The US Supreme Court's reading of what has become known as the Bob Jones case has strong implications for the administration's civil rights policies. It could also have important bearing on the financial status of hundreds of private church-related schools in the United States.
And it is significant in terms of court philosophy on First Amendment freedom-of-religion rights, particularly for those who say separation of the races or sexes is indigenous to their interpretation of the Bible.
In its 8-to-1 decision involving Bob Jones University in Greenville, S.C., and the Goldsboro Christian Schools in Goldsboro, N.C., the court denied federal tax exemptions to private schools that practice racial bias. The former prohibits interracial dating and the latter bans blacks from admission.
More specifically, here's what the court did and did not do:
It reaffirmed a ''fundamental, overriding'' national policy against discrimination. But it did not outlaw discrimination in private schools.
It strongly implied that church-related activities, specifically in education , are not absolutely immune to government scrutiny. However, it did not by any means set aside long-protected First Amendment religious-freedom rights which include insulation from government interference into religious practices.
Chief Justice Warren E. Burger, writing for the court, said this decision ''will not prevent these schools from observing religious tenets'' even though the denial of tax benefits will ''inevitably have a substantial impact on the operation of private religious schools.''
The government's ''fundamental, overriding interest in eradicating racial discrimination in education'' outweighs the cost of denying tax benefits to private schools, Mr. Burger held.
In the lone dissenting opinion, Justice William H. Rehnquist accused his colleagues of ''heavy-handed creation'' of a rule (against tax breaks for racially discriminatory schools) and implied the matter should have been left to Congress.
That's just what the Reagan administration would have originally preferred to do. Last year, it took the stand that the Internal Revenue Service had overstepped its bounds in its longtime policy of denying tax exemptions to discriminatory schools and asked Congress to resolve the matter. However, after a storm of protest from civil rights advocates and others that the White House seemed to be endorsing racism, the President shifted his stance, and in an almost unprecedented move, asked the US Supreme Court to hear the case, after a US Court of Appeals had upheld government policy to deny tax exemptions in a related case.
The administration's policy is complex - and, to many, it appears to be confusing. On the one hand, it has backed the schools' argument that the IRS has no legal authority to deny tax exemptions on the basis of racial policy. On the other, it has refused to embrace the schools' constitutional argument that the denial of such status violates their First Amendment right to practice their religion freely.
Other cases are almost certain to come to the court relating to this second principle. So far, the so-called ''Establishment''-of-religion clause of the Constitution has prevailed in most cases involving church practices - although courts across the US have in recent years handed down varying opinions regarding secular activities of churches and their immunity from government scrutiny and taxation.
The Supreme Court has already agreed to hear a case concerning whether Grove City, a private school in Pennsylvania that refuses to sign antidiscrimination certifications for federal loan funds to its students, should be denied such funds. Grove City, a school with strong Christian underpinnings, insists that it doesn't engage in racial bias, but it balks at subscribing to federal guidelines. It argues that academic autonomy is at stake, as well as religious freedom. If the Supreme Court upholds a Third Circuit Court of Appeals ruling, Grove City schools stand to lose thousands of dollars in federal aid.
Like Bob Jones, Grove City officials insist they won't change their stand. However, they say this is strictly a matter of government interference with private schools - not a question of discriminatory practices. Grove City hasn't directly raised the issue of separation of church and state. But other private church-related schools say this is a salient issue. And they are opposed to government intrusion into policies that may have been formulated as a result of religious orientation.
Meanwhile, the Bob Jones decision is almost certain to continue to have political reverberations. The university's president, Bob Jones III, says it will cost the school up to $750,000 a year in lost donor income and could make it liable for $1 million in back taxes.