Bob Jones University v. United States

1983-05-24

Headline: Court upholds denial of tax-exempt status for private schools that practice racially discriminatory admissions, preventing racially discriminatory religious and private schools from receiving federal tax benefits.

Holding: The Court held that the IRS may deny federal tax-exempt status to private schools that practice racial discrimination, including those asserting religious justification, because such discrimination is contrary to fundamental public policy.

Real World Impact:

Stops racially discriminatory private schools from receiving federal tax exemptions.
Removes charitable deductions for donations to such schools.
Applies even when schools claim racial rules are religiously required.

Topics: tax-exempt status, racial discrimination in schools, religious freedom vs civil rights, private school admissions

Summary

Background

Two private Christian schools with racially discriminatory admissions policies — Bob Jones University and Goldsboro Christian Schools — challenged the IRS after it changed course in 1970 and announced it would not treat racially discriminatory private schools as charitable for tax purposes (Revenue Ruling 71-447). The IRS revoked or denied §501(c)(3) status for these schools; lower courts and the Fourth Circuit held the IRS acted within its authority, and the schools appealed to the Supreme Court.

Reasoning

The Court framed the question as whether a private school that practices racial discrimination can qualify for federal tax exemption under §501(c)(3). It explained that those exemptions rest on a common-law idea of “charity,” which requires a demonstrable public benefit and that the activity not violate fundamental public policy. The Court found an established national policy against racial discrimination in education and concluded the IRS did not exceed its authority in applying Revenue Ruling 71-447. The Court also rejected the schools’ First Amendment claim, holding the Government’s compelling interest in eradicating racial discrimination outweighed any burden from denying tax benefits.

Real world impact

The decision affirms that private schools that maintain racially discriminatory admissions policies may lose federal tax-exempt status and donors may lose charitable deduction treatment. The rule applies to both secular and religious schools when their racial practices are contrary to fundamental public policy. Congress remains free to change the law by statute.

Dissents or concurrances

Justice Powell concurred in the judgment but warned about leaving major public-policy choices to the IRS and stressed Congress should clarify law. Justice Rehnquist dissented, arguing Congress had not authorized the IRS to add this extra public-policy requirement to §501(c)(3).