By David Kurlander

Public schools are facing a flurry of problems, from a downturn in enrollment, to school board rancor over mask mandates, to renewed conservative calls for cameras in classrooms. On “Bans, Schools, & Power: Public Education,” Heather Cox Richardson and Joanne Freeman talked about the roots of this current crisis, zeroing in on the rise of private “segregation academies” in the 1960s as a moment where many Americans abandoned the public school system. In 1978, an attempt by the Internal Revenue Service to lessen the power of these racially discriminatory private schools sparked a fierce battle over the federal government’s role in addressing school problems.

In 1978, there were around 18,000 private and parochial schools in the United States. Around 3,500 of these institutions had emerged after the desegregation of public schools. Many of these schools were almost entirely white. 

In 1969, a group of Black Mississippi parents sued the Treasury Department over the tax-exempt status of their areas’ “segregation academies.” The U.S. District Court for the District of Columbia ruled with the parents in Green v. Connally and gave the IRS the responsibility to figure out which schools should lose their special status. The Supreme Court affirmed the ruling shortly thereafter. 

Over the next seven years, however, only 110 schools across the country lost their tax exemptions. The IRS simply didn’t have the clout or guidelines to effectively enforce the Court’s ruling. 

Enter Jerome Kurtz, President Carter’s IRS Commissioner. The 47-year-old Kurtz had served in the Johnson-era Treasury Department as chief tax legislative counsel. He was a powerful partner at Wolf Block, Philadelphia’s leading tax law firm. And he was a strong supporter of civil rights. 

Kurtz had spent much of his first year on the job trying to close tax loopholes. He worked on a new policy for claiming fringe benefits. He battled with Congress over a proposal to charge tax preparers for licenses. He worked to simplify 1040 forms and other notoriously convoluted tax documents. But he also moved toward the private school tax exemption issue.

On January 9th, 1978, Kurtz delivered a speech before the Practising Law Institute in New York City entitled “Difficult Definitional Problems in Tax Administration: Religion and Race.” He acknowledged the difficulty he faced in devising more enforceable criteria for discrimination in private schools: “We have almost no specific statutory guidance; our authority and obligations on racial issues derive from the constitutional doctrine announced in Brown v. Board of Education in 1954, and cases enforcing and interpreting it, and from the board national policy announced in the 1964 Civil Rights Act.” 

On August 22nd, 1978, Kurtz proposed a fix to the IRS’s passivity on segregation academies. He set a benchmark, arguing that the IRS deny a private school tax-exempt status if the minority percentage in its student body was not at least a fifth as large as the minority percentage in the community—for example, if a school in a 40% Black district had lower than an 8% Black student body.

Kurtz, mindful of the ethnic particularities surrounding some religious schools, argued that other good faith standards could also help schools keep their tax status: minority financial aid programs, recruitment and increasing enrollment of diverse students, and hiring of minority teachers.

Private school advocacy groups, religious freedom organizations, and legislators from across the spectrum exploded in anger. By the end of 1978, the IRS had received 120,000 hostile letters. 

On December 5th, 1978, the IRS opted to hold rare public hearings to talk through the controversial policy. Kurtz opened the proceedings with attempts at reassurance. “This is a proposal, not a decision. Our minds are open,” he said. He also suggested that he was not on a social justice crusade but was rather trying to follow the law: “Our attempt to bring the service’s procedures for testing claims to exempt status into line with the approach of the federal courts in a reasonable and uniform way.” 

After Kurtz’s remarks, 250 witnesses testified about the good, bad, and ugly of Kurtz’s plan. 

Maryland Republican Congresswoman Marjorie Holt testified that the proposal “smacks strongly of the practices of despotic societies.” 

Utah Senator Orrin Hatch added, “Most Americans find your proposed regulations repulsive.”

And Idaho Republican Representative Steve Symms complained, “It is one of the most outrageous examples in IRS history of bureaucratic social engineering.” 

A Tennessee mother, Peggy June Griffin, had perhaps the most blistering assessment: “We do not want the rules ground through the mills of compromise. We want them burned.” 

Not all the criticisms came from conservatives. Livaughn Chapman, the Black Headmaster of Boston’s Roxbury Community School, said, “Our school mostly enrolls black kids, not because we discriminate against whites, but because we’re in a mostly black community and that’s who applies. If this procedure is applied to us, it would shut us down.”

Nathan Dershowitz—controversial trial lawyer Alan’s brother—appeared as counsel for several interlocking Jewish school groups and argued that Kurtz “failed to recognize the unique and special considerations which affect Jewish religious schools…the fact remains that few non-Caucasian Jews settled in America.”

On February 20th, 1979, Kurtz appeared before the House Ways and Means Committee to announce changes to his proposal. The new rules added in 14 guidelines designed to determine whether the school opened in response to public school desegregation; these could further deflect from the comparatively inflexible 20% “safe harbor” threshold. 

Kurtz’s more holistic criteria, however, did not satisfy most congressional critics. On April 27th, 1979, the Senate Finance Committee’s Subcommittee on Taxation and Debt Management held a hearing on Kurtz’s new tax exemption plan. Two of the three Senators present were Southern conservatives from decidedly pro-segregation political dynasties—Virginia’s Harry Byrd, Jr., whose father and predecessor in the Senate, Harry Byrd Sr., was the leader of the South’s “massive resistance” plan to integration, and Georgia’s Herman Talmadge, whose father Eugene served as an openly white supremacist Georgia governor several decades earlier.

The most aggressive voice at the hearing, however, was young California Representative Bob Dornan, a former Air Force Captain and Hollywood actor who had starred in the cult 1964 Cold War thriller The Starfighters. Dornan came over to the Senate to excoriate the IRS in decidedly politically incorrect terms. Dornan picked up Nathan Dershowitz’s concerns over Jewish schools, imagining the IRS trying to figure out “whether there are enough black students present other than Sammy Davis  [Jr., a Black American Jew].”

Dornan also railed against a groundbreaking TIME article from the previous week about homosexuality. “If we look at the current cover of Time Magazine and consider the ludicrous point to which the homosexual and lesbian discussion has been carried in the country, as Time puts it, are the most abused minority, then God forbid that the IRS will decide what quota private schools or aggressive program they have to have to make sure all schools have a fair percentage basis of homosexuality of our schools.” 

Things deteriorated from there. By the time that Kurtz gave his statement, Byrd was framing the issue in stark terms: “The Internal Revenue Service is taking the position that all schools are discriminating unless they prove they are not discriminating. This is a philosophy upon which French law is grounded: a person is guilty until he proves himself innocent. I have always thought that the American system was an individual was innocent until the Government proved him to be guilty.” 

Over the course of 1979, legislators introduced at least three bills to wrest control of the exemption issue from the IRS. Senator Hatch’s, named the “Save Our Schools” Act, got the most attention. Ultimately, however, Congress went another route, tacking on riders to the Fiscal 1980 Treasury Department Appropriations Bill—IRS is part of Treasury—that prevented Kurtz from spending money on implementing the new rules. 

The battle over tax exemptions would spill over into the Reagan administration. In January 1982, President Reagan ran into trouble when he tried to unilaterally reverse the IRS proposals, a decision that Kurtz—back in private practice—told the Washington Post was an “infuriating move.” Kurtz took offense to Reagan’s claim during a press conference that the tax-exemption rules had “no basis in law” and offered a reminder that the IRS was trying to honor the Supreme Court’s decisions. “It wasn’t bureaucrats running amok,” Kurtz said of the proposals. “It was bureaucrats trying to stay out of jail.” 

The issue finally saw a form of closure in 1983, when the Supreme Court ruled in Bob Jones University v. United States that the IRS had legal jurisdiction to revoke tax exemption for discriminatory institutions. “Segregation academies” began to play ball, although many found sneakier ways to continue limiting minority enrollment.

The saga of Kurtz’s quest to integrate private schools is also a story about public education and the lengths to which some Americans will go to avoid putting their children in schools that reflect the nation’s population. 

Los Angeles Times cartoonist Pat Oliphant captured the controversy in a late 1978 cartoon: An IRS agent waits outside the gates of “Saint Stickey Parochial Elementary School,” behind which a group of children—several picking their noses—wait. A priest warns the agent, “Stand back or I’ll be forced to turn these little angels loose on your lousy, broken-down public education system.” 

Clearly, the battle over the tense interplay between religion, ideology, the federal government, and our double-track education system has heated up again, and a new set of Kurtz-style reckonings may be around the corner. 

For more on the IRS tax exemption controversy and other 1970s social issues, check out J. Brooks Flippen’s 2011 Jimmy Carter, the Politics of Family, and the Rise of the Religious Right. And head to the Twitter account of author and Now & Then Editorial Producer David Kurlander for supplemental archival threads on each Time Machine piece: @DavidKurlander.

To receive Time Machine articles in your inbox, sign up to receive the CAFE Brief newsletter sent every Friday.  

The Time Machine Archive 

Catch up on the Time Machine’s deep dives into history, which offer context to understand our present challenges, including these recent pieces: