adequately covered in the time permitted for an oral presentation. The three broad matters addressed are: (1) possible modifications of the proposed procedure under consideration; (2) analyses of available data relevant to some factual claims in public comments to the proposed procedure; and (3) rebuttal to the assertion made by some that the 20 percent guideline of the proposed procedure is a "racial quota". The first two matters are addressed in detail in, respectively, Appendices A and B to this written extension. Summaries of those appendices, plus certain important caveats and qualifications concerning those appendices, are set out immediately below. Following those summaries is a discussion of the error we perceive in objections that have been made concerning the 20 percent guideline.

Appendix A.-The possible modifications described in this appendix are only submitted for IRS's consideration and have not taken into account questions of administrative burden that IRS is in a better position to assess. As we noted, in our oral comments, our approval of the proposed procedure is not conditioned on the acceptance of our suggestions. For the most part, the modifications we have proposed simply make it clear that IRS has the discretion to consider the factual legitimacy of some claims, such as the contention that the guidelines, as drafted, are inappropriate for certain types of private schools. We think that discretion is implicit in the proposed procedure as it is now drafted when read as a whole. Therefore, we do not view our suggestions as making any change of substance, and IRS might legitimately determine to deal with unusual circumstances through case-by-case resolution as concrete cases in the application of the guidelines arise in the future, rather than modifying the guidelines at this time.

Appendix B.-The analyses of data contained in this appendix are primarily addressed to two factual questions raised or implicit in some of the public comments. One question arises from the claim that private schools cannot reasonably be expected to meet the 20 percent guideline because minorities as a group do not enroll in private schools in sufficient numbers. The other question arises from the apparent presumption underlying some comments which expressed concern that large numbers of church-related private schools would be covered by the procedure. We are aware of no factual data submitted to support either the claim or the presumption. The only data readily available to us relevant to the questions are derived from the record in a case concerning state support of private segregated schools in Louisiana, Brumfield and United States v. Dodd.

We recognize the limitations in using the data available to us and appropriate caveats are noted in Appendix B where our data are incomplete or otherwise subject to some limitation or defect. We believe, however, that the quality and comprehensiveness of the facts used is sufficient to show that the claim of a lack of minority enrollment in private schools is, at least in Louisiana, not well founded and to indicate that the concern that a large proportion of churchrelated schools would be covered by the procedure is not likely to prove-out in application of the procedure to specific cases.

Objection to 20% guideline.—Some written comments have asserted that the 20% guideline used in the proposed procedure is a “racial quota" prohibited by the Bakke decision. We do not agree. The recent Supreme Court decision in Regents of the University of California v. Bakke, — U.S. (No. 76-811, decided June 28, 1978), does not raise any question concerning the propriety of the 20% guideline as used in Sec. 3.03, Sec. 4.01 (1) or Sec. 4.02(1) nor concerning the propriety of the factors which will show "good faith efforts" as described in Sec. 4.03. In Bakke the Supreme Court was concerned with what a majority viewed as a "racial preference" under which certain persons were admitted to a school and others, consequently, excluded because of their race. As used in Sec. 3.03, the 20% guideline is only an evidentiary standard for purposes of classifying a private school as "reviewable" or an "other school" (see Sec. 4.04). Such a use of racial statistics as an indicator of racial discrimination has long been endorsed by the Court (see Yick Wo v. Hopkins, 118 U.S. 356, 374 (1886), and more recently Castaneda v. Partida, 430 U.S. 482 (1977)) and is fundamentally different from the issue raised in Bakke. Similarly, the 20% guideline as used in Sec. 4.01 (1) and Sec. 4.02 (1) is only an evidentiary standard which, if met, will relieve the private school of the burden of producing evidence under the alternative standard for demonstrating eligibility for constinued tax exempt status. The failure to meet the percentage standard does not create an irrebutable presumption that the private school is discriminatory. The private school can still produce evidence under Sec. 4.03 to rebut the prima facie case

or to show that it has taken appropriate measures to eliminate any continuing effects of its past discrimination.

With respect to the factors described in Sec. 4.03, we noted in our written comments of October 23, 1978 that we do not view those factors as describing "affirmative action" or as creating "racial preferences". They are simply categories of objective evidence which the federal courts have considered relevant to overcome a prima facie showing of discrimination. Therefore, the procedure properly provides in Sec. 4.01 and Sec. 4.02 that a school, either because of a previous adjudication or because the private school comes under the unique factual circumstances described, "will be considered by the Service to be discriminatory . . ." absent objective evidence of a specified number of those factors. None of those factors, on their face, require a "racial preference", and the comments contending that the practical effect of the guidelines is to require a "racial preference" raise issues that can more properly be evaluated and resolved through application of the proposed procedure in concrete cases.

APPENDIX A

SUGGESTIONS FOR MODIFICATIONS IN THE PROPOSED REVENUE PROCEDURE ON TAXEXEMPT PRIVATE SCHOOLS

In addition to the minor modifications suggested in our written comments of October 23, 1978, the Department of Justice believes that the following changes in the proposed procedure could be made to meet some of the concerns expressed by other persons or organizations without undermining the effectiveness of the procedure to deny tax-exempt status to racially discriminatory private elementary and secondary schools:

1. Delete the reference to private colleges and universities in Section 2.04.-By its terms, the proposed procedure generally applies to private elementary and secondary schools. However, the proposed procedure also states that "in appropriate cases" the principles reflected therein "may" apply to "other types of schools." (Sec. 2.04). The example given of a situation in which the proposed procedure "may" apply is "where a private college or university is adjudicated to be discriminatory." (Id.)

To the extent that the Service is able to identify private schools other than elementary and secondary schools (e.g., private schools having mostly vocational and/or technical programs) which have been adjudicated to be discriminatory (Sec. 3.02), or which by definition are "reviewable schools" (Sec. 3.03), we think the Service is amply justified in applying the principles of the proposed procedure to those schools.

On the other hand, our experience has not shown that there is a demonstrable nexus between the implementation of desegregation measures at institutions of higher education and the formation or expansion of private colleges and universities. Indeed, the factors set out in Sections 4.01, 4.02 and 4.03 describe evidence which the federal courts have said is relevant to establish or overcome a prima facie case of discrimination with respect to private elementary and secondary schools and which is to a large extent sui generis to schools at that level. Several of those factors could not be appropriately applied to undergraduate and graduate institutions. We believe that issues concerning such institutions could be more easily handled by individual revenue rulings. If the Service feels that specific guidelines are needed to govern the determination of the tax status of private colleges and universities, we believe that unnecessary confusion could be avoided by covering such institutions in a separate and distinct revenue procedure.

The modification suggested here could be accomplished by amending the second sentence of Section 2.04 to read as follows:

"In appropriate cases, however, the Service may apply the principles reflected in this Revenue Procedure to other types of schools."

2. Amend Section 3.06 to provide greater flexibility in defining the relevant "community" to be considered in determining compliance with Sections 4.01 and 4.02.-Section 3.06 now defines "community" to mean "the geographical area of the public school district within which the school is located, together with any other public school district from which the school enrolls at least five percent of its student body." Many of the public comments expressed concern that such a definition is overly broad, especially with respect to the operation of parochial

elementary and secondary schools. For example, many churches observed that the racial enrollment of their affiliated schools reflect the racial composition of individual congregations which operate the church-related schools.

We do not know whether such claims are accurate but we believe that Section 3.06 could be modified to permit IRS to test the legitimacy of such claims or any similar claims by adding the following language, or similar language, between the second and third sentences of Section 3.06:

"However, where a school can demonstrate to the satisfaction of IRS that a different definition of what constitutes the appropriate 'community' should apply with respect to its operation, the Service shall use that definition. In making such a showing, the school must establish that the considerations in determining the make-up of the community are to no extent based on race and that the school enrolls students exclusively from that community. The school must also provide an accurate breakdown of the racial composition of the community so defined acceptable to the Service."

Under this formulation, if a school were to claim that the relevant "community" with respect to its operation is a local church congregation, the school would have to establish that all students enrolled at the school are members of the particular congregation and, consistent with Revenue Ruling 75-231, that the congregation itself is not segregated because of discriminatory practices. In the absence of such proof, the Service would be justified in rejecting the proffered definition of community.

3. Modify Section 4.03 to permit a school to present, under limited circumstances, other evidence of “operation in good faith”.—One objection raised to the factors described in Section 4.03 was that some of them were not appropriate for certain religious affilated private schools. It appears to us that most schools with any legitimate claim of that kind would not likely be covered by the procedure and that such rare instances of coverage that might occur could be more effectively handled on their specific facts as they arose. While we do not read the proposed procedure as denying IRS such flexibility (particularly given the provisions in the last sentences of Sec. 4.01 (2) and Sec. 4.02 (2) and the "grace period" provision of Sec. 5.03), the point could be made plain by adding a paragraph 6 to Section 4.03 in the following or similar language:

6. A school which cannot satisfy four of the five factors listed above may justify such failure by presenting evidence that satisfies the Service that the factors not met are, for compelling reasons unrelated to race, not appropriate measures of the school's good faith. In such situations, the Service will consider other objective evidence that the school may present to show operation in good faith on a racially nondiscriminatory basis.

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In addition, appropriate changes would have to be made in Sec. 4.01 (2) and Sec. 4.02 (2), such as adding to the end of the first sentence: or satisfying the requirements of paragraph 6 of section 4.03, infra."

If such a modification is adopted the IRS should make it clear that, in order to guarantee uniformity of application, any determinations under paragraph 6 would be made by the National Office.

4. If modification 3, above, is adopted, delete the provision in Section 5.03 for a grace period.-It was our understanding that the purpose of the grace period in the proposed revenue procedures was to provide IRS some flexibility in determining the tax-exempt status of any school which appeared to be making a substantial good faith effort to operate on a non-discriminatory basis but could not produce objective evidence of such an operation sufficient to meet the guidelines. If the flexibility to deal with such situations is written into Section 4.03 as described above, the "grace period" provision would become a redundancy. Or worse, because of its apparent redundancy, it could provide a means by which discriminatory schools could obtain delays in final determinations on their taxexempt status. We do not believe any legitimate purpose would be served by the uncertainty that would necessarily arise from such delays.

APPENDIX B

ANALYSES OF AVAILABLE DATA IN THE RECORD OF BRUMFIELD AND UNITED STATES v. DODD RELATED TO FACTUAL CLAIMS MADE IN PUBLIC COMMENTS

The following analysis of data in the record of Brumfield and United States v. Dodd is relevant to assessing the accuracy of the factual claims noted and/or the apparent assumption underlying some concerns expressed in public comments.

1. Possible Coverage of Church-Related Schools.-Some written comments expressed concerns that were apparently based on the assumption that large numbers of church-affiliated private schools would be covered by the procdures.

(a) Description and limitations of data used.-Our analysis was limited to comparing the founding or formation dates of church affiliated schools with the respective date of the first desegregation plan or order in the parish where each such school was located. The proposed procedure states that, generally, a school will be considered to have been formed at or about the time of public school desegregation if it was formed within a period of one year before implementation of any initial to three years after implementation of any final desegregation plan or order (Sec. 3.03). Our analysis only separates the schools founded before the first desegregation order from all other schools. Therefore, one cannot conclude that the schools in the "all other" category would necessarily be covered by the procedure. Also, our analysis is based on the best information available to us at this time, and IRS might have other, different information before it at the time it makes the determinations on individual cases under the procedure. Consequently, it should be clear that the generalized analysis performed here is in no way binding on IRS.

In Louisiana, the local school districts are normally coterminous with the parish boundaries.1 Data concerning the number of private schools in each parish were obtained from the Louisiana School Directory for sessions 1965-66 through 1975-76, which is issued by the Louisiana State Department of Education. The dates of formation of church-affiliated private schools were obtained from the information reported on the "Certification and Background Information Form" which the schools filed as a result of orders in the Brumfield case. Since large numbers of nonsectarian private schools did not file forms, the information concerning schools formed after 1965-66 (other than church affiliated) was obtained from exhibits filed in the Brumfield case and would be accurate only to the date of preparation of those exhibits. Church affiliation was determined in the same manner as noted in 2a, below.

(b) Overview of data analysis.-The problem addressed by the proposed procedure is not racially discriminatory private schools in general but the more specific problem of racially discriminatory private schools "formed or substantially expanded at or about the time of public school desegregation" (Sec. 3.03). Insofar as formation of new schools is concerned, that is not a situation typically associated with the traditional church-affiliated private schools. A review of statewide data in Louisiana demonstrates the point.

Using 1965 as a privotal date, there were approximately 180 private schools formed after that date-only 19 were church affiliated. By contrast, 327 of the 414 private schools operating in Louisiana before 1965-66 were church-affiliated and, therefore, would generally not have been formed at or about the time of a desegregation plan or order as defined by the procedure.

A more refined parish-by-parish analysis confirms that general impression. For this analysis shown in tabular form in subparagraph c, below, all parishes where church-affiliated private schools operated in 1975-76 were analyzed. In Louisiana only 36 parishes have such private schools. With the exception of Orleans Parish. the parish data were analyzed for church-affiliated private schools formed after 1963. Orleans Parish data were analyzed for such schools formed after 1955.5

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In the 36 parishes, there were 293 church-affiliated private schools and information on the dates, of formation of 262 (89.4 percent) of those schools. Of the 262 schools on which there was information only 35 (13.3 percent) were formed after one of the above dates (i.e., after 1955 for Orleans and after 1963 for all others).

1 There are two city school systems: City of Monroe, located in Quachita Parish and City of Bogalusa, located in Washington Parish: Only the parish systems were considered in our analysis.

2 Eleven parishes have no private schools, and seventeen others have only nonsectarian private schools.

3 Most court desegregation orders occurred after this date and, of course, administrative action under Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d, was not authorized until approximately this date.

Complete data for 1968-69 was not available and was not included.

5 Desegregation orders were entered in the Bush v. Orleans Parish School Board case in 1957.

This number differs from the number for 1965-66 noted above because of closings and consolidations occurring between 1965 and 1975-76.

1 For Orleans Parish only the number of church-affiliated schools formed after 1955 is noted.

2. Minority Participation in Private Schools.-Some written comments asserted that the 20% guideline of the proposed revenue procedure cannot be met because minorities do not enroll in private schools in sufficiently large numbers. (a) Description and limitations of data used.-In order to provide as accurate an analysis as possible, we utilized data with respect to student enrollment for the 1972-73 school year. The year 1972 was chosen because the racial enrollment statistics for students attending public schools in Louisiana, which provided the bases for determining the percent of black students a private school would have to enroll in order to meet the twenty percent (20%) guideline prescribed in Sections 4.01 (1) and 4.02 (1) of the proposed procedure, was derived from data contained in the Fall 1972 Directory of Public Elementary and Secondary Schools in Selected Districts, OCR 74–5, a publication of the Office of Civil Rights of the United States Department of Health, Education and Welfare. Information in the Directory is the most complete and comprehensive state-wide data available. The 1972-73 school year was also chosen because that is the first year for which comprehensive racial enrollment data is available with respect to students attending private schools in Louisiana. That data was reported on the "Certification and Background Information Form" which the United States District Court required each private school requesting state financial assistance to submit to the Louisiana State Board of Elementary and Secondary Education (B.E.S.E.).

With respect to the enrollment data available for private schools, almost invariably, parochial schools were the only schools to submit the required forms. Thus, our analysis reflects only the racial enrollment of parochial schools. We