Tax-Exempt Private Schools Which Discriminate on the Basis of Race: A Proposed Revenue Procedure 55 Notre Dame Lawyer 1979-1980

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55 Notre Dame Law. 356 (1979-1980)
Tax-Exempt Private Schools Which Discriminate on the Basis of Race: A Proposed Revenue Procedure

handle is hein.journals/tndl55 and id is 346 raw text is:

Tax-Exempt Private Schools Which Discriminate on the
Basis of Race: A Proposed Revenue Procedure

David L. Anderson*

I. A Comparison of the Original and Revised
Proposed Revenue Procedures

On August 22, 1978, the Internal Revenue Service proposed revenue pro-
cedures which would revoke the section 501(c)(3) tax-exempt status of private
schools which discriminate on the basis of race. The original rules proposed
divided private schools into three classes: adjudicated schools, reviewable
schools, and other.' A school adjudicated to be discriminatory meant
any private school found to be discriminatory in a final court or administrative
agency decision.2 A reviewable school was a private school which had never
been adjudicated discriminatory but which was formed or substantially ex-
panded at about the same time as public school desegregation in the communi-
ty served by the school.3 Such expansion was said to justify an inference of
discrimination if the school did not have a minimum percentage of minority
students, i.e., twenty percent of the minority school-age children in the com-
munity served by the school. Other school meant a school neither ad-
judicated to be discriminatory nor reviewable.4
For the original and reviewable schools, objective standards were set forth
which the schools had to meet to rebut the adjudication or inference of
discrimination.5 However, these standards could be expanded to the other
schools category where minority enrollment was insubstantial and where the
school failed to show this enrollment level was unrelated to discrimination.6
The basic standards to rebut the adjudication or inference were: (1) a
minimum number of minority students, i.e., twenty percent of the percentage
of minority school-age children in the community, or (2) the presence of four
out of five indices of good faith operation, i.e., significant financial aid to
minority students, vigorous minority recruitment programs, an increasing
percentage of minority students, employment of minority teachers, and other
substantial evidence of good faith.7 However, even if four out of the five in-
dices were met, the inference of discrimination would generally not be rebutted
if the school did not enroll any minority students.8
If the private school failed to rebut an adjudication or inference of
discrimination, the Service would revoke its tax exemption and suspend ad-

* B.A., Wheaton College, 1975; J.D., George Washington University, 1979. Member of the Ohio
Bar.
1 43 Fed. Reg. 37,296 (1978).
2 Id. at 37,297 (proposed § 3.02).
3 Id. (proposed 5 3.03).
4 Id. (proposed 5 3.04).
5 Id. at 37,298 (proposed 5 4.02).
6 Id. (proposed § 5.04).
7 Id. (proposed 5 4).
8 Id. (proposed 5 4.02.2).

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