The Real Origins of the Religious Right - POLITICO Magazine:

In Green v. Kennedy (David Kennedy was secretary of the treasury at the time), decided in January 1970, the plaintiffs won a preliminary injunction, which denied the “segregation academies” tax-exempt status until further review. In the meantime, the government was solidifying its position on such schools. Later that year, President Richard Nixon ordered the Internal Revenue Service to enact a new policy denying tax exemptions to all segregated schools in the United States. Under the provisions of Title VI of the Civil Rights Act, which forbade racial segregation and discrimination, discriminatory schools were not—by definition—“charitable” educational organizations, and therefore they had no claims to tax-exempt status; similarly, donations to such organizations would no longer qualify as tax-deductible contributions.

On June 30, 1971, the United States District Court for the District of Columbia issued its ruling in the case, now  Green v. Connally (John Connally had replaced David Kennedy as secretary of the Treasury). The decision upheld the new IRS policy: “Under the Internal Revenue Code, properly construed, racially discriminatory private schools are not entitled to the Federal tax exemption provided for charitable, educational institutions, and persons making gifts to such schools are not entitled to the deductions provided in case of gifts to charitable, educational institutions.”