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. BJU appealed.
    • 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 private."
  • The US Supreme Court affirmed the Appellate Court and found for the IRS's construction of 26 U.S.C. 501(c)(3).
    • 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 "charitable."
        • 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 Statute."
      • 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 consistent.
        • "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 precedent.
  • 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).