The Internal Revenue Service, bowing to fierce opposition from religious groups, yesterday softened its proposed rules for revoking the tax exemptions of "segregation academies" -- private schools set up to cater to whites who flee from desegregated schools.
The revised regulations essentially scrap the agency's earlier "mechanical" formulas for deciding whether a private school is discriminating. Instead they seek to provide guidelines under which a local IRS agent can act on a case-by-case basis.
The changes were designed to blunt protests by some religious groups that the original regulations unfairly would have required parochial schools to recruit large numbers of blacks, even if few were likely to want to go there -- as in the case of Hebrew or Amish schools.
The IRS held a week of hearings in early December and was besieged by so many protests that officials conceded almost immediately they would have to back down. Officials still face a grilling Feb. 20 at a House Ways and Means subcommittee hearing.
The revised regulations differ from the previous ones in several important ways. The earlier proposal would have required either that a school enroll at least 20 percent of the total proportion of minority students in its community or else meet four out of five "affirmative action" tests.
Under the new version, a school is not even subject to IRS review unless its creation or recent expansion was "related to" local school desegregation efforts, and even then may be let off under certain circumstances, such as in the case of a Hebrew school.
Moreover, IRS agents also would be given a list of broad guidelines to take into account in judging whether a school is discriminating, from the makeup of the local community to the attitudes and actions of its directors and officials.
The previous "20 percent test" would be turned into what officials call a "safe harbor" provision. Although schools would not be required to enroll 20 percent of the proportion of minority youngsters in their areas, enrolling 20 percent would exempt them from further review.
Finally, all decisions by a local IRS agent -- whether for or against the school in question -- would be appealed automatically to IRS Commissioner Jerome Kurtz, a move officials said yesterday was designed to guarantee "uniformity of interpretation" by agents.
Key administration officials said they expect some criticism by civil rights groups alleging that the revisions amounted to a retreat from the earlier proposal, but they defended the new regulations as "basically what we need" to crack down on so-called segregation academies.
Under present law, all a private school need do to "prove" that it is not discriminating is publish a notice each year declaring that it is open to everyone. Virtually all sides concede the current regulations are ineffective.
Present law requires the IRS to revoke the tax exemption of any private school found to be discriminating against blacks or other minority groups. However, officials say enforcement of the provision has not been vigorous, in part because of inadequate regulations.