Bob Jones University v. United States
The Supreme Court ruled that the IRS was right to strip tax-exempt status from two private religious schools that enforced racially discriminatory admissions and disciplinary policies, holding that tax-exempt charities must not violate fundamental public policy.
The decision confirmed that the government's compelling interest in eliminating racial discrimination in education outweighs the schools' religious objections, meaning taxpayers are not required to subsidize schools that discriminate by race even when the discrimination stems from sincere religious belief.
“Whatever may be the rationale for such private schools’ policies, and however sincere the rationale may be, racial discrimination in education is contrary to public policy.”
The majority's core statement that sincere religious belief does not excuse racially discriminatory school policies from violating public policy.
How it got here: Both schools lost in federal district and appeals courts (one after the IRS revoked exempt status, one after denial of exemption), and the Supreme Court granted certiorari to resolve both cases together.
The Case in Depth
What happened
Bob Jones University, a fundamentalist Christian school in South Carolina, banned interracial dating and marriage among students based on its interpretation of the Bible. Goldsboro Christian Schools in North Carolina admitted almost only white students on similar religious grounds. Both had received or sought tax-exempt status under the tax code before the IRS changed its policy in 1970 to deny exemptions to racially discriminatory private schools.
The question before the Court
Could two private religious schools that banned interracial dating and marriage keep their federal tax-exempt status?
Why it matters
The ruling meant private schools nationwide that discriminate by race lose access to a major federal subsidy — tax exemption and deductible donations — regardless of religious justification. It cemented the IRS's authority to deny tax breaks based on public-policy grounds and signaled that civil-rights principles can limit tax benefits even for religiously motivated institutions.
What changes now
This is a final merits decision resolving both schools' claims; no remand for further factual proceedings was needed since the Court affirmed the lower appellate rulings against the schools. The schools remain ineligible for tax-exempt status and their donors cannot claim charitable deductions. The ruling left open, per the concurrence and dissent, questions about how far the IRS or courts may go in defining public policy limits on other categories of tax-exempt organizations, an issue Congress was urged to address directly.
What this does not decide
The Court did not decide whether denying tax exemptions to discriminatory schools is independently required by the Constitution's equal protection guarantee, since it resolved the case on statutory grounds. It also did not address whether other kinds of policy violations beyond racial discrimination could similarly disqualify an organization from tax-exempt status.
Concurrences and dissents
Concurrence — Justice Powell
Justice Powell agreed with the outcome but worried the majority's reasoning gave the IRS too much power to decide, on its own, which public policies are 'fundamental' enough to void a tax exemption. He argued the exemption's purpose is to encourage pluralism and diverse viewpoints, not to reward only groups that align with 'the common community conscience,' and that Congress, not the IRS or courts, should define such policy limits going forward.
Dissent — Justice Rehnquist
“Congress has expressed its decision in the plainest of terms in § 501(c)(3) by providing that tax-exempt status is to be given to any corporation, or community chest, fund, or foundation that is organized for one of the eight enumerated purposes, operated on a nonprofit basis, and uninvolved in lobbying activities or political campaigns.”The dissent's argument that the statute's plain text sets exclusive requirements with no added public-policy test.
Justice Rehnquist argued that Congress, not the IRS or the courts, must decide whether racial discrimination disqualifies an organization from tax-exempt status, and that Congress had never actually amended the statute to add such a requirement. He contended the statute's plain language sets out clear, exclusive criteria for exemption, and that congressional inaction on bills to overturn the IRS's 1970 policy did not amount to ratification. He would have reversed and granted the schools tax-exempt status.
How the Court got there
The legal reasoning, step by step
- The Court read the tax-exemption statute together with a companion charitable-deduction provision, concluding that Congress meant tax-exempt 'charitable' organizations to satisfy the common-law meaning of charity, which requires serving a public purpose and not violating public policy.
- Because racial discrimination in education had, through decades of court rulings, legislation, and executive action, become an unmistakable and fundamental national policy, the Court held that a school violating that policy could not be considered 'charitable' and therefore did not qualify for tax exemption.
- The Court found that Congress had effectively ratified the IRS's 1970-71 position through years of awareness and inaction on bills to overturn it, plus its 1976 enactment of a related provision denying exemptions to discriminatory social clubs, which the Court treated as confirming evidence that the IRS acted within its authority.
- Turning to the religious-liberty claim, the Court applied the framework requiring the government to show a compelling interest that could not be served by less restrictive means before it may burden religious practice, and found the government's interest in ending racial discrimination in education was compelling enough to justify denying tax benefits.
- Applying these conclusions to the facts, the Court held Goldsboro's admissions policy and Bob Jones University's interracial-dating and marriage rules were both forms of racial discrimination, so the IRS properly denied tax-exempt status to both schools.
Doctrinal impact
Cases affected by this decision
Reaffirms Green v. Connally (330 F. Supp. 1150)
The Court relied on and affirmed the reasoning of this lower-court decision denying tax exemptions to discriminatory schools.