Tax-Exemption Controversy

Report Outline
New Interest in Old Debate
First Amendment Questions
Tax Exemptions and Politics
Special Focus

New Interest in Old Debate

Reagan's Actions, Court Cases Renew Debate

Of the controversies that arose during President Reagan's first year in office, none was more politically damaging than the administration's decision to reverse a 12-year-old Internal Revenue Service (IRS) policy of denying tax exemptions to schools that discriminate on the basis of race. When the policy shift, which had a direct bearing on a pending Supreme Court case, was announced Jan. 8, civil rights groups accused the president of racism. When Reagan attempted to repair his image by submitting legislation patterned after the old IRS rule, right-wing politicians and organizations cried, “Betrayal.”

The press discussed the issue mainly in terms of President Reagan and his civil rights record. The president did more, though, than reopen old wounds in the historic conflict between those who demand racial integration in all corners of society and those who continue to resist it. Reagan also raised the whole issue of tax exemptions, of who gets them and why, to a higher plane than it had ever before occupied in the nation's history.

Even before the president got involved, the issue of tax exemption was receiving national attention because of the pending Supreme Court case involving Bob Jones University in South Carolina and the Goldsboro Christian Schools in North Carolina, which were challenging the IRS policy on schools that practice racial discrimination (see p. 213). The debate over tax exemption has often been a heated one. Many furors have erupted, especially in the past 30 years, as Congress, states and localities, the IRS and the courts have sought clearer definitions of which organizations should be tax-exempt.