Tuesday, July 30, 2002


Policy risks schools’
tax-exempt status


The admission of a non-Hawaiian student to Kamehameha Schools has reopened the debate about the schools' admission policy.

CONTROVERSY generated by the admission of a single non-Hawaiian Maui eighth-grader to Kamehameha Schools provides an indication of the possible turmoil ahead over the schools' policy giving preference to students of Hawaiian ancestry. The estate's trustees can expect to be forced to deal with legal challenges that grow with the increasing opposition to race-based entitlement programs. A rigid policy excluding non-Hawaiian students could be disastrous. A carefully crafted policy that excludes race from consideration but effectively results in a student body that is largely Hawaiian may be the best strategy.

As University of Hawaii law professor Randall W. Roth explained in the Star-Bulletin's Sunday Insight section, Kamehameha Schools could lose its federal tax-exempt status by refusing to admit non-Hawaiians. Trustee Nainoa Thompson estimates that could result in a bill of $1 billion and cause a reduction in funding for the schools of more than 40 percent, leaving it impossible to maintain all three campuses, its outreach programs and planned charter schools.

Even if the trustees chose to accept such drastic cutbacks to maintain ethnic goals they ascribe to Princess Pauahi's will, they could face obstacles, according to Roth, who teaches courses in trusts and estates and federal taxation. Federal rules obligating estate trustees to preserve trust assets generally prevent them from voluntarily giving up tax-exempt status. An exemption might allow them to do so to comply with the terms of the will, but the will does not specify a general preference for Hawaiian students, only Hawaiian applicants who are orphans or indigent.

When the Internal Revenue Service took on the estate's former trustees in 1999, the agency left the schools' admission policy intact. The IRS district office had recommended that the estate's tax-exempt status be revoked because of the admission policy but it was overruled by the Washington office. However, IRS officials at the national level cited a 9th U.S. Circuit Court of Appeals ruling in Rice vs. Cayetano, siding with the state's defense of a law allowing only Hawaiians to vote in Office of Hawaiian Affairs elections. After the IRS upheld the schools' tax-exempt status, the Supreme Court overturned that 9th Circuit's decision, ruling that the OHA elections were unconstitutionally discriminatory. That has left the IRS decision on shaky ground.

John Goemans, the attorney for Harold "Freddy" Rice, has said he is considering filing a class-action lawsuit challenging Kamehameha's admission policy. Such a challenge is likely to be based on a 1983 Supreme Court ruling that denied tax-exempt status to Bob Jones University, a bastion of Southern conservatism that excluded blacks. The university has since integrated its enrollment but has continued to ban interracial dating, a policy that raised controversy two years ago when then-presidential candidate George W. Bush held a campaign rally on its campus during the South Carolina Republican primary.

Roth points out important differences at Kamehameha Schools. While Bob Jones University excluded persons of a particular race, Kamehameha limits enrollment to a certain race and admits mixed-race students, although giving preference to those whose varied blood includes Hawaiian. However, it may be argued that any preference based on race -- even a single drop -- is racially discriminatory, disallowing an institution tax-exempt status.

One "controversial" idea to eliminate charges of discrimination, Roth says, would be changing Kamehameha's admission policy to "remove blood from the equation" and "take into account other aspects of what it means to be Hawaiian." He says that could consist of "an applicant's exposure to, knowledge of or interest in Hawaiian language, history and culture."

Such a policy, or one that removes Hawaiian blood from admission requirements in other ways, is sure to anger proponents of continuing to give preference to Hawaiian applicants or even excluding non-Hawaiians altogether. Kamehameha trustees have the unenviable task of assuaging that strong sentiment while acting in the best interest of Hawaiians.


Published by Oahu Publications Inc., a subsidiary of Black Press.

Don Kendall, Publisher

Frank Bridgewater, Editor 529-4791;
Michael Rovner,
Assistant Editor 529-4768;
Lucy Young-Oda, Assistant Editor 529-4762;

Mary Poole, Editorial Page Editor, 529-4790;
John Flanagan, Contributing Editor 294-3533;

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