At the time that Reagan administration officials were deciding to restore tax exemptions to racially discriminatory private schools, they debated using the same legal arguments to support an exemption for a Nazi group's publications that preach racial hatred.
The government finally decided to fight the exemption, but on much narrower grounds than it argued in the lower court. Thus, the Nazi case is another example of the complications the administration has run into trying to police what its officials consider the IRS habit of regulating on public policy grounds not specifically authorized by Congress.
In 1978, IRS denied tax-exempt status to National Alliance, saying the white-supremacist group didn't meet the required "educational" definition because its publications advocated murder and kidnaping of blacks and Jews. The group sued, and last May a federal judge said the IRS rules blocking the exemption were unconstitutionally vague.
While the government was deciding its appeal strategy in the Nazi case, the administration moved to reverse a 12-year-old policy and restore tax exemptions for schools that discriminate. It argued that IRS had no authority to deny exemptions just because some private schools violated the "public policy" against racial discrimination.
Some attorneys said the same legal reasoning required that the appeal in the Nazi case, National Alliance v. U.S.A., be dropped totally. In a Jan. 7 memo, IRS general counsel Kenneth Gideon urged that the appeal "be allowed to continue."
The week following the Jan. 8 private-schools policy reversal, Justice and Treasury officials agreed not to drop the Nazi appeal entirely, officials said. On Jan. 18, the government filed a brief in the case, but it dropped all reference to the "public policy" precedents it had cited in the lower court.
Some attorneys involved in the case said yesterday that the reversal on private schools undercut the government's position in the National Alliance case. Not being able to argue that its newsletter, Attack!, and monthly magazine, Action, violated public policy by advocating racial hatred "is sort of like chopping someone's legs off and then saying it's okay to still run the race," one attorney said.
The government's position in the National Alliance case is further complicated because a panel of the U.S. Court of Appeals for the District of Columbia in 1980 ruled unconstitutional the same IRS regulations used to deny the Nazis' application.
IRS had denied an exemption to a militant feminist publication, "Big Mama Rag," because it didn't present both sides of issues it advocated. The appeals court said the regulations violated the group's free-speech protection.
Sara-Ann Determan, attorney for National Alliance, said yesterday that she thinks the government's brief on the Nazi case still argues public policy in saying the exemption should be denied.
In its brief, the government argues that U.S. District Court Judge Oliver Gasch erred in ruling against IRS in May by not considering that the Alliance publications didn't qualify for an "educational" exemption "because of the manner in which they advocate their particular view."
A leader of National Alliance said his group was "more mature and sensible" than most Nazi groups, although they held similar beliefs. The group's newsletter advertises bumper stickers with slogans such as "The Jews Are Our Misfortune" and "Build White Unity." The American Civil Liberties Union defended the group's views as protected by the First Amendment.