IRS to Reconsider Restoration of Tax Exempt Status of All-White School

The commissioner of the Internal Revenue Service said Friday that the IRS will reconsider a widely criticized decision that restored the tax exempt status of a private all-white Virginia school created after the Supreme Court banned racial segregation.

Commissioner Roscoe L. Egger Jr. told the House Ways and Means oversight subcommittee that the Baltimore district office of the IRS failed to follow required review procedures when it restored the tax exempt status of Prince Edward Academy of Farmville, Va., on Aug. 21.

“We are in the process of assessing this case,” Egger said. “Because of public concerns in this case, we will expedite those procedures.”

The publicity about the Prince Edward case could affect a number of other private schools that have applied to have their tax exempt status restored. The staff of the House subcommittee said that 111 schools lost such status from 1971 to 1983, when the Supreme Court upheld IRS procedures for handling applications for exemptions. Fourteen schools have had their benefits restored, and seven other applications are pending in the national office, Egger said.

Contributors to a tax-exempt organization are allowed a tax deduction for their gifts.

Members of the subcommittee questioned whether Prince Edward Academy, which still has no black students or teachers, has changed its policies and now practices non-discrimination.

“We would accept black students or any students” who applied, said John William Crews, attorney for the school and its parent foundation. He said that the school complied with IRS requirements by adopting a policy of open admissions and publicizing it in a local newspaper.

Rep. Charles B. Rangel (D-N. Y.) said that the IRS “cannot passively trust the good will of a segregationist school but must make sure that the school’s good old days of racial discrimination are over. If they are not over, tax exempt status simply cannot be conferred.”

Egger noted that privacy laws prohibit the IRS from disclosing certain details of such cases. However, he said, “When an institution has a history of discrimination, that creates the inference that remains unless and until they take action to demonstrate in good faith that they have changed.”