Allen v. Wright and Donald T. Regan v. Inez Wright

Parents of African American public school children filed a nationwide class action suit alleging that, by permitting tax exemptions for racially discriminatory schools, the IRS did not fulfill its obligation according to provisions of IRS Code. Although the importance of the respondents' claim seemed to be its focus on a government (IRS) practice that seemed to foster expansion of segregated private schools, the Court cited determining criteria as requiring proof of "injury in fact" that was "fairly traceable" to government action.

In 1976, the parents of African American children attending public schools that were undergoing desegregation brought a nationwide suit to the U.S. District Court for the District of Columbia Circuit. Their claim maintained that the Internal Revenue Service (IRS) was not acting in accordance with U.S. Code, which mandated denial of tax-exempt status to racially discriminatory private schools. (At the time, U.S. Code and IRS policy required that a school not be segregated and admit "students of any race in order to be granted tax-exempt status.")

Parents who brought suit had listed 32 segregated private schools with tax-exempt status in their respective domicile areas. In response, W. Wayne Allen, headmaster for one of the private schools named in the suit, initiated a motion to dismiss the complaint based on the parents' lack of standing to bring suit. The district court accepted Allen as a defendant, which led to the stalling of the judicial process for several years. During this period, the IRS proposed a new set of revenue procedures to further define the requirements a private school had to meet in order to obtain tax-exempt status. Although legislation strengthening IRS guidelines was blocked in the U.S. Congress until the end of 1980, the district court granted Allen's motion to dismiss the lawsuit. That decision was subsequently reversed by the U.S. Court of Appeals for the District of Columbia Circuit, which held that parents had standing to bring suit because, as their suit claimed, their children suffered from what amounted to government sanctioning of segregated institutions through tax exemptions. Accordingly, the court of appeals ordered that any educational institution that discriminated racially should not qualify for tax-free status. The case was also remanded to the lower court for final adjudication.