Bob Jones v. United States 461 U.S. 574; 103 S. Ct. 2017; 76 L. Ed. 2d 157 (1983)
Bob Jones University (BJU) was
a religious school that had a tax-exempt status under a provision of the
IRS Code (26 U.S.C. §501(c)(3))
for private schools.
Bob Jones University also had
a policy against interracial dating, which was contrary to public policy.
Although, it is not
unlawful to have such a policy, since they wree a private school.
The IRS sent BJU a letter
informing them that their tax-exempt status was being revoked because of
their racially discriminatory policies.
The text of §501(c)(3) said that it was for groups, "organized
and operated exclusively for religious, charitable, scientific, testing
for public safety, literary, or educational purposes." The Statute
said nothing about discriminatory policies.
The IRS made this decision
after being ordered to stop according tax-exempt status to private
schools in Mississippi that discriminated as to admissions on the basis
of race in Green v. Kennedy (309
F.Supp. 1127 (1970)).
BJU refused to admit
minorities until 1970, but quickly changed their policy after Green was decided.
BJU sued for an injunction.
The Trial Court granted a
preliminary injunction, but it was overturned both by the Appellate Court
as well as the US Supreme Court (416 U.S. 725).
The courts felt that there
was irreparable injury until the IRS made their final decision.
5 years later, the IRS
officially revoked BJU's tax exempt status. BJU again sued.
BJU argued that the decision
was an unconstitutional violation of their 1st Amendment right to free speech.
The Trial Court found for BJU.
The IRS appealed.
The Trial Court found that
the IRS exceeded their authority.
The Appellate Court reversed.
The Appellate Court found
that that §501(c)(3) must be read
in conjunction with the section on charitable trust law (§170). To be eligible for an exemption under
that section, an institution must be "charitable" in the common
law sense, and therefore must not be contrary to public policy.
The Court found that BJU did
not meet this requirement, since its "racial policies violated the
clearly defined public policy, rooted in our Constitution, condemning
racial discrimination and, more specifically, the government policy
against subsidizing racial discrimination in education, public or
The US Supreme Court affirmed
the Appellate Court and found for the IRS's construction of 26 U.S.C.
The US Supreme Court agreed
that nothing in the plain language
of 26 U.S.C. §501(c)(3) allowed the IRS to revoke BJU's
tax-exempt status because they were racists.
BJU argued that there was
no language expressly requiring an organization to be
The text said basically
religious or charitable. Under
a plain language reading
it doesn't need to be both.
However, the Court found
that the IRS could read a "common law" public interest
requirement into the construction of 26 U.S.C. §501(c)(3).
"It would be wholly
incompatible with the concepts underlying tax exemption to grant
tax-exempt status to racially discriminatory private educational
entities. 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)."
The Court cited Congress'
refusal to intervene as proof that they approved of the IRS's
construction of the statute.
The Court found that "it
is a well-established canon of statutory construction that a court should
go beyond the literal language of a Statute if reliance on that language
would defeat the plain purpose of
The Court looked at §170 which helped to define what Congress meant
by 'charitable', and found that §170 and §501(c)(3) should be read together in order to be
"§170 reveals that Congress' intention was to
provide tax benefits to organizations serving charitable purposes. The
form of §170 simply makes
plain what common sense and history tell us; in enacting both §170
and §501(c)(3) Congress sought to provide tax benefits to
charitable organizations, to encourage the development of private
institutions that serve a useful public purpose or supplement or take
the place of public institutions of the same kind."
In a dissent, it was argued
that the literal terms of 26 U.S.C. §501(c)(3) could not be read to exclude Bob Jones from
charitable status, and that the courts should not read terms into Statutes
that were not explicitly written into them by Congress.
The dissent felt that "regardless
of our view on the propriety of Congress' failure to legislate we are not
constitutionally empowered to act for them." So basically, if
Congress didn't like the law as written, they should be the ones to
change it, not the courts.
Basically, the dissent
argued that even though everyone agrees that discrimination is wrong,
having the courts add words to Statutes that aren't there sets a bad
Basically, in this case, the
Court showed a willingness to look past the words of a Statute to
interpret it according to the fundamental intent of the Statute.
The tax-exempt status was
intended to provide public benefits by decreasing the cost of education.
In the Court's opinion, this benefit was not served by BJUs policies so
they should not qualify for the exemption.
The way the Court justified
their decision was to say that even if §501(c)(3) didn't explicitly require a tax-exempt
organization to be 'charitable', §170 did, so that counts. Then, once they made
that leap, they looked to the common law and case law to define what it
means for an organization to be 'charitable'.
BJU's race discrimination
policy didn't meet public policy goals, therefore it didn't meet the
definition of 'charitable', therefore it didn't meet the requirements of
§170, therefore it didn't meet
the requirements of §501(c)(3).