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Barr, William: Files Folder Title: [Bob Jones & Goldsboro] (7)

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Barr, William: Files Folder Title: [Bob Jones & Goldsboro] (7) Ronald Reagan Presidential Library Digital Library Collections This is a PDF of a folder from our textual collections. Collection: Barr, William: Files Folder Title: [Bob Jones & Goldsboro] (7) Box: 2 To see more digitized collections visit: https://reaganlibrary.gov/archives/digital-library To see all Ronald Reagan Presidential Library inventories visit: https://reaganlibrary.gov/document-collection Contact a reference archivist at: [email protected] Citation Guidelines: https://reaganlibrary.gov/citing National Archives Catalogue: https://catalog.archives.gov/ . :·.· --... """ -· .. •... · -~:. ·· .. .·: ':- : ·, -~·l-.J.~- Gd~.I'~ CC : 'l'L-R-3 71-7 5 . TL-R-361-761 ' ! 7 JUL 1981 · TL-R-140-79 . ; -. 'Br4:ACLevinc • -1 ·• - , '~ The Honorable John f. Xurray ~ Ac~ing Ansistant Attorney General Tax Division tiepartment of Justice Washington, D.C. 20530 Re:· Goldsboro Christian Schools,· Inc. v. United States, · 4tq Cir., No. 00-1473 - s.ct.No. 01-1 .·. ; Bob Jones Univer.s1ty v. Unitecl States, 4th Cir.,· Nos. 79-1215, 79-1216, and 79-1293-S.Ct. no. 81-3 Your ref: JFM:MLP:RSPomerance 5-54-674 5-67-1479 Dear Mr. Murray: ?his is in response to your letters of .'July 13, 1981 occldng our views on the petitions for. writ of certiorari in the above­ styled cases. l"or the reasons otated below, we strongly urge that your office acquiesce in the filing of these petitions because they raise a question of sub~tantial administrative ii:1portance. '11 l~e Uni te<l States Court of Appc:als for the Fourth Circuit, in its unpubliuhcd dncision in Goldsboro Christiun Schools, Inc. v. United States, No. 00-1473 (4th Cir., filed Feb. 24, 1981) (here­ e:j. inr.tf ter "Goldsboro"} afiirri'\ed summarily for the Government the v opinion of tl:~ United States District CourL for·the Eastern District of North Carolina, on the basis of its decision in Cob JoneG University v. United States, 639 ~"'.2d 147 (4th Cir. l'.)00) (ucreinafter "l!ob Jones") •. '!'her.afore, while the factual backqround is sor:1ei1hat different in these cases, we believe they presant substantially similar istJucs and rcco1ancnd they be treated in the same brief· in reply to both pc ti tions for writ of ccrtiorciri. Tho Court of Appeals held in Dob Joneo that the Internal Revenue Servicf;! ha<l statutory authority to re:voke the I.R.C. S 50l(c)(3) tax-exempt ntatus of Bob Jones University because · it proh iL>i ts interracial dating and r.ia.rriogc and because of its prcv ious policy of excluding all unrnari.·ied blacks from adniss ion to the University. :.. 'l'he court further found that this revocc:ition did not violate the First 1\.ncndi'Jcnt to the United States Con­ stitution even though r;uch rule ;:incl policy \/ere bas~a· upon r~ligiou~ boliefs. In so holding, the Court of Appeals rcvcrGcd the decision of the lower court (468 r'.Supp. 890 (D.s.c. 1970)) • .. :·· . .-.: : ·.• .. : .. .' . ..... ·. : ~~ 'l'L-R-371-75 - 2 - TL-R-361-76, TL-R-140-79 In Goldsboro, the Court of Appe~ls upheld the Service's revocation of the tQx-exampt status of app~llant because it denied admission to blacks on· rclig ious grounds •.!./ _ Petitioners in the Bob JonGs case brought a suit for refund to· recover ~21 pa id as li'u·rA:"'"- 'l'hc Gov~rnmi:?nt countercla imcd for $489,675.59 plus interest. In Goldsboro, petitioner Geeks a refund of $1,912.10 FICA, ~74o.10 Ii'U'l'A, ·and $739.73 income tax withholding, this last amount relating to the issue described in footnote l. After appropriate abate:rncnts and credits of tax, the prop~r amount the Government would recovur is $116,185.01. Bob Jones University argues that a writ of certiorari should be grant(;!d for the following rcu.sons: l. This is a case of first impression for the Supreme Court involving a matter of 11r&at nlltional iraportance; 2. The Fourth Circuit opinion misconstrued I.R.C. 5 50l(c)(3) by requiring every organization organized exclusively for reli­ gious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster international amateur sports competition, or for the prcvtintion of cru~lty to children or · animals, tO meet the COnl1rlOl1 la\.I definition Of "charitable" despite the fact the term "charitable" appears as a separate category of exempt organizati"on in I.R.C. § 50l(c)(3); l/ That court also affirmed the lower court holding on a completely separate issue - that the fair rental value of living quarters (houses) furnished by appellant to its employees without cost to the employees constitutes additional· taxable wages paid which are subjuct to the income tax withheld and employment taxes (l"ICA and FU'..i.'A) under .t.n.c. §§ 3102, 3111, 3301, and 3403. Specifically, the court found that nppcllant did not satisfy the requirements of I.R.C. § llY providing for an exclusion from gro~s income of an employee of the value of lodging. Appellant docs not raise this issue in its pctitio~ for certiorari. In light of the recent Supreme Court decision in nowan Cos .. , Inc. v. United States, 49 U.B.L.w. 4646 (June 9, 1981), holding that "wages" has the same definition for FICA and FU'.£',\ as for income ·tux with holding, we recommend this issue not be raised in our reply brief • . ··~ . : . .;... •..: .... TL-R-371-75 - 3 - TL-R-361-761 TL-R-140-79 3. The Fourth Circuit decision threatens all religious institutions since it denies a religious institution a tax exemption because of its failure to conform to "public policy" ~he meaning of which is left to the unlimited discretion of the -Internal Revenue Service~ 4. The Court of Ap~als is incorrect in holding that there is a compelling governmental interest in "eliminating all fonns of racial discrimination in education" even though that would collide with the exercise of religious liberty1 s. The Court of Appeals' reliance on Green v. ConnollX, 330 F. Supp. 1150 (D.D.C. 1971), aff'd. per curiam sub. nom,. Coit v. Green, .404 U.S. 997 (1971), to justify the denial of tax exemption is incorrect since that case deals not with reli­ gious entities nor First Amendment questions but with whether an organization is "charitable" and therefore in step with public policy. In so doing, the Court of Appeals' decision violates the Free Exercise Clause of the First Amendmenti and 6. The Establishment Clause of the First Amendment has been breached if a religion and government are excessively entangled by the use of the mechanism of taxation of churches which hold and practice beliefs contrary to what is prescribed as acceptable to government. Similarly, the petition in Goldsboro is based on the following points: 1. The question of whether the denial of tax-exempt status to a private, church-related school which maintains a racially discriminatory admissions policy based on sincere religious beliefs and the unconstitutional infringement of First Amendment rights by such denial has never received plenary review by the Supreme Court and is of widespread importance. The resolution of these questions would af fcct every educational organization which maintains a racially discriminatory admissions policy based on sincere religious bclicfs7 2. The Fourth Circuit's holding that an "educational" organization must meet the common law definition of "charitable," in addition to the requirement of I.R.C. 5 50l(c)(3) that organi­ zations "organized and operated exclusively for religious, charitable ••• or educational purposes" shall be exempt from . taxation, violates well-recognized rules of statutory construction1 . ~ . ... ~ •..•. TL-R-371-75 - 4 - T~-R-361-76; TL-R-140-79 3. The Fourth Circuit's decision gives judicial approval to the unconstitutional exercise of legislative powers by the !nternal Revenu~ Service, an.adninistrativc agency1 4. · ~ince there is no evidence of any Congressional intent to deny tax-exempt status to educational organizations, like this appellant, the Fourth Circuit violated the holding of NLRD v. Catholic Bishop of Chicago, 440 U.S. 490, 507 (1979); and - . s. The Fourth Circuit's decision, forcing the school either to cease practicing its sincere religious beliefs because they are contrary to federal "public policy" as announced by the Internal Revenue Service or to incur a high tax burden, is an unconstitutional infringement of the school's rights under the Free Exercise Clause of the First Amendment. We strongly urge that the Government acquiesce in the petition for certiorari in both Bob Jones and Goldsboro because of the substantial administrative importance of the questions presented. The g~eat significanc~ of these issues has already been recognized by certain Supreme Court justices in a dissent to the denial .of a petition for writ of certiorari in Prince Edward School Foundation v. United States, U.S. ~~­ (No. 80-484), cert..!-denied Feb. 23, 1961 (81-1 U.S.~.C-.-~ 9203). In Prine~ Edward, the U.S. 'District Court for thci District of Columbia (the U.S. Court of Appeals for the District of · Columbia affirmed per curi~ in an unpublished opinion on June 30, 1980) upheld the Service's denial of tax-exempt status to a . private school which discriminates in its admissions policy. Justice Rehnquist, who was joined by Justices Stewart and Po~cll, wrote that the validity of the 11 Service's policy of denying tax-exempt status to private schools which have a racially dis­ criminatory admissions policy is not apparent from a reading of the relevant provisionn of the 1954 Code." He states that, "[a}rguably," the separate references to the different types of organizations entitled to tax-exempt treatment in I.R.C.
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