Bob Jones University v. U.S. 461 US 574

1. Bob Jones University v. U.S. 461 US 574 Jason Yu Chen TX 8020 Summer, 2007

2. Cites • Cites: 52 AFTR 2d 83-5001, 461 US 574, 103 S Ct 2017, 76 L Ed 2d 157, 83-1 USTC P 9366 • Date Decided: 05/24/1983 • Judge: Chief Justice BURGER

3. Facts • Bob Jones University is a S.C. nonprofit religious institution that believes the Bible forbids interracial dating and marriage. • Prior to 1971 African Americans were excluded from the school. • From 1971 to 1975 the school accepted African Americans married within their race. • In 1976 the 4th Circuit ruled in McCravy v. Runyon that racial exclusion should be prohibited from private schools. • Bob Jones started enrolling unmarried African American students, but still banned interracial dating & marriage.

4. Facts (continued) • Until 1970 IRS extended the tax-exempt status to Bob Jones. • In 1970 IRS started challenging the tax-exempt status of private schools practicing racial discrimination. • On Jan. 19, 1976 IRS revoked the school’s tax-exempt status. • From 1970 to 1975 the school filed tax returns and paid $21.00 under the Federal Unemployment Tax Act. • IRS claimed unpaid tax of $489,675.59 plus interest for the taxable years of 1971 to 1975

5. History • The U.S. District Court in S.C. • IRS exceeded its delegated power • The 4th Circuit Court of Appeals • Sec. 501(c)(3) must be read against the background of charitable trust law and thus should not contradict public policy. • The U.S. Supreme Court • Granted certiorari

6. Issue Should Sec. 501(c)(1) be interpreted solely by the plain language of the Code or should it be analyzed within the framework of the Code and against the background of the congressional purposes?

7. Argument • Bob Jones: the school is not racially discriminating. It now allows all races to enroll and the ban on interracial dating and marriage applies to all races. • IRS: the school is practicing racial discrimination.

8. Supreme Court Ruling • Decision: favored IRS • Petitioner does not qualify as a tax-exempt organization under §501(c)(3). • The IRS's 1970 interpretation of §501(c)(3) was correct. • The IRS did not exceed its delegated power by the revocation.

9. Reasoning • An examination of the IRC's framework and the background of congressional purposes reveals unmistakable evidence that underlying all relevant parts of the IRC is the intent that entitlement to tax exemption depends on meeting certain common-law standards of charity—namely, that an institution seeking tax-exempt status must serve a public purpose and not be contrary to established public policy. • Whatever may be the rationale for such private schools' policies, racial discrimination in education is contrary to public policy. Racially discriminatory educational institutions cannot be viewed as conferring a public benefit within the above "charitable" concept or within the congressional intent underlying §501(c)(3).

10. Reasoning (Continued) • Such interpretation is wholly consistent with what Congress, the Executive, and the courts had previously declared. • The Government's fundamental, overriding interest in eradicating racial discrimination in education substantially outweighs whatever burden denial of tax benefits places on petitioners' exercise of their religious beliefs. Petitioners' asserted interests cannot be accommodated with that compelling governmental interest.

11. Conclusion Regardless of religious sincerity of policies, compelling government interest in eradicating racial discrimination substantially outweighed any burden that denial of tax benefits would have on schools' exercise of religious beliefs.