447, !9 /l-e - gK(- 4 G gidf.u nf.s . 7 D o n a l d C. At.tx.sNpr.R, ..-Commissioner. Kited by the Office c: the Federal Recister ,hn November 6, 19”3 ; 3:4.) a m ., cut: 'published in the i-sue at 'he Feerrm K<T,is!er for Novernber 7, 197a, tD i -R. 6 C :TR 001.20!: end JeUrminj- ion U:'.eri. Aiio reft I, Orcticn 501; 1.501 (e) (3)-/.) I cy. Pros. 73-50 1 SECTION !. PVRVOSE .01 This Revenue Procedure sets forth guidelines and recordkeeping requirements lor determining whether private schools that are applying for recognition of exemption from Federal income tax under section 501 ,cl (3, of the Internal Revenue Code of 1954. or are presently recognized as exemp. frem tax, ha\e racially noncuscrurina- torv policies as to students. Sue. 2. Background. .Cl A school that decs not have a racie.Uv nondiscriminatory pones as l A U . r » . T lH - lU T . -!*>«* N . t . i. ! « • C.S. 230. . . .02 .V schcor ihustt'shev.- .••afilrma- ■ tiveLy bozh that it-.has. adopted a raciallv nondiscriminatory policy as to students that is made known to the rermrr.l public and that since the adoption of that, policy it has operated in a bona tide manner tn accordance therewith. .03 Internal Revenue Service ex perience ■ with private schools has shown a need for more specific guide lines to insure a uniform approach to tiie determination of whether a private school has a racially nondis- crimimtorv policy, as to student;. •.04 This Revenue Procedure not apply to public schools. Sec. ?. DF.HNtTross. students means: to -ail the rieh;«. privtlcep-. >ire.:rsar.« activities r.ee.crailv accorded or m y r able to students at mat tcimol a:.e y ..school cîcs r;■ t cii'Cnru.nir.l'd on o> rice in aa.T.uusirauon- 1 ts ccmc- policies, acMus'ionj poiiCio:.. s c . znd Ic.in prr«:ra:ii'. anci athletic and «ehlv>1 -adrmn:5tered programs. .02 The Service considers discrimt- nation on the basis of race to incmoc discrimination on the basis of color and national or ethnic origin. A policy of a school that favors racial minority groups with respect to admissions, facilities and programs, and financial assistance will not constitute discrimi nation on the basis of race wnen the purpose and effect is to promote tnc establishment and maintenance cf that school's racially nondiscriminatory policy as to students. .03 A school that selects students on the basis of membership in a re ligious- denomination or unit thereof will not be deemed to have a dis criminator,’ policy if member-nip in the denomination or unit is open to all on a racially nondiscriminatory basis. .0-1 For purposes of this revenue procedure, the term “ school" has the ■. .0! Organizational rt'/jviymcntt. A school must include a statement in its charter, .bylaws, or' ether 'pjvemm.g instrument, or in a resolution of its governing body, that st has a racumv nondbcriiainntmy police as to students and therefore does not discriminate against applicants and students on the basis of race, color, and national or ethnic origin. .02 Statement of Policy. F.vmy school must include a statement Pi us racially nondiscriminatory policy xs to students in ail its brochures : nd missions, piogrnrns, and scliolais!:; V>̂ docs A statement substantially similar cO the Notice described in subsection ;a) of section 4.03, fufrrx, will be ace1 pe able for. this purpose. Further, evrry tat a school must include a reference to itsorl raciallv nondiscriminatory policy in other written ado-ertising that it :.ICS ; ns a means of mionutng prosper >•••*% Rf.d students of its programs. Th.e fothJ’A*-.TV.u: • - ; *he u-fetcnees will he acceptr.’ulo: nTf *1 !.C A I SCi.tiCii Cl C.» 51 • I» 5 of l {i«- r. t i rricc, color, ar*ci tviiticm! or c'.:. »»• r.vrj.f.;;; ociu-r or irrin. .03 P u b lic it y . That school must m T V f* its raciallv nondiscriminanty ;u .:cv known to all segments of tire gen-Tal ccmnumity served by tnc schO?1 ! The school must use one of 'he following two methods to satisfy this requirement: (a) The school may publish a notice of us racially nonCiscr.!.......* tors- policy in a newspaper of ger.-’ ral circulation that serves ail racial u-g- mmts of the community. Ib is publica tion must be repeated at least once annually during the nericdthe period of the school's solicitation for students or. in the absence of a sc licit ition ping. am. during the school's registration period. W here more than one comummi c is served by a schorl, the school mav publish its notice in t:to«o ncwm.mers that arc reasonable likely to ue icau by all racial segments cf d.e t uiunitics that it seres. The notice must appear in a section of the u ‘t S d - NCtf«” ’ K i a .4i»i& w i n j - i a i f U i l t ^ a m i It ."it 1‘T-rsri tiller (t)lumn inches, tt must In* captioned in .it least 1 2 j.-finl bold face typo a« a tint-re of noiulisrj ittinia(t»ry j •, •';Cy as to students, . and.its test rnu* i • be jjri.ntt*st in at .•least/ .If . point *vpo. 'The following notice wifi be acceptable: NOTICE-Gp n g m d i s c r i m i n a t o r y POLICY ’ AS TO STUDENTS T K? M irh- of adm it* stud-vus of .\:iv race, . ,"r* rational and -iiit-ii: origin to ail the rictus, nnvilertes. pn.ter.uiis. and activities sr i.c ra iiy ufc^^cicd ->r jn.icic .iv.nt \K|f« {., stnci.-ntr. at the «rho-l. It d.*w not dis- rrinniMic no die Imms ,,( rac-. color, n.i- tion.ai and ethnic origin in .vlitiinistcati»>a . 1(5 educational policies. a.iimwion* poti- c 1 TT- scholarship and !<vm oreeram s, anti athletic and other schuoi-adm m i'icrrd program s. (b) The school m.is* use the broad- cast media to publicize us racially nordiscri minatory policy if this u*e mal.rs sttch nondiscriniiraiorv policy to ai! segments of the’ general ccri^Pmity t!ic school scr.es. If this method is chosen, the school must provide documentation tii.it the means by which this policy was communi cated to all segments of the general community was rcasr-nabiv expected to he effecttve. Tn this case, appro priate documentation would include ■ was an nccnirnts, ng hours ere likelv ven^nf sufficient duration to convey clearly, and tiiat they 'ere oroaticas; on ratlin “Opics of the :laps*? or s<:r:pt rncord i s!! *. in*X tin t !:hea- ,1 c C-JH.Ate r. i m;hcr of a »•i.'lO '.il t!i.at t;.rv wc;re nir.i |c ciuii *viten t»iC .innonneen ti A ,0 be mrtmiuncatcd to all '( tliC KC!acral comm M il.itv. t.itions likeli er television to be listened to bv uh'-tantial numbers of members of all • iciai segments of the general com- rnnity. Announcements uniat he made tiring the period of the school’s -lica.ttinn fur students or, in the hsence of a solicitation program, dur- ig the school s registration period. Communication of a racially nnn- tMTimittntofy jN-licy as to students y a sctiooi to leaders of r.iciai groups ' !he sole means of ptiotit itv getierallv -** not be considered effective to iak/; t/'.c policy known to ail segments the community. I oi tfus section •■ ..II nut apply when one of the ftii.uwimj paragraphs applies: (a) If for the preceding three years die enrollment of. a parochial or odicr _c.hurch:tHatyd ■ s,• iunot consists, of stu- • tlcmts. at icast 75 percent of whom are members of the sponsoring icligious denomination or unit, the school may mane Known its raeiaily nondiscrimi- natory policy in wiiatcver newspapers or circulars the rciigious denomin.i- tim, or unit utilizes in the communities from "inch the students are drawn. These newspapers and circuiais m ar he those distributed by a particular religious denomination or unit or by an association that represents a num- Ik t of religious organizations of the same denomination. If, however, the school advertises in newspapers of general circulation in the community or communities from which its stu dents are drawn and paragraphs- (b) tm<t ^c) ot this subsection are not np- plienble to it, tiien it must comply with paragraph fa) of subsection ! of tin’s section. (b) If a school customarily draws a substantial percentage of iis students nationwide 0r worldwide or from a large geographic section or sections of die United -States and follows a racially noi'discriminatorv policy as to students, t.".c publicity requirement may he satisfied by complying with seemm 4.02. supra. Such a school may demonstrate that it follows a racially noruliscriminatory policy within the meaning of -the preceding sentence either by showing that it curremlv enrolls students of racial miuoritv groups in tin amugful munbers or, when minority students arc not en rolled in meaningful numbers, that its promotional activities and recruiting efforts in each geographic area were reasonably designed to inform students of ail racial segments in the general communities within the area of the availability of the school. The ques tion whether a school satisfies the preceding sentence will be determined or. the basis of the facts and circum stances of each case.— (c) If a school customarily draws its students from local communities and follows a racially ncndiscrimina- iei|i!t"*metit mav he satisfied r,,f:u plying with section 4.02. tupr-i y.,r|a a school may demon*tra-c *li.it > foiluws a i.iciallv nondii. limr.amr J jioiicv within the meaiiit ceding sentence h>. caning ..f *j, p:c- s.-.iv.vm** ;ij.»f indents of » a- ...! tucanmgful nnrv.- "iiethcr a i»; h r*< > i ig sentence •.• ill basis of the fict* aiul circumstances of each case'. G:u oi the facts and circumstances that :ho Service will consider is whether th_* school s promotional activities ar.d re cruiting eflijrts in each area were reasonably designed to inform students of a:! rarial segments in the genera! commuintics within the area i f the availability of 'die school. The Si nice recognizes rhat the failure by a school drawing its students from iocai communities to enroll racial mii.ititv group students may no: neresoiniv indicate toe absence of a facially nnn- ciJ' criminatory police as to students when there are relatively few or r.n sucii students in these communities. Actual enrollment Is, however, a meaningful indication of a racial!'- nomli* criminatory policy m a <c:r.-| its unity in which a public scr.cc! *~r schem's became s»11 a j <~ •. t to a dew:*: '•*... tion order of a federal court o’ her- wi'e expiesslv became obligated t,, tmpiettu’nt a desegregation plan’under the terms o! any wtitten contract or other coinmitir.cm to which aav Federal agency was a pariv. I he Service encourages «c:*.oo|. ;o satisfy the puhlicuv requirement bv the methods described in suh^-ri■ sr. i ot tiiii section, icg.tr.i'c'i - f w:.i - :cr a school considers itself within ";h- section 2 , because it beliescs :: e methods to be the most e'fcctivr to make known a schools ta. I.iilv r. a- disermnnatory policy. In tlhs me ud it is each school's responsibility :o de termine whether patagiapb 'a ; , :!■ ), or (c) of subsection 2 applies to it. On audit, a school mu**! be prepared to demonstrate that t.ie humic to publish its taciailv noudi'criiuiu.uc rv policy in accordance ’..id: subsection 1 of this section was justified by tine nm.'licauon to it of "■ nun f ' l a ; , or (c) of subsection 2. Further, 47 .. . * prepared to demon- of metal daemmaatson r.t cm- m- ir ; nt T ? hasmubliclv disavowed of faculty and aummiMratvy' yum -s V3. ; rf anv statements pur- imficauvc ot a racially nom.:„..rr..n..- tVr Kavc- -bemV /.madb; o.l ..Its ::;;̂ orV-^hry-ns-m students/ : after' November ju’. 1073} dial "An 'Feature .. io .comply- ')■ -mure ■ to- ■ traiy « its. publicity ot a ,;ub .noc.discruuinz.mry policy as- .■ ntr. to. the e-ytr-vt .that tuc :r its onnrTpaT cfhcird were" ‘sciitit'f 1 must be at programs d in a rac inner. icholcrshiir and bon programs. enoral rule, ail scholarship or orv.narable benefits procurable comply with- flu: guideline*‘wiit prep • narily.rcauit ihychc nropCM-d ccvojancfl. 'o f thr exemt’t icVtus' "of~n <e!mormv' aerertiaTTcc" with *ih i* prtwMhr** -set its. tori:i programs. A 7CG. shew that ail Si.e.facilities arc nonaiscr.min a- 1972-1 C.R. ArrutCATio.-ts Fen. UXLMt’T STATUS. TAX be : a: r.nv <;ivcn : eh col nnxst he with tar on a racially nor.discr.rninri* 1 Ra; asis. Their availability on this current nv.si known tiirougnout tnc so far a Icon" u n it y being served by the sequent tc in .blicity required by tins section cr for that school to be con- ; racially r.ondiscriminatcry as to ts. Consistent with section 3.02, scholarships ar.d loans that are pursuant to financial assistance ir.ts fm.oring memorrs ot one "re racial mhmrity croups that crisp.cd to. pro;neve, a . scr.coU iv nondiscriutirtatory peltry :*>U elvers civ affect t.'.e seneal s ex status, financial assistance pro- i favoring ns racial, srou ns •mbets of one or that do not sigmf- ore: ; o:U the schoo, s .01* immatorv polios &.C .dverse-.v atrect the rt.a: submitted. Kwry school lilir.tr an ap plication for recognition of a tax exempt status mi'.'’ 'tipple me Service owing information'. _____ composition, as of the current arodontic year and prujerted v be feasible for the sub limate year, of— . (a) Student body, and (M Faculty and administrative stad. 2 Amount of scholarship and loan funds, if any, awarded to students enrolled and racial composition of students who have received such awards. .3 A listing of incorporate,!found ers--, board members, and donors of land or huildir.es, whether individua.i or organizations. \ statement v.hcmcr any of me ratal inns described in subsection have at the time otherwise does not require. However, a statement of the method by which the.'racial composition was determine,* . 'must be snppltect. r T C h g ' fnformation requited- .to./«r . •submitted under S'-ctmn 5.0! ■ dmula .not identify' individual .students • tvierr.hers- oi t-hc. facuitwn:ui adirdnU- iraai'-c- skuT,, j ; . • S ec. 6. P u b l ic c o m p l a in t s c ? p .A C t .s t . d i s c r i m i n a t i o n . The Service is interested in receiv ing any information that an exempt private school is not operating tinuer a raciailv nonciscrimmatory pcttcy as to students, including any judicial or administrative determinations to this ciTect. This information may be sent to the ’.oral Distiict Director -f inter nal Revenue or to the Cm:.mbstoner of internal Revenue, 1111 Constitu tion Avenue, NAT, Washington, D .U 20224, Attention Iv.EO. S ec. R;-coKn:;F.K?tNG r e q u ir e m e n t s . .01 Spceilb records. Except as pro vided in section 7.03, each exempt 2 of this section the application is led an objective of individual action on tly will r.< I s ex mpt status. Certification. An rirvd to take official f of a school that claims to be ]y nonciiscriminatory as to stu- must certify annually, under ties of perjury, on an Internal nuc form to be issued, th.it to of Ids knowledge ar.d belief the 4 has satisfied the applicable rc- rrr.cnis of sections 4.01 through of this Revenue Procedure, r F e e b l y ar.d S t o J . The existence t racially discriminator/ policy respect to empio; men: of faculty administrative staff is indicative racially discriminatory pohvy as tudents. Conversely, the amor.ee so,vatc school education and, statement whether any of tho tnaivir.- uali described in subsection^ .01-3 of this section arc oiTicers or active mem bers of such organizations at the time the application is ncld. 5 Year of organization. .02 Limit aliens. 1 For purposes of section 5.01, the racial composition of the student ooca., faculty, and administrative staff may be an estimate based on the ben m- fot mation readily available to me without requiring studen. faculty, or ad- mi nisi ru nvc start to submit miorma- tiic school that the scr.ool private sciu.'C’1 must matntain :or a minimum pci iod of timea yeaiS, be- ginning with the wear at -.cr ’.iie year o f coiapih.ti' ,n or aery.•.is'.doa. me ft*l-;rvv.;ni' rccorciS ,ior : use C\ the Service on ;.r-.ryer request 1 Records ir.ciictitir.5 , . 1 the rac.ai C gs: t *' o Z11 •f) • J of the sttadent Ooc.y, faculty, n:;c! admin istrr.t •vc staff for cat!', acatieinic year. 2 Records sufficient ’:o document tb.at scholarsiiip and ct!her f.r.anr'.al assistance is awarded on a rac.auy nondisc runma'.civ basis. 3 Copies of all brochures, cata logues, and advertising dealing with student admissions, programs, ar.a scholarships. Schools ad'.ertis.n. ticnally cr in a large evograpme seg ment or segments of the - - l 1 -seed onlv maintain a reccic to indicate school, applicants, stunert ...hen and in what puo-...'- tior.s their advertisements weie pl.weu. •1 Copies of all materials usrc by or on be1 aali of the school to solicit con- ti ibutions. .02 Limitation. i For purposes o! section - -acial ccumosition of die stuccn: bod;, non 4 3 - 4 ‘id *.cuhy,' and administrative stntT m ay he an estimate based ott tlie best in formation reaudv av ail.tide .to die J th o o !, w ithout tvqu'inm ' stu d en t-h p- .plicams.-? ev en ts,. f n<y Ity. or. adminis- ' '- tritivo spiff : » submit; itif> 'n‘n.vun:i..t(v the school.- tl.nt the set:oc*l ; otherwise does not require.' For each. a endemic v-'year,-however, a re err'd of ihc.picthot.i- . jjy wiuch., facial composition, .is- dgv tenr.ir.iid must be maintained. A school may not discontinue maintain ing a system of records tha: reflects racial composition of students, faculty, and administrative statT usei on No vember 6 , 19*5, unlcss.it substitutes a different system that compiles sub stantially the same information, with out the advance approval of the In ternal Revenue Service. 2 The Service tines not require that a school release personalis identifiable rt^ords or personal information con- t f l j therein except in accordance with the requirements of the “ Family Educational Rights and P'ivacy Act of 1974," 20 U.S.C. ?i232g(l974). Similarly, the Service does no: require a sch.ool to !;eep recotd> the mainte nance of which is prohibited under state or federal law. .03 Exceptions. The records de scribed in section 7.01 need not be incre.pcr.uer.tly maintained for Internal . • Revenue.Service .use'if 1 Suhsto.rti.dly the same informa tion that each cf these uTuicis would provide has been inciuucd tn a report oj^renorts filed in accordance with i M s ith an agency or agencies of Federal, state, or local government, and this ir.fc i illation is current within one >ear, and 2 The school maintains copies of these reports from which this informa tion R readilv obtainable. Records described in section / . 0 1 ptovidmq iwfcirtnaf.on not incluucti m reports filed with an agency or .vrnrics must be maintained by the si bool for Serv ice use. .0? Failure to ine-r.:,i:n record:. Failure to maintain or to province upon the proper request the required rcrotds and information will create j a presumption that tnc cream.’anon lias failed to comply with these guide- | lines. ! i i See. ft. Mtsarostri't schools. The United St ties District Court for. the District of Coiumbia has Or dered snccilie I’ lhbeiitics and record- ** ’ ' m keeping licrj’.uie'u.-.utT.. for ■ Mi.yijMppt private. sertoois. '(vrcch ' a*. • Cor.nAtty' 1:.30 F; Sujip-. H 50, a(Td.' sub nom. Coil ,t\ Green, ',104 U.S-. 99* (1971). TdVt&c4 extent that dhe'-requiremcrits ,.ei tile. Conit- s Order, vary . frctti- dice guidelines and recordkeeping require ments set fontt'n in this Revenue Pro cedure, the Court's Order is control ling for Mississippi schools. SftC. 9. Ei: FhCTtVE DATE. .01 Section 4.02 is not applicable until February 4, 1976. .02 To tire extent that the pub licity requirements set forth in sec tion 4.03, shot a, differ from those set forth in Rev. Tree. /2-54, 19/2-2 C.B. 834.. they shall not be effective until a school’s fust period of solicitation tor students or, in the absence of a solicita tion program, dining the school’s a r t registration period beginning after November G, 1975. .03 The recordkeeping requirements set-forth in section 7, suf.ru. shail not be effective until January 1, i97o- Sxc. 10. 1:.f !-t c t ;ve on OTitnn occt;- MittTS. . Rev. Tree. 72-54 is superseded. CF!i CQL.201; Xulinv ar.i dfler~.ir.a- i: i f i t e n . i*r.rt l, Stciiom 401, 402; 1.401-1, l . - iu j i a i-1 .} Rev, Prcc. 75-511 \ S ection 1. Portcse .01 Tills Revenue Procedure pro-; vides supplemental and revised pro cedures of the Internal Revenue Serv ice pertaining to the issuance of opin ion letters bv the. National Office as to the-acceptability of the form of certain master and prototype pension, annuity, and profit-sharing plans that include self-employed individuals, and tire status for exemption of related toasts or custodial accounts. . 0 2 This revision is made to permit die issuance of opinion letters with re spect to the acceptability of the form of these plans under sections 401 and, 301(a) of the Internal Revenue Code 1 A .«c r i t TIH-1 • 19. i4 i*4 No»rmt»«r 13. i *3TS. 49 of 1954, as amended by the Eam’e y o Retirement Income Security .-'ct of 1974 (Public Law 93-li d'., approved September 2,' 1974, (hcrcirtafn r r > .ferre’d . to.as• “.the Act” ). - .. . p S ec . 2. 'RaCk « : iq i??.'o '.no ' g e Nkraj. • INFORMATION - . .0.1 Rev. - Proc. . 72-7, .l972-.l C.R- • 715',•'contains procedures relating' to 'the issuance of opirilon letters as to the' acceptability of the form of master and prototype plans deigned to in clude scif-cinploycci individuals. .02 Rev. I’roc. 74-39, 1974-3. CM. •194, was issued to temporarily limit titc issuance of opinion lettets until guidelines could be developed for de termining whether plans meet die re quirements of section 40! o? the Cod.-, as amended by the Act. Rev. Free. 75-33, 197:i-39 I.R.ft. 17, and.orbed the issuance of opinion lettc.s wi'h rest/oc? to those master a» plans for vI’hicii guidelhv. had been developed. Additional g.iiddir.i ' have now been developed permitting the publication of this Revem;ic Fre ’cdure extending the area in wideli '.ph.ien letters on n’.aster and pro to typo plans may be isjucd. S ec. 3. R I.'UNCS AND Ort.Nto:; I.Fit t e k s .01 E.xcr;pt for the pi a deter: bed in subsectior;t .02 below. ;i i'l N.l uVI *1 11 Olticc cf the Service, titsor. r mt: will furnish a written cp.in ;-r. a: to the acceptabili:Y 1 - nr i-r.r.'o:-.• g n • cl*#-* q-s ■•01 of the Code, as am." .tried bv due Act, and suction 50 i L*F.) of t'..e ‘fur; i of any defined contribution manor . r prototype plan d'dgr.i-d to inch'dJ self-employed individuals who me .• adopt the plan. If the fern cf plan includes a master trust or c.c cdi.J account, a ruling will a So be issued witli respect to the exempt status cf the trust or custodial account which forms part of the master oiart. .02 Subsection .01 above do -s not permit the issuance of opinion letter; and rulings with respect to the follow ing: j ( l ) a plan yjliru. ittet! by a s; or.ser ir. ̂ urgani«:.it:o:i o:: ,er titan ;i rt.tdc m :: rciVb.Monul 5̂cc: : .ion, a bank with!. t'r.fj cf .on JOi'd: • '!) , a- insurance rompar.y,. or a rcguia'cd ir. vestment company; - ‘K d I( ii ; . JAM /*»’ < — — O) _ o _ Mr. John A. Bug&s b. that the "Service considers discrimination cn e to include discrimination ].or and national or ethnicthe basis oi: r on the basis ot c.o 11 origin : V. : ■O' Prohib j. u c rr n ]. o v m c n t d i s crimination. Section 4.07 of Revenue Procedure 75-50 states that the "existence of a racially discriminatory poliev with respect to employment of i:acuity and administrative staff is indicative of a racial, discriminatory policy as to stu-dents.^ Conver-y_y» the absence or racial discrimination^ m e...p o.,l̂ l“- of faculty and administrative staff is indicative. „ of a racially nondiscriminatcry policy as to suUu--n-s. c. Rased on Tit3 c . jv - 1072, pron i.nj u U l.. s ervi.ee s 1 C J r , t * O 1 U L on u i.ecriminati on in tee x.o o t The underlying discussion at page 197 oi Commission’s report outlines several notable statutory exceptions to the Title 3.x rule pmt otherwise generally prohibits sexual discrimina tion in any educational program^or activity F C* d C IT T? 1 ’ ̂ 1 pi p n ̂ I r ! r\ ^ 1_ S tl cTl T1 G • • a. i. t- ] i uUC reccivin;; . r : L J. LHC •TLsUnnce :ivon - G ~ r * tthese statutory exceptions were given ruil ̂ in the comprehensive Title IX regulations^ recent.., issued. In view of tine number and breadth cl such exceptions and the continuing absence of judicial, precedents that would support a contrary conclusion, the Service continues_to bcl' crimination in education has incompatible with charitable matter of any well-cstablisr nc-bs cnce of 3 r . a r*s.-ont rary 0LI ,vc tha t sexun.1 .0tl yet come *• 0 :XCm T ip t:.on st r [ i. u [ Fcderal pu,b]_i dis- Hon'.i ire school r.v111:1 n 1 e nubl 1.cation by — a"Tinnni. scrKninatorv ixoi:ey 11 private Section 4 of Revenue Proccdur " 7 r C O,e / j - a 0 every school "include a statecent of llv nonuiscr :minatory■ policy as to s 50 rccuires tudents » '■ - 3 - Kr. John .A. Euggs stuaent ad.ni Further, each school cusL disci* j.ra 1 a n t o r y p o 1 i the rcnernl comm.uuj.v. *cer ta in cxcop L ians, requirement by pubi or by broadcasting announcements ns to 'their racially no r.d .i. s crj.mina to ry pollct ca talc i \ucs ,dpali p.o t. *»Llv •ams, and scho larc;hipeg.• f'■na kg its rapin]d J. c- -Ll_y 0 r.- \ t*r» Co ail sc — ionfs 0 n ■ved bv tb.e schoo ].• r * th chO 0 1 s mus - sati sfy rUi k.is ; a not ice in a r,e*.t gpaPc r pacific guidelines ore riven for either method, includi--** U/C al->uc a requirement tr.at publication be repeated at least once annually and the announcements be during the period of the school's solicitation for students or, in the absence cf a solicitation progr an 4 y during the school's registration period. Rc-ouire '*’.11 tax- c?;c*-riot mrivatc school? to collect and c’-es.s - C. 1. *‘V si. f s* ethnic anc: rrx data on stud..- r.ts facu itv , :' 1 : C • S f • r; for a'ids don, ana roc ipic.p.is o f s cholvsrs.iins m.d aweras. .With certain limitations and exceptions, section 7 of Revenue Procedure 75-50 requires that schools’ maintain-,•'for them use df'"the Service" •' upon proper request, records to indicate- the racial composition of the student body, faculty, and ad t o y ]- ministrativc staff for each academic year and records sufficient, to document that scholarships and other financial assistance are awarded on a racially n.cndiscrirninatcry basis. Recommendation 2 reality ofYou recommenced that we increase the size ana qia^.w; our enforcement effort in the private school area-. Sped suggestions induced: a . Exoauc! ex v l :v:\t.ions to at 1 onst 10 of exrrr.p.t n rivp. t <: k s .i o !. - nn a provide ru.ic.c l in.es i:or uad: select Ton • • • school:;. Our examination program for fiscal 1976 prcvi< for the examination of 1 0 % of nonchurch-related ■1 r. < -• -«Tr" * r r - m - »r,Tj / f \ rr> 4 / ;ir. John A. Humps school exempt- under'- irdividu-a' or . feterninat ions , a f : Lehat . least . 5.0 m iuve net beciv previously, examined.-.-•• Schools- w-il1 be selected .. ■. /on t lie b.a s i s . 9 f;' .1 ;>f o man t. ion c an Lai hed. on our Exempt Organ bent ion Master Ei.ie, supplemented by comp Laint s received and each key district's . knowledge of local conditions. b. Pave Ion field instructions defining what should b e co ve r.a.u in an lout;on n a t i o n . V.'e arc. now final i.7.j.ng private school examination guidelines and a private school examination checksheat to conform our examination procedures to the require ments of Revenue Procedure 75-50. Thus, when the guidelines are issued, examiners will have compre hensive instructions for reviewing all the key factors covered in the-Revenue Procedure. Require inmocli ate correct’’ ve aotie 11 v’r,ere a private scffioo [*’ if to unci 1 0 f a 177" xiconn;ranee C o n d u c t i o t lev:-;::: . nnej.ca:-: vac re •nr: j. ranee 1.s j.ounc; ana connect j ve action 3.s promt sec:. When a school is found to be in noncompliance, it is given a reasonable opportunity to clarify or change- 'its-policies■‘dr.d- practices' in’ order to retain i c- ! ‘ - h j* *“■' v * •_ ' i'' i »Ca i5 c r iminato 0 cl s a. s expedi-1' - ±. .-> ex cm.nt sta If a school is unable- or unwilling e* >* irni nntory r c era ire me. n t s , it • -. 1 k- evidence and be heard in la r appeal. procedures. Hcw- 11 as availed itself of all its L a N n I • cm ** 1 k *- 'J tll‘d lias not conformed.1*3minatory requirements, tnc Service . ousiy as possible to revoke the school's exempt status. The Service has procedures for recommending a future examination of any exempt organixatioa. In our private school examination guide 1 3 nr s . \;e ill cmphas ime 1 11 o need to recomm-oad future examinations for private schools where nen- comp] unite lias been found and corrective action has been promised. • T --v - • , . f y .«-} v > {***# <— *T** * ' M r . John A. Burrs • .R-'oc.onir.rnjnLgon- 3 h v« ' ; v-.y.'vyo A ' . •> wW '•••• 'You re co.7rr.cn Jo cl --that:' Aha Service apply.the.same standard's hand-. procedures''.'. to ■'church-sponsorerf-private-' schools as airâ ..-.applied to- -all- other: private School s''and that weF give'"'priority to reviewing a broad cross section of church-sponsored private schools. Revexvje Rn 1 i:i;; 7 57 s _ i r>l orovi.des that Fnurch-rcl ated s; :o 1 arc subject to the requirement of a racially nor.discriminatorv :o students in order to qualify for ex-emotion fr:roapolicy Federal income tax. Cur fiscal year 1970 examination' program provides for the examination of some church-related schools in ci manner consistent with the effective dates in section 9 of Revenue Procedure 75-5050. Generally,— --------- j j — t ‘ selection of elementary and secondary•schools. plan to emphasize the »Reco::rm?.ndnti on \ou recommended that IRS and HEW devc-lon uniform complianc standards and coordinate private school reviews and that' an information-sharing mechanism should be adopted to avoid any duplication of effort. As we have previously discussed with you. n r ,-7 U t v.i Service do not have identical legislative responsibilities in . }lP^5 b̂p,.-,2AhoQ,l - . a r c t s i * a e h -.nece-ssa-ri-lv ' 1 Lmi.ts--the--- •' ' odgree'of uniformity* possible. .However, . cur staff • members have met with-HEW personnel'several times’v/ithin the last year. As a result of these meetings: T..7c are on the mailing list to receive the Inter- cigGiny Repo c t and tne Lrst ot Title VX Assurances Received that are published by HEW's Office for Civil Rights. We have_obtained information on racial and ethnic classifications that will be useful to our examiners when disseminated in our private school ex, guidelines. Lnation * Mr.* John A. Buggs •; J:,r- iv:-; \ -K^-T ^ T T j t n u ̂ to "each, of our .region^ and_kcv^ ^ ; , distrxea.. ifc'c:d- • ': b ,̂ C:'V :“M.•/-;■,.:m ;.Vc ;,t-, in our examination program.Schools 1 i f n > - n i s h HEW a. raon^hl} U s t nbfpri51t4 schcoLs^hnt have bean recognized as tax-exempt: contacts v/n.t ..a,., n- g;; f Ju- p Cc to• explore Inc 1/ •■ l — W t k » ‘ k —o f A . g r i c u i t a r e a;’.d _ t h •:. e-Ul w 1 * ̂‘ 11 “ - , ̂ r • V \ • *> • i-.. v —> ••- i v n 1 p scl'lOO 1 cate! O I- [ avauabj.L.. ■ O j. t— ■'‘yy' ' , t -i nror^or"t*- tee nrovrsicn-. selection p u l s e s . - '•« «;»» * procedure 75-50 into cut of Revenue nuixnn c M ~ M organization lost.*, end tramm^, i>< Tr-crral Mevenue Manual. Whaleapplicable portions Oi .nc l n w C i ^ W v W ^ ^ rccoi~;ondat t h o y M r M f c l r o i M M M M o M t l W stops we have taken that no relate to your reccnrr.endations. With kind regards, * ey-v, vr:̂ ;-̂ VSr: w M i'-M.-y tfb MM.; -W cssi.bI c value :or audt 10 k 1. h j Sincerely, , / C A2.cr.aude:/s/ iCXUu t. Comriissroner Enclosures (2) ■-$ *jz ‘ ■ *'; ;r ’•'**. •■**•• '-7*'! " *% ’ S* . !< ' £4 f - ’ .I'" •“ A* *%; ' .*: ,Vi4v?7. . . V ' ' / w *V : A' _ f-’ 0 0 V* v—W •• CERTIFICATE OF SERVICE • *%; •.’ •; - :V.- .-a v h.'y ... '• ’.. • *'• ' ■ • ■ •••-• r ‘ .--.-s • • .•.?.• ' •• • •■ . •■ •.’ ’ • ; • ' ’ " The undersigned certifies that a copy of the foregoing Motion for an Order Substituting Parties Defendant, to En force Decree, and for Further Declaratory and Injunctive Reiis has been served, this day of July, 1976, by first-class mail, postage prepaid, on the following: Honorable Meade Whitaker Chief Counsel, Internal Revenue Service 1111 Constitution Avenue, N.W. Washington, D.C. 20224 Honorable Scott P. Crampton Assistant Attorney General Tax Division U.S. Department of Justice 9th £ Constitution Avenue, N.W. Washington, D.C. 20530 eys for Defenear, ts 3 . Leonard, Esquire 9 th S treetf N . W * .gton , D.C. 20036 .ntervenoc / i /yf / ;/ CJL norma:; J': chachkin f.. ___ .... - s a d - APPENDIX E VOLUME I UNITED STATES DEPARTMENT CF THE TREASURY INTERNAL REVENUE SERVICE HEARING PROPOSED REVENUE PROCEDURE ON TAX EXEM PT P R IV A T E SCHOOLS Tuesday, December 5, 1978 Departmental Auditorium 14th a Constitution Avenue, N.W. Washington, D .C . c h a i r m a n : a l w i n b o r n e A s s i s t a n t C o m m i s s i o n e r and Exemp t O r g a n i z a t i o n THE PANEL: JEROME KURTZ C o m m i s s i o n e r o f I n t e r n a l R e v e n u e STUART SEI GEL C h i e f C o u n s e l LAURALEE MATTHEWS A s s i s t a n t t o t h e C o m m i s s i o n e r JIM FULLER S t a f f A s s i s t a n t t o C h i e f C o u n s e l JOE TEDESCO D i r e c t o r , E x e mp t O r g a n i z a t i o n s D i v i s i o n MILT CERNY E x e mp t O r g a n i z a t i o n s \ c r r e ^ s p o r t i n g C o m p a n y 1 2 3 4 5 6 7 8 9 10 1 1 12 i:i 14 In Hi 17 l> 15 21 •> • > •> 2 J D C A W C O PAGE COMMISSIONER JEROME KJRTZ, Opening Remarks ORRIN G. HATCH United States Senator, Utah JOHN B. ANDERSON Representative, Illinois, 16th Congressional District MARJORIE HOLT Representative, Maryland, 4th Congressional District 20 31 LAWRENCE P. MCDONALD Representative, Ohio, 23rd BARRY M. GOLDWATER, JR. Representative, California, ROBIN L. BEARD, JR. Representative, Te inessee, 36 Congressional District 39 26th Congressional District 42 6th Congressional District RONALD M. MOTTL Representative, Georgia, 7th Congressional District PEGGY JUNE GRIFFIN Evansville, Tennessee STEVEN D. SYMMS Representative, Idaho, 1st Congressional District GEORGE E. REED General Counsel, U lited States Catholic Conference WILLIAM 3. 3ALL, Counsel National Committee for Amish Religious Freedom Association of Christian Schools International Organized Christian Schools of North Carolina THOMAS LUKEN Representative, Oh o, 2nd Congressional District WILLIAM J. McMILLAN, President, Florida Association of Academic Non-Public Schools Acme Report ing C o m p a n y '.•32) 5̂ 8 ure* _ O p - 4 6 52 53 59 6 6 34 i 6 1 2 :» 4 5 6 7 8 9 10 11 12 1.1 14 i.r* 10 17 18 19 20 21 22 20 24 25 CHAIRMAN WI 'IBORNE: Good morning and welcome to the Internal Revenue Service public hearing on the proposed revenue procedure relative to private schools. I want to welcome all of you. Before we get started, let me introduce the members of our panel. At my far left we have Joe Tedesco, who is the Director of our Exempt Organizations Division. To Joe s immediate right we have Jim Fuller who is Staff Assistant to the Chief Counsel for the IRS. To Jim’s right we have Laura Matthews who is an Assistant to the Commissioner of IRS. And to Laura's right we have the Chief Counsel for the IRS, Stu Seigel. To my immedi ite left we have the Commissioner of IRS, Mr. Jerry Kurtz. I t link the Commissioner would like to make a couple comments bef jre we get started. ( C e m j , py COMMISSIONED KURTZ: Good morning. I welcome you to tnis public hearing o i the proposed revenue procedure that would establish guidelines for determining whether certain private schools claim L.ng tax exemption have a racially, non- discriminatory policy as to students. We are here to receive comments and suggestions from members of the public and for representatives of organizations affected by the propo >ed revenue procedure. During the ihree-month period since the proposed procedure was published in the Federal Register, we have A c m e R e p o r t i n g C o m p a n y : a 4 3 S d _ ZZa 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 IS 17 18 19 20 21 22 23 24 25 received a great many written comments and numerous requests to speak at this hearing. As a consequence, this hearing is scheduled to continue for four days, through December 3, so that all who requested a time to speak will have it. xhe pro ceedings will be recorded and a transcript will be prepared. I want to take a few minutes to explain our reasons for promulgating this proposed revenue procedure, and to address what we perceive to be some fundamental misunderstand ings reflected in many of the comments we have received about the role of the Internal Revenue Service and the proposed pro cedure itself. Many <>f the written comments, although critical* offer constructive suggestions and comments. However, others have strongly criticised the Service on the grounds that we are somehow exceeding our authority. The primary function of the Internal Revenue Service to collect the revenues of the United States. In doing so we are bound to carry out the laws as enacted by Congress and as interpreted by the Courts. Section 501(c)(3) of the Internal Revenue Code grants| exemption from income tax to entities organized and operatec j exclusively for relig-.ous, charitable, scientific, or educa— Ii Itional purposes. Section 170 of the Code grants a tax deduction for contributions mace to such organizations. • • |j The Internal Revenue Service, in its role of admims-j Acme Report ing C o m p a n y / L̂ > _ 3 1 tering the tax laws, nust determine whether a particular organi- 2 zation claiming tax exemption is entitled to exemption under n the statute and whether contributions to such organization 4 qualify for deduction under the terms or the statute. The Internal Revenue Service has no interest in the admissions policy of any school except as that policy may affect its claim for special tax treatment under the tax laws. In 1971, a Federal District Court in Green v. Connallv, a case which was affirmed by the Supreme Court of the United States, construed the statutory language of Internal Revenue Code Section 501(c)(3) wnich, as I've stated, exempts from tax those entities "organized and operated exclusively ror religious, charitable, scientific, . . . or educational pur poses," and held that private schools with a racially dis criminatory policy as to students were net entitled to tax exemption and tax decuctible contributions. Under the common law, an organization, to be recognized as a charity, may not operate illegally or contrary to public policy. The Court recognized those principles and ruled that private schools are not entitled to tax benefits accorded to charities if they contravene the well established Federal public policy against racial discrimination in education as expressed in Brown v . Board of Education and the Federal Civil Rights Laws. Accordingly, that court enjoined the Secretary of the Treasury and the Commissioner of internal Revenue ^rom Acme Report ing C o m p a n y I/O.'l 4 M M M - 1 2 3 4 5 6 7 8 9 10 11 12 1.1 14 l.p !f 1' 11 1! •_>i > ■j ■j 9 ranting tax exemption to private schools in Mississippi that iad racially discriminatory admissions policies. The Service mblished Revenue Ruling 71-447, stated the policy that private schools with a racially discriminatory policy are not entitled :o tax exemption. In 1975, the Service held that the rule against racially discriminatory admissions policies by tax exempt private schools was e [ually applicable to schools operated or controlled by churches. This Service position has been upheld in Federal District Court against challenges that it violated first amendment guarantees. The Service has required private schools that claim tax exemption to adopt a written policy of nondiscrimination and to publish it annually. However, in spite of these requir ments, there are schools that have been adjudicated by Federal courts to be racially discriminatory, and therefore ineligible for state aid, yet have retained their Federal tax exemption under our existing procedures. The plaintiffs in the original Green case I mentioned earlier have reopened the case and at approximately the same time a nation-wide class action was filed challenging the adequacy of the Service's enforcement in this area. The Civil ; Rights Division in the Department of Justice and tne uommissior^ on Civil Rights also have been critical of the Service's rules j in this area. We naie reviewed our current rules and have Acme Report ing C o m p o n y 2C 2 62a 48.HH -Le. concluded that more objective rules may be necessary to identi fy those schools whicn, while claiming a nondiscriminatory policy, are operated in a manner excluding minority students. The Court has deferred any action on the two oases at this time, pending resolution of the Service's final action with regard to the proposed revenue procedure. In determining whether a school is racially dis criminatory, Federal courts have held that the fact that a school was formed or substantially expanded in the wake of public school desegregation, together with an absence Ol minority enrollment, creates a "badge of doubt" which places the burden of proof on the school to prove, by clear and con vincing evidence, that, in fact, the school's facilities are l1 open to all races. The courts have looked to factors such as vigorous recruitment programs, scholarships for minorities, and minority faculty members, for clear and convincing evidence of non discrimination in the case of such "badge of doubt" schools. Of course, the plainest evidence of nondiscrimination is the oresence of some minority students. The proocsed revenue procedure is directed to school^ that have already been adjudicated to be racially discrimina- | torv or that would be "badge of doubt" type schools under the j approach of the Federal courts. It is our attempt to bring the Service's procedures for testing claims to exempt status into .Acme Report ing C o m p a n y 1 2 3 4 5 6 7 8 9 10 11 IS ir 1< 1! Il 1 1 1 •J 1 1 ine with the approach of the Federal courts in a reasonable nd uniform way. The proposed procedure spells out two ways in which ichools can demonstrate that they are operating in good faith .n a nondiscriminator/ manner. The first and most obvious way _s for a school to show it currently has minority enrollment of more than an insignificant number. For this purpose, the revenue procedure reli.es on an objective safe-harbcr test— is the percentage of minority enrollment equal to 20 percent Oj. the percentage of the minority school age population in the community? Thus if t le minority student population m the community is 30 percent, a 6 percent minority enrollment in the scnool will satisfy the "safe-harbor" test. If a school's minority enrollment meets this test, that will be the end of the inquiry. Many have incorrectly characterized this objective safe-harbor approach as establishing a quota contrary to the Supreme Court decision in the Bakke case. It does net. I- is simply a guide for our examining agents. It merely says that :his level of minority student enrollment itself is evidence | of nondiscrimination. In cases where the safe-harbor test is not met, the school will not be determined to be discriminatory. Rather, the Service will extend its inquiry into other facts to make such determination. 4cme Report ing C o m p a n y 2 021 6 2 1 2 2 3 1 4 5 <5 8 9 10 11 12 13 14 15 lfi 17 18 The proposed procedure sets out criteria by which a reasonable determination can be made as to the question of discrimination in cases not covered by the safe-harbor, based on factors used by the Federal courts. We are very concerned about schools that claim to have special facts and circumstances not covered in the pro posed procedure. We will be reviewing the procedure, for example, to determine whether it applies unfairly to schools such as cer tain religious schools that may face special conditions in attracting minority students. We recognize that efforts have been made by many sectors of the religious community to eliminate discrimination in education. It is not our intent aether to impede these efforts or to hinder the educational. programs of those organizations. The testimony we receive at this hearing, as well as the written comments submitted to us, will enable us to evalu ate more fully the problems involved in the proposed new pro- 19 20 21 22 I 23 j 24 | 25 :edures and assist us in making any appropriate changes. We ^ant to make every re isonable effort to avoid hardship to scnools whose practices and policies are genuinely nondis- zriminatory in charac ;er. At the same time, however, we believe we are required under the law to enforce the well settled Federal policy to den/ exemption from tax under Code Section 501(c)(3) and the deductibility of contributions under Code Acme Sep or ting C o m p a n y 2021 62 3 - »« 6 _ Q p — 6 6 MR. SEIGEL: Thank you very much. CHAIRMAN WINBORNE: Any more questions? Than* you very much, Sir. Is Mr. William B. Ball present and ready to speak? MR. WILLIAM 3. BALL, COUNSEL, NATIONAL COMMI-TEE FOR AMISH RELIGIOUS FREEDOM: Ladies and Gentlemen, I should like to say at the outset, in speaking on behalf of the National Committee for Amish Religious Freedom, the Association of Christian Schools, International, and Organized Christian Schools of North Carolina that I do not represent any racists schools and my own background would preclude my Going so. was attorney for important groups of Amicci Courier in Loving v. Virginia, the miscegenation case, in Jones v._Meyer, and I was volunteer counsel for several years in the 1960's for the Pennsylvania Equal Rights Council. Consequently, what I have to say today is not against the background of hostility I to efforts to provide for racial justice. j I am, however, very much concerned about religious liberty. And that's the point of my testimony on benaif of these groups today. The founding of the various religious schools for which I speak has been recognized by the courts as a most obvious expression of religious raith and a matter I of fundamental right. But ic's important also to understand ji that tne point in tine and the place at which any such school j is founded or maintained is likewise dictated cy the ivcme R e p o r t i n g C o m p a n y •202> 4863 I 1 2 :i 4 5 6 i 8 9 10 11 v: i: i< 1; V 1 1 1i 6 7 ecessities of faith. That is to say if Amish settlers, for xample, locate in an area where they can form and sustain immunity life, there, too, and then, too, must the Amish ichool be established. So also are fundamentalist Christians laced with the same necessity; where their jobs and tneir lomes are, there they must establish their schools. But under the proposed revenue procedure, those schools may well lie in a danger zone. That is to say that if a religious school, by virtue of the proposed revenue proce dure, is a reviewable school, it's therefore prima facie discriminatory, it's therefore prima facie liable to lose it's tax exemption, it's therefore prima facie in danger of extinc tion. That's because the definition of community contained in Section 3.06 of the proposal, coupled with the time period contained in Section 3.03. | Now, the term community as used in the proposal bears no rational relationship whatever to the religious necessities of the communities of faith which I represent today. They attempt to tie the faith community to public school population j patterns. The great error in the proposed revenue procedure in this respect is that it attempts to force the schools of 1 the faith communities to be related to population patterns of j public school districts. The church school is forced either then to bear the very significant consequences of being Government classified as Acme Reporting Company 202) 629-10 58 __ / I O _ 6 8 discriminatory or else it must accept the hitherto unheard or intrusion upon its liberties o£ having Government say whom it shall enroll as a student. This imposes a secular enroll ment standard in schools which have been defined by the Supreme Court of the United States as "integral parts of the religious mission" of the churches which operate them. And this, under the First Amendment, may not be. It would be bad enough if the definition of community in Section 3 were clear and stable. Unfortunately, it is not. Community is not only the public school in which the religious school is located, it is that "together with any other public school district from which the religious school enrolls at least five percent of its student body." So let's now consider a religious congregation which founds a school lying on the outer edge of school district A and which draws children of that church's faith from that and four other school districts— 3, C, D, and E. Some of these districts have what the proposal calls minority children, and some don't The administrator of, let's say, a 50-pupil religious school is then put to the exquisite task of checking out the roxlow- ing: (1) find out the exact school age population of each of the five school districts; (2) ascertain exactly the number in school districts a , B, C, D, and E of school age children in each of the named categories— Black, Hispanic, and so on and of any ethnic categories which might be mcludec under Acme Report ing C o m p a n y o<?; •-pa - lie 1 2 4 5 6 7 ft 9 10 11 12 12 U I' 11 r i i • i 2 5 9 nat rather dubious term which you have inserted in your efinition of minorities, namely, including; (3) figure the ercent which the population of the minority children bears to he school age popilation of each of the five school districts; 4) ascertain per district the number of children in one school rho are residents in school districts A, B, C, D, and E; 5) figure out whether in each case that number equals five jercent of one’s student body; (6) to avoid being a reviewable school with ail the cire consequences which that entails, idmit to enrollment a sufficient number of new pupils irrespec- ;ive of any religious consideration in order to ccme up to the 20 percent factor, even if this necessitates dismissing rhildren from your scnool whose parents enrolled them in your school in obedience to religious conscience. The problem is further complicated by the time factor which appears in 3.03. It is true that if your school lacks the 20 percent minority factor stated m the latter section, it will net be a reviewable school unless it was formed cr substantially expanded "at or about" the time or j public school desegregation in that community. But what does j "at or about the time" mean? ! In Section 3.03 IBS gives itself a blank check; note j the wording. "Generally, a school formed or substantially expanded during any calendar year within the period beginning one year before implementation of an initial public school i e r o a Secort ing C o m p a n y I 2 U 2 ' lilft 4l4*M 70 ̂ : 4 14 17 I 18 1 i:i i 24 : 25 i desegregation plan in the community and ending three years after final implementation of such desegregation plan or modifications thereof will be considered as formed or sub stantially expanded at or about the time of public scnocl desegregation.” IRS thus tells America what the public employees of IRS will be willing to consider as falling within the time span generally? that is to say, usually, but not necessarily always. As we keep in mind that this proposed revenue procedure is intended to operate throughout the nation as law for nonconformance to which a church's educational ministry can be economically destroyed, we come to look at the terms of the time span itself, whether it is generally observe^ of not. There we see the words "final implementation or such desegregation plan or modifications thereof." But "modifica tions thereof" leaves the terminal date open because the equity powers of the courts give them a future jurisaication to continue to modify the plans. The wide-openness of tie time period is made even more evident by the following words: "The time of the initial and rinal implementation of a desegregation plan will be determined with reference to the effective date specified by the terms or the appucabxe court order or voluntary plan." That does not say that the time runs from a date certain to a date certain. It says something else: "with reference to." That means that the IRS Administrator need Acme Report ing Com p any 20 J > 126 4«rt!j 71 only in some way to take the effective dates into account or in some manner refer to them. Attention now must be turned to the meaning of "substantially expanded." The proposed revenue procedure 3.03 says this: "Whether a particular school will be considered substantially expanded is dependent on all the facts and circumstances of such expansion including the per centage increase in the school's enrollment and the relation- snip between the school’s expansion and the public scnooi desegregation plan." Here, again, IRS gives itself a blank check and gives the little religious school administrator a headache. Seemingly, IRS must have the latitude while the administrator must have all the fortitude. IRS administrators will con sider "all the facts and circumstances" then make their own subjective 3udgment unregulated by any knowable public standards Thev will ponder "the percentage increase in the schcoi s enrollment," but according to no knowable public standards. The will contemplate "the relationship between the school's | expansion and the public school's desegregation plan," out without any knowable public standard to bind them down. They i will, in a wore, do their own thing because there is nothing he-e to bind them to do otherwise. But it may be objected tnai i a religious school may purge itself of the harsh presumption that it's racially discriminatory by evidencing under Section 4 that it is operating in good faith. ) Acme Report ing C o m p a n y >02' 621 7 2 1 1 3 5 6 7 8 9 10 11 12 13 14 13 !6 1H 19 20 21 2‘2 23 24 25 As he now comes to read Section 4, one religious school master is necessarily dismayed. As has been seen, it is as though he had been told to hurdle a 100-foot wall. Now in the balance of Section 4's provisions, he's told if you can’t hurdle it, try jumping from it. Section 4.03 sets forth five items of evidence, at least four of which must be mani fested by the religious school if it is to be considered operated in good faith. I would like briefly to comment on those points. 1. The granting of scholarships or other financial assistance "on a significant basis" to minority students. Comment: (1) The church funds are trust funds for reli gious purposes. They cannot be diverted by government to other purposes, save as these would relate to matters, for example, of i-ecairs, fire safety, intimately related to health or safety] j and then only pursuant to patently clear and reasonable statutes.i! (2) The phrase "on a significant basis" is further a-oordian-like language giving the IRS administrators j ! unconstitutional discretion in evaluating the evidence. (3) T know of no religious school today which II has a n: c .< e 1 to spare. Their resources are only as deep as 1 their parisnioners' pockets. The schools which I represent are all relatively small schools; they are not publicly funded.. ! The oarents who enroll their children there typically do so at j I I ! Acme Report ing C o m p a n y M . '1 HIM M IL, _ 73 great personal sacrifice. They already pay public school taxes. Government is without constitutional power to extract from them their monies dedicated to religious education of their children to support an administrator's social program. 2. Active and vigorous minority recruitment programs (1) Apart from the total unconstitutionality of Government's purporting to make private non-tax supported religious institutions engage in recruiting programs is fact that Government has no power to make these institutions pay out of their limited resources for a non-Congressionally authorized social program. (2) Here, again, through the use of the broad language "active and vigorous" we have wording which makes the public administrator the legally uncontrolled judge of tne evidence and the religious schoolmaster like a yoyo on the string of the administrator's discretion. (3) IRS's unfamiliarity with the subjects it seeks to regulate is no more clear than here. The funda mentalist schools do not recruit. They evangelize; and evangelization is not a thing subject to Governmental direo- t ion. CHAIRMAN WINBORNE: Mr. Ball, you have run sub- i stantially over; you're pretty close to the end new. j MR. 3ALL: I'm just gerring near the end. May ; Acme Rap or tirvp C o m p a n y 2C2) 928 4-388 _tH a __ 74 1 2 appreciate CHAIRMAN WINBORNEs it. Could you just wind it up? We'd 4 ft 6 7 a 9 10 11 12 i:t 14 lft Mi 17 18 19 I 24 I MR. BALL: I will do that. I was going to comment briefly on the fourth point, which was employment of minority teachers or professional staff. (4) The schools that I represent have as a prime criterion religious selction of their staffs and teachers. The requirement of the Amish is that these people be Amish, and of the fundamentalist Christians that these people be born again Christians who totally comport with the moral and faith standards of the church. They cannot be made to accept teachers on any other criteria. I'd like th>:n to simply come to my conclusions, if I may, and they are four; I'm sorry; they are eight. VOICE: Mr. Chairman, excuse me just a minute. I would very respectfully request that we hear Mr. Ball out. I think that he voices a great many massive points that this group is interested a: this time in hearing. CHAIRMAN WINBORNE: Mr. Ball has said he is reaching his conclusion, as I understand it. MR. BALL: Yes, Mr. Chairman. I appreciate your courtesy in this matter. I was originally scheduled, ao you know, speaking for three groups to be able to speak for 20 minutes and that was reduced by Mr. Cerny s texephone ca^x the other day, which I accept, but I'm at the conclusion now. Acme Report ing C o m p a n y I 2 01' 5 2 H 4 M 8 8 75 1 2 3 4 5 i 6 7 8 9 10 11 12 13 14 15 i io; i 17 IN 19 20 21 •V) j W i! ! M i '25 i s r " * * r M B v*+ The first conclusipn1 that I think, Ladies and t". i. Gentlemen, is very clear. These regulations do violence to the civil rights of religious schools and pastors, parents, and children who relate to them. Government is never going to advance the legitimate interests of minority groups by imped ing the enjoyment of the religious civil liberties of all the people. Secondly, the proposed revenue procedure fails the rests laid down by the Supreme Court of the United States for determining the constitutionality of Governmental action under | the First Amendment. It does, in fact, as we have shown, restrict and impede and, indeed, threaten the existence of bonifide peaceable religious activity, which under well known court decisions has been held to be protectable. This regulatory scheme also violates the establish ment clause of the F.rst Amendment, because the Supreme Court has held that clause to be violated not only by Governmental action which excessively entangles Government and church schools, but also, under the Marberger case, by action which pcses the potential lor such an entanglement. I believe these guidelines to be entanglement itsel-. The proposal, I think, clearly in Section 602 pro vides a violation of equal protection by singling out newly formed schools and making that solely the criteria of the classification. It's a very dubious statutory authority and i Acme Report ing C o m p e n y ‘<£0*1 a HUH — /Qa /— 1 2 :i 4 r, 6 7 a a 1C 1! r, i: l i / 7 6 'll be happy to explore that if you should question me about I think these regulations are shot through with self- snferred grants of wide open standardless powers for IRS iministrators. I have tried to indicate that previously. I'm concerned, of course, about the burden of proof uestions but I have not taken those up because I think at he very threshold of inquiry is the religious liberty question here respectfully refer you to the subsequent testimony of lr. Thomas Neuberger of the Christian Legal Society who pro vides an excellent analysis of the decisions of the Supreme :ourt with respect to burden of proor, and so on. Then, second to last is the fact that we are fearful :hat if based solely upon IRS administrators' interpretations 3f Supreme Court decisions, which we feel are not in point, IRS may fasten this proposed revenue procedure on religious schools, there's no reason why in succeeding years the admin istrative imagination will not produce further and worse intrusions upon those schools. I refer you to the letter of Mr. Jeffrey Miller of March 20, 1978, of the U.S. Commission on Civil Rights. Plainly, in conclusion, the present proposal may be only a hint of what some public servants have in mind with respect to the rights and liberties of the citizenry. It s no answer, Gentlemen, to say that IRS employees are expert in ail manner of religious, racial, and social questions and must Acme Report:ng Company ( «. 02) 528 udUd — D — 1 2 :i 4 s 6 < 8 9 u; li i: i: i i 7 7 ■ a* «■• +*■ 'tv ■*■ ■> •̂5? ■ ‘5. e celied upon no deal wisely and fairly as administrators, ly clients are as little desirous of the favor of public ser- ■ants as they are fearful of their disfavor. Their reliance .s not upon public employees, but upon laws given by the legislature and within the constitution. Thank you very much. MR. FULLER: I have a question, Mr. Ball. You talk a lot about constitutional rights. Is it your position that a private school that’s operated by a church has a constitutional right to racially discriminate? MR. BALL: What do you mean by racially discriminate,' MR. FULLER: Have a racially discriminatory policy. MR. BALL: What would you mean by that, if I may ask MR. FULLER: Exclude minority students. Is that your position? MR. BALL: No, that is not the position. First of all, Green v. Connal.^, which I think we have to accept as law as it has been developed this far, arising cut of the facts or rhat case, tell us that a private school — MR. FULLER: Church school? MR. BALL: Wait a minute. A private school which has a policy of racial exclusion will be denied tax exemption. Now there was reserved in that decision by Judge Leventhai the very question w h i c h you posed, namely, wnether there a^e other considerations involving religious freedom m tne case Acme Report ing C o m p a n y o / 1 2 •>• l ■i 5 6 7 3 9 1(1 11 15 i: i- i. l i i l 7 3 f religious schools. I won’t give you my personal opinion on his as a citizen. An opinion as far as being a lawyer goes s simply another lawyer's opinion on what the reach of rcen v. Connally is. But one thing is clear; one thing I .hink is very clear: It’s one thing to observe the holding in :he facts in Green v. Connally; namely, exclusion or children jecause of race. It’s another thing entirely to seek to impose ipon religious schools a whole administrative arrangement such is this, multiple regulations such as these are— the Supreme :ourt never got near that issue of whether you could regulate those schools. Wouldn't you agree? MR. FULLER: Are you familiar with the Goldsborough Christian School's case? MR. BALL: Yes, I am. MR. FULLER: Do you have any comment on that? MR. BALL: Mo, I have no comment on that case at all. I'm familiar with it and it's the sole case that is in point. MR. FULLER: What does it hold? MR. BALL: The District Court in that case held that: a religious school which practices racial discrimination may not have tax exemption. Is that your understanding? Now, it says nothing at ail about imposing upon the I schools a whole body of regulations. It didn't field that; those weren't fact3 in the case. j MS. MATTHEWS: I have a question about your comments j Acme Report ing C o m p a n y 2 0 2 > 6 2b 4 d d A — O o * - 7 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 f» 17 18 19 20 21 22 23 24 25 on substantial expansion, and the determination of whether a school has been substantially expanded and therefore would be reviewable under the proposal. You stated, if I'm correct, that looking to the facts and circumstances of the expansion and the relationship of that expansion to the public school desegregation was, in your view, an unsatisfactory standard because it was too flexible. What standards would you suggest as being more precise, or more reliable? MR. BALL: Well, I tall you, I'd like to provide you— and I don’t mean this sarcastically at all — I'd like to provide you advice or seme good thoughts on that. I didn t come prepared to make a suggestion on that score. But I do know that the way to do it isn't this wav. You can't cure a problem by worsening a matter. This language is Sxmply w-de open language. It's unconstitutionally vague as I understand tne cases. It's just wide open language. And under that, plainly, Ms. Matthew:;, the Administrator can decide I 11 take into consideration all the facts and circumstances. That's no standard at all. This is law for the United States It's incredible law for the United Stares. CHAIRMAN W3NBORNE: Thank you very much, Mr. Ball. MR. BALL: Thank you. CHAIRMAN WIN30RNE: Do we have as yet any of the Members of congress who were scheduled to testify? I- you would like to testify, come forward. A c n e Report ing C o m p a n y .202) 523 4-iUH A S . <»• . I B