In light of two cases soon to be decided by the U.S. Supreme Court--"Bob Jones University v. United States" and "Goldsboro Christian Schools, Inc. v. United States"--this monograph discusses the issue of freedom of religion and racially discriminatory private religious schools. After noting the statutory basis of tax-exempt status granted by the U.S. Internal Revenue Service (IRS), the author explains the historical underpinnings of the fundamental national policy against racial discrimination and describes the events leading up to the IRS decision to deny tax-exempt status to racially discriminatory private schools. The monograph then discusses the constitutional conflict that arises when religious beliefs violate the national policy against racial discrimination. The author next explores the establishment clause problem that occurs when government treats one religious institution differently than another. Finally, he discusses section 501 (c)(3) of the IRS code (which grants tax-exempt status to charitable organizations) and traces IRS authority and policies regarding the granting and, later, denial of tax-exempt status to private religious schools discriminating on the basis of race. (Author/RW)