IRS Still Harassing Private Schools

Despite a Republican Platform promise last year to “halt the unconstitutional regulatory vendetta launched by President Carter’s IRS Commissioner against independent schools,” the Reagan Administration has done virtually nothing to redeem this pledge. The problem, according to House and Senate conservatives, is that Roscoe Egger Jr., whome President Reagan appointed in February to head the Internal Revenue Service, is taking legal advice on this issue from the same Justice Department lawyers who orchestrated the Carter policy.

At issue is the three-year-old attempt by the IRS—a branch of the Treasury Department—to apply harsh, new, quota-based “affirmative action” standards to the nations’ private educational institutions, including many fundamentalist/evangelical Christian schools.

Under these standards, schools which were “established or expanded” during a period when nearby public institutions were desegregating would automatically be presumed guilty of racial discrimination unless they met an arbitrary quota of minority enrollments. This would be true even of schools that had never turned down a black applicant.

Schools failing in this so-called “reviewable” category would lose their exemption from taxation and their right to receive tax-deductible contributions unless they made a “showing” of non-discrimination by pursuing a list of costly and cumbersome “affirmative action” requirements not demanded of other institutions.

To understand what is involved, some background is helpful. The impetus for this attack on private education came in the mid-‘70’s when a group of black parents from Mississippi, none whom had ever sough admission for their children to a private school, reopened a 1971 lawsuit known as the Greene decision. Not satisfied with the 1971 decision, which had held that private educational establishments which were proved to be discriminatory should be denied tax exemption, the Greene plaintiffs—spurred on by militant civil rights groups—now demanded that the IRS be forced to require affirmative action based on quotas.

The IRS initially defended itself vigorously against these demands. In briefs filed on behalf of the agency by attorneys from the Justice Department’s Tax Division, the IRS argued that among other things, such quota0based regulations would be both unnecessary and unfair. Within months of the Carter inauguration, however, the agency did a complete about-face on the issue.

Not only did it drop its defense in the Greene case, but, in August 1978, it issued a proposed new “revenue ruling” yielding to the Greene  plaintiffs’ full list of desires—and this without even waiting for a court ruling on the matter.

As might have been expected, word of these “guilty-until-proven-innocent” regulations provoked a storm of protest and Congress—led by Representatives John Ashbroook (R.-Ohio) and Helms (R.-N.C.)—responded by attaching a pair of amendments to the fiscal 1980 Treasury appropriations measure forbidding the use of any funds to implement the proposed regulations, in effect killing them. But though these amendments were extended last year by means of a continuing resolution which still remains in effect, they have by no means put an end to the danger.

The reason is that, in May of last year, U.S. District Judge George L. Hart handed down a decision on the Green case. That decisions, while it applied only to Mississippi, ordered the IRS to put into effect in that state much of what the agency already wanted to do anyway. So, on the strength of this court order, the IRS went ahead and applied its quota-based approach to scores of church-related institutions in Mississippi, notwithstanding the express denial of any funds for this purpose by Congress.

Not surprisingly, the Christian schools and their conservative supporters exported all of this to change as soon as Reagan assumed office. Not only had the GOP Platform termed the Carter policies an “unconstitutional regulatory vendetta” but the report of the Reagan transition team on education contained four full pages of recommendations intended to undo the Carter approach. In addition, the President himself has frequently expressed his opposition to the onslaught against these schools.

A good summary of the kind of changes conservatives expected was contained in a letter to Commissioner Egger from Rep. Ashbrook, dated February 25, in which the Ohio lawmaker urged Egger to:

  • Formally revoke the quote-based revenue procedures. The effect, said Ashbrook, would be similar to the February 2 action of Education Secretary Terrel Bell, revoking Carter-proposed bilingual-education regulations which, like the controversial IRS proposal, had also been blocked by Congress.
  • Mount “an honest and vigorous court defense” in the Green case and in a similar suit known as the Wright litigation. In particular, Ashbrook urged that the IRS support the efforts of various church-related schools which have been adversely affected by the Green ruling to intervene in the case. Such intervention is necessary since these institutions, which believe their 1st Amendment rights are violated by Judge Hart’s decision, have never had the opportunity to argue their position in court.
  • “Launch an internal investigation to determine the extent of unethical or illegal ‘sweetheart’ relationships between IRS attorneys and the Green and Wright attorneys. Ashbrook suggested that “Government attorneys who worked to advance the interests of the plaintiffs, at the expense of government interests and in defiance of Congress, should be disciplined.”
  • Stop enforcing the Green order in Mississippi, since it violates “the constitutional prohibition on expenditure of federal funds in ways forbidden by Congress.”

Ashbrook was not the only legislator to urge such a course of action. Similar suggestions have been made in writing by other lawmakers, including  House Republican Whip Trent Lott (Miss.) and GOP Senators Strom Thurmond (S.C.),  Jesse Helms(N.C), John East (N.C.) and Thad Cochran (Miss.). Yet, amazingly, the IRS has reacted as though Reagan had never been elected.

Instead of supporting the motions of Christian schools to intervene in the Greene litigation, for example, the IRS has merely stated that it has “no objection” to such intervention. Since the IRS under Carter had said that it had “no position” on such efforts, the agency’s new stance, according to Jack Clayton of the American Association of Christian Schools, is “only a marginal improvement, if any.”

Even more shocking are reports that, despite the change in Administrations, the IRS is continuing to search for ways to circumvent the congressional ban on its quota based rules. Conservative lawmakers note that such efforts, in themselves, are violations of the congressionally passed measure, since it prohibits the expenditure of any funds whatever for this purpose.

The obvious question, of course,  is why the IRS continues to be so attached to the liberal goals of the Carter Administration in this area, when those goals so clearly violate the President’s philosophical and political principals. The answer, a number of well-placed Washington sources told Human Events, can be found in the Tax Division of the Justice Department.

While there may be others, two Tax Division officials in particular are said to be advising Egger that he has no choice under the law but to go along with the Green decision. One if John F. Murray, the acting assistant attorney general (Tax Division).

Murray, who is a Justice Department holdover temporarily filing his position, is believed interested in landing the post on a permanent basis. Perhaps for this reason he has sought to make a friendly impression on congressional opponents of the proposed IRS regulations. Yet those in a position to be most knowledgable about his rile say that he is working against a reversal of the Carter policies. As one source bluntly put it: “We’ve got to get this guy [Murray] out of there.”

Actually, Murray holds but one of three key assistant attorney generalships that have yet to be permanently filled at Justice. The damage he is doing to the school issue underscores the importance of putting Reaganites into these post immediately.”

The other name mentioned is that of Donald J. Gavin, an attorney in the Tax Division who has worked on the Green and Wright cases for at least four years. Gavin, along with several other lawyers, signed a May 10, 1977, legal brief, which argued persuasively that neither the time of a school’s founding or expansion nor a low level of minority enrollment is sufficient to constitute prima facie evidence of discriminatory intent. But on July 28th, 1978, Gavin signed another brief upholding the opposite position, and he has pushed hard for the use of such factors in determining an educational institution’s tax status.  

In recent conversations with Capitol Hill aides, Gavin has suggeste4d that the congressional ban on new IRS regulations does not apply to carrying out the Green order. While the measure prohibits the IRS from carrying out any rule affecting the tax-exempt status of these schools was not in effect prior to Aug. 22, 1978, Gavin argues, the Green ruling, since it is only a modification of a decade-old case, is not covered by the ban. It is clear from legislative history, however, that is was precisely the IRS’ attempt to satisfy the Green plaintiffs that the funding restriction was intended to prevent. Yet this is the kind of advice Gavin and other Tax Division lawyers are now believed to be providing to Egger.

Human Events attempted unsuccessfully to interview Egger, Murray and Gavin. Egger, though a spokesman, declined to discuss the whole mater on the grounds that is was “still under litigation.” Murray and Gavin were both away from their offices and unavailable for comment.

At the same time they are upset by the Reagan Adminstration’s failure to date to reverse the Carter policy in this area, supporters of the  Christian schools are also disappointed—and not a little perplexed—by Judge Hart’s rulings in the Green case.

The Wright and Green cases are so similar that, for a time, they were consolidated for purposed of argument on the grounds that the two actions involved “common questions of law and fact….” 

In his 1979 decision in Wright (which by that time had been separated from Green), Judge Hart refused to instruct the IRS to impose on a nationwide basis the same quota-based requirements that he later ordered the agency to impose in Mississippi when he ruled in Green. In denying plaintiffs’ demands in the Wright case, Hart noted that “Plaintiffs would deprive these schools of their valuable tax-exempt status without ever giving the affected schools a day in court.”

But although  the church-related schools in Mississippi that have been adversely affected by Judge Hart’s ruling in the Green litigation believe they have similarly been denied a chance to defend themselves (in particular, they believe questions involving the religious clauses of the 1st Amendment have never been addressed), Judge Hart has twice refused the motions of such schools to intervene in the case during the past year. Despite clear evidence that these institutions had been directly affected as a result of the Green order, the judge denied their motions to intervene on the mistaken assumption that they schools had not come under the terms of his order. 

William Bentley Ball—the noted constitutional lawyer who has won several landmark cases involving religious and educational freedom, including the famous Amish case in Wisconsin and the Dunkard case in Ohio—believes the judge must have denied these motions because of “some sort of accident or inadvertence.” For that reason, he has filed yet a third motion to intervene—this time on behalf of the Clarksdale Baptist Church of Clarksdale, Miss.—and he is hopeful that, on this third try, the affected churches will finally get their chance to be heard.

Also joining as intervenors in the Clarksdale motion are Sen. Helms and Congressman Lott, Ashbrook and Dornan. At least 17 additional members of congress have signed a petition urging Judge Hart to grant the intervention motions. The lawmakers argue that Judge Hart’s order in Green “exceeds the power of the judicial branch of government under the Constitution, inasmuch as it directs the carrying out of activities for which Congress has denied funding….” 

The significance of the Green decision extends far beyond Mississippi. If it allowed to stand, the precedent could be used as the basis for extending the same regulations nationwide.


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