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Bob Jones University v. United States

Supreme Court of the United States · 1983 · Constitutional Law

Constitutional LawTax ExemptionFree Exercise ClauseRacial Discrimination in Education501(c)(3)170charitable conceptpublic policy limitation

Facts

After announcing in 1970 and formalizing in Revenue Ruling 71-447 in 1971 that racially discriminatory private schools were not "charitable" within the meaning of §§ 170 and 501(c)(3), the IRS denied tax benefits to such schools. Bob Jones University, a religious and educational institution, had excluded Black applicants until 1971 and later allowed Black students to enroll while prohibiting interracial dating and marriage and denying admission to applicants in or advocating interracial marriage. Goldsboro Christian Schools maintained a racially discriminatory admissions policy based on its interpretation of the Bible and for the most part accepted only Caucasians. Both schools claimed tax-exempt status and argued that denial of that status exceeded IRS authority and violated their religious freedom.

Issue

Whether nonprofit private religious schools that prescribe and enforce racially discriminatory admissions or student-conduct policies on religious grounds qualify as tax-exempt organizations under § 501(c)(3). Also, whether the IRS had authority to deny or revoke that status on public-policy grounds and whether doing so violated the Free Exercise Clause.

Rule

To qualify for tax exemption under § 501(c)(3), an institution must not only fall within one of the statute's listed categories but also be "charitable" in the common-law sense by serving a public purpose and not acting contrary to fundamental, established public policy. Racial discrimination in education violates a fundamental public policy, so racially discriminatory educational institutions are not entitled to tax-exempt status; denial of that status does not violate the Free Exercise Clause when the government acts to further its overriding interest in eradicating racial discrimination in education.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Cedar Light Academy, a nonprofit K-12 school in Tulsa, is organized for religious and educational purposes and operates on a nonprofit basis. The school refuses admission to children whose parents are in interracial marriages because its board teaches that such marriages are religiously forbidden.

If the IRS denies the school's § 501(c)(3) status, which is the strongest justification under the governing rule?

Explanation. An organization must do more than fit a listed category such as religious or educational. Under the majority's rule, § 501(c)(3) incorporates the common-law charitable concept, requiring service to a public purpose and consistency with fundamental public policy. Racial discrimination in education violates such a fundamental policy, so the IRS may deny exemption even where the school is religiously motivated and otherwise educational.