nature, of interest to identifiable groups which are not composed of a significant number of minorities.

These refinements in guidelines for determining which schools are reviewable are extremely important. The IRS has considerably narrowed the population of private schools subject to review. The total number of schools subject to review will be decreased by using local IRS agencies, familiar with the designated geographical areas, as monitors of the special considerations affecting the timing and expansion of the enrollment of the schools, the size of the minority enrollment and the relationship of the expansion of the school to desegregation orders. This system is eminently preferable to having the Washington agency making these determinations from afar.

These changes represent vast improvements over the old rules. We have waited eight years for the IRS to demonstrate that it was possible to prevent religious discrimination and to promote racial harmony at the same time. It is a shame that formulating safe and effective safeguards would involve such a delay. This delay has been caused in part by the inability of the IRS and the Congress to demonstrate that the promulgation of the rules is in keeping with the guarantees of the Constitution and the Civil Rights Act.

The parents who send their children to private schools idenify very strongly with the extra-academic ideals most private schools instill in children. These philosophical concerns are only heightened by the alarming conditions which have eroded the quality of education in some public schools today. Private schools have been particularly successful at avoiding the symptoms of decay we see in public education today; their enrollments are rising, their students are learning, their curricula are sound and their discipline is strong. It is therefore natural and wholly appropriate that these citizens are on guard against any policy which tends to compromise the integrity of their children's schools.

It is of utmost importance that the Congress and the IRS insure that while the dictates of the Constitution, the Civil Rights Act, and the Coit v. Connally decision are enforced, the autonomy of the private schools and of the religious organizations which operate them, is preserved. Otherwise, the freedom to choose alternative systems of education will have no meaning.

STATEMENT OF HON. BARBARA MIKULSKI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MARYLAND

Mr. Chairman, I appreciate being given the opportunity to submit my views on the revised IRS procedures regarding the tax exempt status of private and parochial schools.

As a Member of Congress representing a district with many parochial schools, I am very aware of the vital role of these institutions in our educational system today. Private and parochial schools have performed admirable service in this country and have provided excellent education for many generations of young people. According to recent reports, an all-time high percentage of minority students are currently enrolled in parochial schools.

Closing these schools would not only result in enormous harm to our nation's educational and religious systems, but also cause financial havoc to many city governments. It would be a devastating loss to vital urban neighborhoods such as those I represent. I oppose any regulations which would prove unnecessarily obstructive to the continued operation of legitimate parochial and private schools. Although I believe that the amended IRS proposal is a great improvement over the original plan, I do feel that there are some remaining aspects which should be corrected. For Example:

According to section 3.03, paragraph C of the procedure, "Ordinarily, the formation or substantial expansion of a school at the time of public school desegregation in the community will be considered to be related to public school desegregation." This provision unfairly assumes that because a school happens to enlarge at a time when desegregation is occurring, that the expansion is actually caused by it. In fact, the two events may be completely unrelated; given the time necessary to plan and finance such construction, it may well have begun long before the desegregation activity.

A second example of an area which should be amended is found in Section 3.03. paragraph B where it states that ". . . a school will be considered to have significant minority student enrollment if its percentage of the minority school age population is 20 percent or more of the percentage of the minority school

age population in the community served by the school". I am very concerned that the word "community" will be misinterpreted as meaning the same community which is served by the public schools in the same locality. If this occurs, inaccurate and unfair standards will be used as a measure for the schools. In reality, the communities which public schools and private and parochial schools serve are frequently very different. For example, one parochial school will often serve several public school districts. Therefore, the regulations should explicitly state that the word "community" is defined as the areas normally served by the private or parochial school, so long as the area has not been intentionally established to exclude minorities.

I was pleased that the IRS modified its original proposal in this matter. I hope that it will continue to exhibit the flexibility and sensitivity necessary to prevent unnecessary difficulties to worthwhile educational institutions.

STATEMENT OF HON. CLARENCE E. MILLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

The IRS proposals dealing with the tax exempt status of private schools, if adopted, constitute a case of regulatory overkill, are extreme in concept, and raise many more problems than they seek to solve. Some of these problems are procedural, some are proprietary and some are Constitutional. The proposals should be withdrawn, with abuses in school integration dealt with on a case-by-case method, as is currently done.

These proposals automatically bring into question the tax exempt status of schools set up or expanded during and following desegregation in local public schools if the schools do not meet a minority quota. Some of us view this as an Alice in Wonderland brand of "justice"-"sentence first, verdict later".

Many question whether IRS has the need or authority to establish and enforce such new and extensive rules. No one is saying that we should allow tax breaks for segregated schools, but IRS already has significant authority to act, and indeed, has done so in the past, where evidence of discrimination exists.

Apparently, IRS presumes that schools set up or expanded when area schools were undergoing desegregation were organized to avoid desegregation, and that the low percentage of minority students is evidence of discrimination. Common sense would indicate this is not necessarily the case.

Numerous other events have coincided to make private schools attractive to many parents, in addition to the chaos attending some school districts during integration and social change. What appears to some to be reduction in discipline, disrespect for authority, declining moral values, lowered academic achievement, and other indications of a laxity in student behavior and deportment are just a few reasons some parents choose private schools. The expansion of private schools simply has coincided with what many parents perceive to be declining discipline and the lowering academic standards in some public schools. As for low minority enrollment, many such schools may not be attractive to some minorities who themselves may feel certain peer pressure to conform. To label private schools with low minority enrollment as biased, and then to challenge them to prove that they are not biased is arrogant. It constitutes another government program which seeks to shift the burden of proof in racial matters. While schools in the reviewable category are to be required to prove that they are not guilty, it seems that they can do this only by meeting requirements appropriate for schools already proven to be guilty. In other words, they must use affirmative action programs to meet quotas for minority enrollment.

Not the least of the problems is the potential for abuse. This quota with its burden of proof on the schools can be extended to all schools, even colleges and universities, and extended beyond integration to courses of study and curriculum. In addition, tax exemption is the American way of stimulating private sector diversity, innovation and higher principles which uplift the weak and poor. The very real danger exists that such quota systems and government rules would be used to club these beneficial organizations into government-conceived plans and programs for social change.

Among the proponents for growing Federal power are those who view the tax exemption as a Federal dole to be meted out to those who suit the government criteria, and to be withdrawn when so-called "government ideals" are not met. Briefly, some of the problem areas which stand out are:

The burden of proof. Reviewable schools would be required to show that they do not discriminate, even those with an open door policy. The burden of proof

should be on the government to prove guilt, not the school to prove innocence. Application of standards. The use of quotas, as they propose, is questionable and probably illegal, as the Baake decision indicates. Will they use some form of numerical standards implying statistical justice?

The definition of community. A community may be geographical for a public school, less so for a private school, but not at all likely for a religious school. A religious school usually draws on a community of belief not geography, which transcends boundaries, jurisdictions and neighborhoods.

Laws written by bureaucrats. A most important question faced by Congress in these proposals is whether we want law as far-reaching and important as this to be written outside Congress. A regulation, with the force of law, if upheld by the courts, might as well be statutory. Rather than have bureaucrats and judges write such law, Congress should hold hearings on the measure and allow debate on the floor of the House and Senate. If it is this important, it deserves exposure to the legislative process and evaluation on its merits. Essentially, the questions is whether such responsibility for lawmaking should be snatched away from the lawmaking bodies and given to the agencies and courts, or should Congress rightfully reclaim their prerogatives.

Anyone who thinks IRS will improve education automatically should remember what HEW has done for educational quality.

The revisions of the proposals earlier published still fail to correct the basic weaknesses outlined in the statement, and if implemented would be vague, subjective and erratically enforced. The proposals should be withdrawn, and abuses dealt with as they are currently.

STATEMENT OF THE NATIONAL EDUCATION ASSOCIATION

The National Education Association supports the termination of tax exemptions for private schools that practice discrimination on the basis of race or ethnic identification, age, sex, or physical conditions, or whose admission practices act in such a manner as to increase segregation in public school systems.

Legislation and court decisions are explicit with respect to such practices by public schools. Consequently, neither the federal government nor the states should assume a posture that would in any way suggest support of private schools which engage in overt discriminatory practices or which in any way operate to increase racial or ethnic isolation, segregation, or discrimination in the public schools.

Since tax exemptions are, in effect, a form of public subsidy for nonpublic educational programs, the failure of the Internal Revenue Service to adopt meaningful sanctions and monitoring of private schools which practice or contribute to segregation and discrimination amounts to the effective condoning of such practices on the part of the federal government.

The National Education Association believes that the 20 percent criterion for monitoring discrimination in private schools will prove to be inadequate. The standard should not be less than the level of minority attendance in the public schools of any given city or metropolitan community.

Under the proposed standards, in a community with a 35 percent minority public student population, a private school with only seven percent minority attendance would escape the monitoring procedures provided in the proposed regulations. A private school with 12 percent minority enrollment in a community with a 60 percent minority public student population would likewise escape regulation. In a community where all the white students had left the public schools to attend private segregated academies established for discriminatory purposes, a segregated institution with only 20 percent minority attendance would escape regulation. These minimal levels are not sufficient to counter the destructive effects of such enrollment practices of segregation in public school systems. We believe that the acceptance of such situations by any agency is contrary both to the national interest and to federal laws and policy relating to the elimination of all forms of discrimination and segregation in the field of education.

The National Education Association does not object to the presence of private or church-supported schools operating side-by-side with public school systems. Such schools have made important contributions to diversity in American life and, especially in the case of church-related programs, toward the well-being and spiritual purposes of their members. We have no objection to legitimate educa

tion programs which have not been founded for racist or exclusionary purposes and which represent legitimate interests.

We are deeply concerned, however, with the advent and/or expansion of private educational systems, whether founded for profit or supported by churches or other non-profit groups, where such expansion has contributed to increased minority isolation in the public schools. The National Education Association has in the past supported action by the Internal Revenue Service to revoke or deny tax exemptions to private schools that practice racial discrimination, and the Association has worked cooperatively with other organizations and with national church groups to reduce the spread of private segregated academies and to persuade the Internal Revenue Service to monitor and regulate their activities. Although public school desegregation became the law of the land in 1954, federal pressure for desegregation did not become effective until after the passage of the Civil Rights Act of 1964. The decade between the Brown decision in 1954 and the Civil Rights Act of 1964 saw a rapid growth of new private segregated academies. Many of these came about because of the establishment of even minimal programs of desegregation.

In dozens of Virginia communities, for example, public schools were closed and all-white segregated academies were established in the late 1950's when token desegregation plans began to be ordered by the courts. The Prince Edward County Schools were actually closed for five years, from 1959 to 1964, and reopened only after repeated orders of the Supreme Court and intervention by President Kennedy. In that school district today, as in many similar districts across the South, the continued presence of the "Academy" has meant that students attending public schools do so in almost totally segregated learning environments and with diminished educational resources further limiting minority students' educational opportunities.

Enforcement of the Civil Rights Act of 1964 saw widespread growth in private segregated schools, and activities of such schools, both private and churchsupported, have served to defeat and disrupt desegregation efforts in many major cities in the North and West. In some cases public school properties were sold or transferred to such private schools as a result of implementing desegregation. Action by IRS in 1970 to require private schools to demonstrate nondiscrimination to qualify for tax-exempt status was a beginning, and further steps in 1972 and 1975 provided additional assistance in helping to remedy the dilemmas posed by the operation of discriminatory private schools. We believe that the regulations now proposed will provide some improvement, although greater effort is still needed.

We propose that the 20 percent criterion be modified to deny tax-exempt status unless private schools submit proof of nondiscrimination whenever minority enrollment is substantially different than the minority enrollment in the major public school system, or the metropolitan area in which the schools are located. We propose that “substantially different" be defined as a discrepancy of 10 percent between the minority enrollments of the school and the community. We hope that final regulations will truly encourage desegregated nonpublic education.

STATEMENT OF THOMAS STEPHEN NEUBERGER, CENTER FOR LAW AND RELIGIOUS FREEDOM OF THE CHRISTIAN LEGAL SOCIETY

I. INTEREST OF THE CENTER FOR LAW AND RELIGIOUS FREEDOM

1

The Center for Law and Religious Freedom (the "Center") is a division of the Christian Legal Society 1 founded in 1975 to protect, promote, assure and enhance the freedom of Christians in the exercise of their faith guaranteed by the United States Constitution. The Center attempts to marshal the necessary legal skills and authorities to be able to act where the rights of Christians to exercise and express their faith are being infringed. Its resources include prominent constitutional attorneys and law professors as well as an awareness of national trends. The Center has held several regional conferences providing continuing legal education by experts in fields such as constitutional law, federal practice and procedure, non-profit organizations, state and federal taxation, and

1 The Christian Legal Society is a non-profit Illinois corporation founded in 1961 as a professional association of Christian judges, attorneys, law professors and law students. Today it includes over 1800 members throughout the United States.

other recent developments. It has also participated in both legal and administrative proceedings. The Center's national membership and professional resources enable it to focus public attention upon unconstitutional incursions on religious freedom that would otherwise go unrecognized.

The Center was invited to make its expertise available to this Subcommittee. Because of the Center's concern that the Congress be fully advised of the Constitutional problems raised by the Internal Revenue Service's (the "Service's") revised revenue procedure, the invitation of the Subcommittee was accepted. Counsel and the Center are versed not only in the law relating to the First Amendment to the United States Constitution but also the body of discrimination law under the Fourteenth Amendment and other federal statutes. Counsel have participated in numerous cases in these areas and have published articles about the Federal anti-discrimination statutes.3

II. SUMMARY

2

The Service is a revenue producing institution without proven competence in the difficult areas of First and Fourteenth Amendment constitutional law. Its revised revenue procedure displays this lack of expertise.

The Supreme Court, in its decisions interpreting the Fourteenth Amendment, has directed that no one can be proven to be racially discriminatory in the absence of "intentional" discrimination. The Court has set out in its decisions very careful methodologies for proving "intentional" racial bias. The proposed revenue procedure does not follow this obligatory manner of proving "intentional" discrimination. As a matter of constitutional law the procedure thus is fundamentally flawed. The procedure also limits a school's method of defense to proof of so-called "objective" evidence. There can be no such limitation on the type of proof offered to disprove intentional discrimination.

The procedure also does not display an awareness of its potential for endangering First Amendment religious values. By preferring those religious bodies which have in the past had private religious schools, it violates governmental neutrality toward religion and enters on the forbidden path toward judging competing religious beliefs. Moreover, since religious education is a recognized right protected by the First Amendment, the delicate balancing of competing values here is more appropriately made by Congress, since only "compelling" state interests can override religious liberty claims. The Congress, not the bureaucracy, should weigh the balance. The procedure also opens the door to governmental preference towards religious bodies which faithfully follow every public policy. Those who disagree with a particular policy will be taxed. This can inevitaby lead to the establishment of favored religions. The danger additionally exists of excessive governmental entanglement with religious beliefs because of the surveilance necessary under the procedure as it is written.

Finally, there is an absence of Congressional authority for the thrust of the government's entry into the First Amendment area relating to religious schools. Absent such authority the tax laws should not be used to enforce social policies.

III. FACTUAL BACKGROUND

Imagine part of a midwestern state where the only parochial schools have historically been Lutheran. Assume further that the number of Bible believing parents desiring to educate their children in the tenets of their particular faith in a totally religious atmosphere is growing. Most of these same parents, who are members of several local non-denominational fundamentalist churches, are concerned also with the quality of the educational product in the public schools, their perceived lack of discipline, and the educational philosophy of secular humanism which many think to be pervasive therein. A pastor accepts a call to a local independent fundamentalist church and there leads an effort to establish a religious 2 See, Walker v. Robbins Hose Fire Co., F. Supp. Civil Action No. 74-172 (D. Del., February 8, 1979); Scott v. University of Delaware, 17 FEP cases 1486 (D. Del. 1978) appeal pending (3d Cir. 1979); Stallings v. Container Corp., 75 F.R.D. 511 (5 Del. 1977); Fesel v. Masonic Home of Delaware, Inc. 428 F. Supp. 573 (D. Del. 1977); Keegan ▼. University of Delaware, 349 A. 2d 14 (Del. 1975) cert. denied 424 U.S. 934 (1976); Hanshaw v. Delaware Technical and Community College, 405 F. Supp. 292 (D. Del. 1975). See, "An Analysis of The Evidentiary Standard Under the Employment Discrimination Statutes," Equal Employment Practice Guide (Federal Bar Association: 1978); "Sex As A Bona Fide Occupational Qualification Under Title VII," 29 Labor Law Journal 425 (July 1978); "Evidence And Intent In A Fourteenth Amendment Employment Discrimination Case," 29 Labor Law Journal 72 (February 1978).

See Alan N. Grover, Ohio's Trojan Horse (1977).

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