## Facts

- Bob Jones University, a nonprofit religious educational institution, enforced policies barring admission of applicants in interracial marriages and disciplined students for interracial dating, based on religious beliefs.
- Goldsboro Christian Schools, a nonprofit religious school, maintained an openly racially discriminatory admissions policy that largely excluded nonwhite students.
- The IRS changed its administrative position in 1970–71 and determined that private schools lacking a racially nondiscriminatory admissions policy do not qualify as “charitable” within § 501(c)(3) concepts, and therefore are not entitled to tax-exempt status.
- The IRS revoked Bob Jones University’s § 501(c)(3) status and denied Goldsboro’s application for exemption, resulting in tax liabilities.
- Bob Jones University and Goldsboro paid portions of assessed taxes and filed refund suits; the government sought additional unpaid taxes in Bob Jones.
- Lower courts ultimately upheld the IRS actions, and the cases were reviewed together.

## Issues

1. Whether the IRS acted within its statutory authority under 26 U.S.C. § 501(c)(3) in revoking or denying tax-exempt status to religious schools engaging in racial discrimination.
2. Whether revocation or denial of § 501(c)(3) status for such schools violates the Religion Clauses, including the Free Exercise Clause.

## Decision

- The Supreme Court held that neither school qualified for tax exemption under § 501(c)(3).
- The Court sustained the IRS’s authority to interpret “charitable” for § 501(c)(3) purposes to exclude private educational institutions whose policies are contrary to fundamental public policy.
- The Court concluded that racial discrimination in education is contrary to fundamental national public policy and that subsidizing such discrimination through tax exemption is incompatible with the purposes of charitable tax exemptions.
- The Court held that any burden on religious exercise from loss of exemption was justified by the government’s overriding interest in eradicating racial discrimination in education.
- The Court affirmed the judgments upholding the IRS actions in both cases.

## Legal Principles

- Qualification for § 501(c)(3) status requires consistency with common-law charitable concepts, including that an organization’s purposes and operations not be contrary to established public policy.
- Tax exemption functions as a form of public subsidy; the government may condition that subsidy on compliance with fundamental public policy.
- Racial discrimination in education violates a fundamental national public policy and therefore disqualifies a private school from being treated as “charitable” under § 501(c)(3).
- Government action that incidentally burdens religious exercise may be upheld when necessary to achieve an overriding governmental interest of the highest order; eradicating racial discrimination in education meets that standard.
- The First Amendment does not require the government to subsidize religiously motivated conduct that conflicts with fundamental public policy, even if the conduct remains lawful.

## Conclusion

The Court upheld the IRS’s denial and revocation of § 501(c)(3) status for religious schools practicing racial discrimination, reasoning that such discrimination is contrary to fundamental public policy and that the government’s overriding interest in eliminating discrimination in education justifies the resulting burden on religious exercise.


Bob Jones Univ. v. United States, 461 U.S. 574 (1983)