Bob Jones University v. United States

No. 81-3

Argued October 12, 1982

Decided May 24, 1983 *

461 U.S. 574

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE FOURTH CIRCUIT

Syllabus



Section 501(c)(3) of the Internal Revenue Code of 1954 (IRC) provides

that "[c]orporations . . . organized and operated exclusively for

religious, charitable . . . or educational purposes" are entitled to tax

exemption.  Until 1970, the Internal Revenue Service (IRS) granted

tax-exempt status under  501(c)(3) to private schools, independent of

racial admissions policies, and granted charitable deductions for

contributions to such schools under  170 of the IRC.  But in 1970, the

IRS concluded that it could no longer justify allowing tax-exempt status

under  501(c)(3) to private schools that practiced racial

discrimination, and in 1971 issued Revenue Ruling 71-447 providing that

a private school not having a racially nondiscriminatory policy as to

students is not "charitable" within the common law concepts reflected in

 170 and 501(c)(3).  In No. 81-3, petitioner Bob Jones University, while

permitting unmarried Negroes to enroll as students, denies admission to

applicants engaged in an interracial marriage or known to advocate

interracial marriage or dating.  Because of this admissions policy, the

IRS revoked the University's tax-exempt status.  After paying a portion

of the federal unemployment taxes for a certain taxable year, the

University filed a refund action in Federal District Court, and the

Government counterclaimed for unpaid taxes for that and other taxable

years.  Holding that the IRS exceeded its powers in revoking the

University's tax-exempt status and violated the University's rights

under the Religion Clauses of the First Amendment, the District Court

ordered the IRS to refund the taxes paid and rejected the counterclaim.

The Court of Appeals reversed.  In No. 81-1, petitioner Goldsboro

Christian Schools maintains a racially discriminatory admissions policy

based upon its interpretation of the Bible, accepting for the most part

only Caucasian students.  The IRS determined that Goldsboro was not an

organization described in  501(c)(3), and hence was required to pay

federal social security and unemployment taxes.  After paying a portion

of such taxes for certain years, Goldsboro filed a refund suit in

Federal District Court, and the IRS counterclaimed for unpaid taxes. 

The District Court entered summary judgment for [461 U.S. 575] the IRS,

rejecting Goldsboro's claim to tax-exempt status under  501(c) (3) and

also its claim that the denial of such status violated the Religion

Clauses of the First Amendment.  The Court of Appeals affirmed.



Held:  Neither petitioner qualifies as a tax-exempt organization under 

501(c)(3).



(a) An examination of the IRC's framework and the background of

congressional purposes reveals unmistakable evidence that, underlying

all relevant parts of the IRC, is the intent that entitlement to tax

exemption depends on meeting certain common law standards of charity --

namely, that an institution seeking tax-exempt status must serve a

public purpose and not be contrary to established public policy.  Thus,

to warrant exemption under  501(c)(3), an institution must fall within a

category specified in that section, and must demonstrably serve and be

in harmony with the public interest, and the institution's purpose must

not be so at odds with the common community conscience as to undermine

any public benefit that might otherwise be conferred.



(b) The IRS's 1970 interpretation of  501(c)(3) was correct.  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).



(c) The IRS did not exceed its authority when it announced its

interpretation of  501(c)(3) in 1970 and 1971.  Such interpretation is

wholly consistent with what Congress, the Executive, and the courts had

previously declared.  And the actions of Congress since 1970 leave no

doubt that the IRS reached the correct conclusion in exercising its

authority.



(d) The Government's fundamental, overriding interest in eradicating

racial discrimination in education substantially outweighs whatever

burden denial of tax benefits places on petitioners' exercise of their

religious beliefs.  Petitioners' asserted interests cannot be

accommodated with that compelling governmental interest, and no less

restrictive means are available to achieve the governmental interest.



(e) The IRS properly applied its policy to both petitioners.  Goldsboro

admits that it maintains racially discriminatory policies, and, contrary

to Bob Jones University's contention that it is not racially

discriminatory, discrimination on the basis of racial affiliation and

association is a form of racial discrimination.



No. 81-1, 644 F.2d 879, and No. 81-3, 639 F.2d 147, affirmed. [461 U.S.

576]



BURGER, C.J., delivered the opinion of the Court, in which BRENNAN,

WHITE, MARSHALL, BLACKMUN, STEVENS, and O'CONNOR, JJ., joined, and in

Part III of which POWELL, J., joined.  POWELL, J., filed an opinion

concurring in part and concurring in the judgment, post,   REHNQUIST,

J., filed a dissenting opinion, post,  [461 U.S. 577] BURGER, J., lead

opinion



CHIEF JUSTICE BURGER delivered the opinion of the Court.



We granted certiorari to decide whether petitioners, nonprofit private

schools that prescribe and enforce racially discriminatory admissions

standards on the basis of religious doctrine, qualify as tax-exempt

organizations under  501(c)(3) of the Internal Revenue Code of 1954. I A



Until 1970, the Internal Revenue Service granted tax-exempt status to

private schools, without regard to their racial admissions policies,

under  501(c)(3) of the Internal Revenue Code, 26 U.S.C.  501(c)(3), and

granted charitable [461 U.S. 578] deductions for contributions to such

schools under  170 of the Code, 26 U.S.C.  170.



On January 12, 1970, a three-judge District Court for the District of

Columbia issued a preliminary injunction prohibiting the IRS from

according tax-exempt status to private schools in Mississippi that

discriminated as to admissions on the basis of race.  Green v. Kennedy,

309 F.Supp. 1127, appeal dism'd sub nom. Cannon v. Green, 398 U.S. 956

(1970).  Thereafter, in July, 1970, the IRS concluded that it could "no

longer legally justify allowing tax-exempt status [under  501(c)(3)] to

private schools which practice racial discrimination."  IRS News

Release, July 7, 1970, reprinted in App. in No. 81-3, p. A235.  At the

same time, the IRS announced that it could not "treat gifts to such

schools as charitable deductions for income tax purposes [under  170]." 

Ibid.  By letter dated November 30, 1970, the IRS formally notified

private schools, including those involved in this litigation, of this

change in policy, "applicable to all private schools in the United

States at all levels of education."  See id. at A232.



On June 30, 1971, the three-judge District Court issued its opinion on

the merits of the Mississippi challenge.  Green v. Connally, 330 F.Supp.

1150, summarily aff'd sub nom. Coit v. Green, 404 U.S. 997 (1971).  That

court approved the IRS's amended construction of the Tax Code.  The

court also held that racially discriminatory private schools were not

entitled to exemption under  501(c)(3) and that donors were not entitled

to deductions for contributions to such schools under  170.  The court

permanently enjoined the Commissioner of [461 U.S. 579] Internal Revenue

from approving tax-exempt status for any school in Mississippi that did

not publicly maintain a policy of nondiscrimination.



The revised policy on discrimination was formalized in Revenue Ruling

71-447, 1971-2 Cum.Bull. 230: Both the courts and the Internal Revenue

Service have long recognized that the statutory requirement of being

"organized and operated exclusively for religious, charitable, . . . or

educational purposes" was intended to express the basic common law

concept [of "charity"]. . . .  All charitable trusts, educational or

otherwise, are subject to the requirement that the purpose of the trust

may not be illegal or contrary to public policy. Based on the "national

policy to discourage racial discrimination in education," the IRS ruled

that a [private] school not having a racially nondiscriminatory policy

as to students is not 'charitable' within the common law concepts

reflected in sections 170 and 501(c)(3) of the Code. Id. at 231.



The application of the IRS construction of these provisions to

petitioners, two private schools with racially discriminatory admissions

policies, is now before us. B No. 81-3, Bob Jones University v. United

States



Bob Jones University is a nonprofit corporation located in Greenville,

S.C.  Its purpose is "to conduct an institution [461 U.S. 580] of

learning . . giving special emphasis to the Christian religion and the

ethics revealed in the Holy Scriptures."  Certificate of Incorporation,

Bob Jones University, Inc., of Greenville, S.C. reprinted in App. in No.

81-3, p. A119.  The corporation operates a school with an enrollment of

approximately 5,000 students, from kindergarten through college and

graduate school.  Bob Jones University is not affiliated with any

religious denomination, but is dedicated to the teaching and propagation

of its fundamentalist Christian religious beliefs.  It is both a

religious and educational institution.  Its teachers are required to be

devout Christians, and all courses at the University are taught

according to the Bible.  Entering students are screened as to their

religious beliefs, and their public and private conduct is strictly

regulated by standards promulgated by University authorities.



The sponsors of the University genuinely believe that the Bible forbids

interracial dating and marriage.  To effectuate these views, Negroes

were completely excluded until 1971.  From 1971 to May, 1975, the

University accepted no applications from unmarried Negroes, but did

accept applications from Negroes married within their race.



Following the decision of the United States Court of Appeals for the

Fourth Circuit in McCrary v. Runyon, 515 F.2d 1082 (1975), aff'd, 427

U.S. 160 (1976), prohibiting racial exclusion from private schools, the

University revised its policy.  Since May 29, 1975, the University has

permitted unmarried Negroes to enroll; but a disciplinary rule prohibits

interracial dating and marriage.  That rule reads: There is to be no

interracial dating.



1. Students who are partners in an interracial marriage will be

expelled. [461 U.S. 581]



2. Students who are members of or affiliated with any group or

organization which holds as one of its goals or advocates interracial

marriage will be expelled.



3. Students who date outside of their own race will be expelled.



4. Students who espouse, promote, or encourage others to violate the

University's dating rules and regulations will be expelled. App. in No.

81-3, p. A197.  The University continues to deny admission to applicants

engaged in an interracial marriage or known to advocate interracial

marriage or dating.  Id. at A277.



Until 1970, the IRS extended tax-exempt status to Bob Jones University

under  501(c)(3).  By the letter of November 30, 1970, that followed the

injunction issued in Green v. Kennedy, 309 F.Supp. 1127 (DC 1970), the

IRS formally notified the University of the change in IRS policy, and

announced its intention to challenge the tax-exempt status of private

schools practicing racial discrimination in their admissions policies.



After failing to obtain an assurance of tax exemption through

administrative means, the University instituted an action in 1971

seeking to enjoin the IRS from revoking the school's tax-exempt status. 

That suit culminated in Bob Jones University v. Simon, 416 U.S. 725

(1974), in which this Court held that the Anti-Injunction Act of the

Internal Revenue Code, 26 U.S.C.  7421(a), prohibited the University

from obtaining judicial review by way of injunctive action before the

assessment or collection of any tax.



Thereafter, on April 16, 1975, the IRS notified the University of the

proposed revocation of its tax-exempt status.  On January 19, 1976, the

IRS officially revoked the University's tax-exempt status, effective as

of December 1, 1970, the day after the University was formally notified

of the change in IRS policy.  The University subsequently filed returns

under the Federal Unemployment Tax Act for the period from December 1,

1970, to December 31, 1975, and paid a tax [461 U.S. 582] totalling $21

on one employee for the calendar year of 1975.  After its request for a

refund was denied, the University instituted the present action, seeking

to recover the $21 it had paid to the IRS.  The Government

counterclaimed for unpaid federal unemployment taxes for the taxable

years 1971 through 1975, in the amount of $489,675.59, plus interest.



The United States District Court for the District of South Carolina held

that revocation of the University's tax-exempt status exceeded the

delegated powers of the IRS, was improper under the IRS rulings and

procedures, and violated the University's rights under the Religion

Clauses of the First Amendment.  468 F.Supp. 890, 907 (1978).  The court

accordingly ordered the IRS to pay the University the $21 refund it

claimed and rejected the IRS's counterclaim.



The Court of Appeals for the Fourth Circuit, in a divided opinion,

reversed.  639 F.2d 147 (1980).  Citing Green v. Connally, 330 F.Supp.

1150 (DC 1971), with approval, the Court of Appeals concluded that 

501(c)(3) must be read against the background of charitable trust law. 

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.  In the court's view, Bob Jones University

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. 639 F.2d at 151.  The court held that the IRS acted within its

statutory authority in revoking the University's tax-exempt status. 

Finally, the Court of Appeals rejected petitioner's arguments that the

revocation of the tax exemption violated the Free Exercise and

Establishment Clauses of the First Amendment.  The case was remanded to

the District Court with instructions to dismiss the University's claim

for a refund and to reinstate the IRS's counterclaim. [461 U.S. 583] C

No. 81-1, Goldsboro Christian Schools, Inc. v. United States



Goldsboro Christian Schools is a nonprofit corporation located in

Goldsboro, N.C.  Like Bob Jones University, it was established to

conduct an institution or institutions of learning . . . giving special

emphasis to the Christian religion and the ethics revealed in the Holy

scriptures. Articles of Incorporation  3(a); see Complaint  6, reprinted

in App. in No. 81-1, pp. 5-6.  The school offers classes from

kindergarten through high school, and, since at least 1969, has

satisfied the State of North Carolina's requirements for secular

education in private schools.  The school requires its high school

students to take Bible-related courses, and begins each class with

prayer.



Since its incorporation in 1963, Goldsboro Christian Schools has

maintained a racially discriminatory admissions policy based upon its

interpretation of the Bible.  Goldsboro has for the most part accepted

only Caucasians.  On occasion, however, the school has accepted children

from racially mixed marriages in which one of the parents is Caucasian.



Goldsboro never received a determination by the IRS that it was an

organization entitled to tax exemption under  501(c)(3).  Upon audit of

Goldsboro's records for the years 1969 through 1972, the IRS determined

that Goldsboro was not an organization described in  501(c)(3), and

therefore was required to pay taxes under the Federal Insurance

Contribution Act and the Federal Unemployment Tax Act. [461 U.S. 584]



Goldsboro paid the IRS $3,459.93 in withholding, social security, and

unemployment taxes with respect to one employee for the years 1969

through 1972.  Thereafter, Goldsboro filed a suit seeking refund of that

payment, claiming that the school had been improperly denied  501(c)(3)

exempt status.  The IRS counterclaimed for $160,073.96 in unpaid social

security and unemployment taxes for the years 1969 through 1972,

including interest and penalties.



The District Court for the Eastern District of North Carolina decided

the action on cross-motions for summary judgment.  436 F.Supp. 1314

(1977).  In addressing the motions for summary judgment, the court

assumed that Goldsboro's racially discriminatory admissions policy was

based upon a sincerely held religious belief.  The court nevertheless

rejected Goldsboro's claim to tax-exempt status under  501(c) (3),

finding that private schools maintaining racially discriminatory

admissions policies violate clearly declared federal policy, and

therefore must be denied the federal tax benefits flowing from

qualification under Section 501(c)(3). Id. at 1318.  The court also

rejected Goldsboro's arguments that denial of tax-exempt status violated

the Free Exercise and Establishment Clauses of the First Amendment. 

Accordingly, the court entered summary judgment for the IRS on its

counterclaim.



The Court of Appeals for the Fourth Circuit affirmed, 644 F.2d 879

(1981) (per curiam).  That court found an "identity for present

purposes" between the Goldsboro case and the Bob Jones University case,

which had been decided shortly [461 U.S. 585] before by another panel of

that court, and affirmed for the reasons set forth in Bob Jones

University.



We granted certiorari in both cases, 454 U.S. 892 (1981), and we affirm

in each. II A



In Revenue Ruling 71-447, the IRS formalized the policy, first announced

in 1970, that  170 and  501(c)(3) embrace the common law "charity"

concept.  Under that view, to qualify for a tax exemption pursuant to 

501(c)(3), an institution must show, first, that it falls within one of

the eight categories expressly set forth in that section, and second,

that its activity is not contrary to settled public policy.



Section 501(c)(3) provides that "[c]orporations . . . organized and

operated exclusively for religious, charitable . . . or educational

purposes" are entitled to tax exemption.  Petitioners argue that the

plain language of the statute guarantees them tax-exempt status.  They

emphasize the absence of any language in the statute expressly requiring

all exempt organizations to be "charitable" in the common law sense, and

they contend that the disjunctive "or" separating the categories in 

501(c)(3) precludes such a reading.  Instead, they argue that, if an

institution falls within one or more of [461 U.S. 586] the specified

categories it is automatically entitled to exemption, without regard to

whether it also qualifies as "charitable."  The Court of Appeals

rejected that contention and concluded that petitioners' interpretation

of the statute "tears section 501(c)(3) from its roots."  639 F.2d at

151.



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 general

words used in the clause . . . , taken by themselves, and literally

construed, without regard to the object in view, would seem to sanction

the claim of the plaintiff.  But this mode of expounding a statute has

never been adopted by any enlightened tribunal -- because it is evident

that, in many cases, it would defeat the object which the Legislature

intended to accomplish.  And it is well-settled that, in interpreting a

statute, the court will not look merely to a particular clause in which

general words may be used, but will take in connection with it the whole

statute . . . and the objects and policy of the law. . . . Brown v.

Duchesne, 19 How. 183, 194 (1857) (emphasis added).



Section 501(c)(3) therefore must be.analyzed and construed within the

framework of the Internal Revenue Code and against the background of the

congressional purposes.  Such an examination reveals unmistakable

evidence that, underlying all relevant parts of the Code, is the intent

that entitlement to tax exemption depends on meeting certain common law

standards of charity -- namely, that an institution seeking tax-exempt

status must serve a public purpose and not be contrary to established

public policy.



This "charitable" concept appears explicitly in  170 of the Code.  That

section contains a list of organizations virtually identical to that

contained in  501(c)(3).  It is apparent that Congress intended that

list to have the same meaning in both [461 U.S. 587] sections.{10}  In 

170, Congress used the list of organizations in defining the term

"charitable contributions."  On its face, therefore,  170 reveals that

Congress' intention was to provide tax benefits to organizations serving

charitable purposes.{11}  The form of  170 simply makes plain what

common sense and history tell us:  in enacting both  170 and [461 U.S.

588]  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.



Tax exemptions for certain institutions thought beneficial to the social

order of the country as a whole, or to a particular community, are

deeply rooted in our history, as in that of England.  The origins of

such exemptions lie in the special privileges that have long been

extended to charitable trusts.{12}



More than a century ago, this Court announced the caveat that is

critical in this case: [I]t has now become an established principle of

American law that courts of chancery will sustain and protect . . . a

gift . . . to public charitable uses, provided the same is consistent

with local laws and public policy. . . . Perin v. Carey, 24 How. 465,

501 (1861) (emphasis added).  Soon after that, in 1877, the Court

commented: A charitable use, where neither law nor public policy

forbids, may be applied to almost any thing that tends to promote the

well-doing and well-being of social man. Ould v. Washington Hospital for

Foundlings, 95 U.S. 303, 311 (emphasis added). [461 U.S. 589]



See also e.g., Jackson v. Phillips, 96 Mass. 539, 556 (1867).  In 1891,

in a restatement of the English law of charity{13} which has long been

recognized as a leading authority in this country, Lord MacNaghten

stated: "Charity," in its legal sense, comprises four principal

divisions:  trusts for the relief of poverty; trusts for the advancement

of education; trusts for the advancement of religion; and trusts for

other purposes beneficial to the community, not falling under any of the

preceding heads. Commissioners v. Pemsel, [1891] A. C. 531, 583

(emphasis added).  See, e.g., 4 A. Scott, Law of Trusts  368, pp.

2853-2854 (3d ed.1967) (hereinafter Scott).  These statements clearly

reveal the legal background against which Congress enacted the first

charitable exemption statute in 1894:{14}  charities were to be given

preferential treatment because they provide a benefit to society.



What little floor debate occurred on the charitable exemption provision

of the 1894 Act and similar sections of later statutes leaves no doubt

that Congress deemed the specified organizations entitled to tax

benefits because they served desirable public purposes.  See, e.g., 26

Cong.Rec. 585-586 [461 U.S. 590] (1894); id. at 1727.  In floor debate

on a similar provision in 1917, for example, Senator Hollis articulated

the rationale: For every dollar that a man contributes for these public

charities, educational, scientific, or otherwise, the public gets 100

per cent. 55 Cong.Rec. 6728.  See also e.g., 44 Cong.Rec. 4150 (1909);

50 Cong.Rec. 1305-1306 (1913).  In 1924, this Court restated the common

understanding of the charitable exemption provision: Evidently, the

exemption is made in recognition of the benefit which the public derives

from corporate activities of the class named, and is intended to aid

them when not conducted for private gain. Trinidad v. Sagrada Orden, 263

U.S. 578, 581.{15}



In enacting the Revenue Act of 1938, ch. 289, 52 Stat. 447, Congress

expressly reconfirmed this view with respect to the charitable deduction

provision: The exemption from taxation of money or property devoted to

charitable and other purposes is based upon the theory that the

Government is compensated for the loss of revenue by its relief from

financial burdens which would otherwise have to be met by appropriations

from other public funds, and by the benefits resulting from the

promotion of the general welfare. H.R.Rep. No. 1860, 75th Cong., 3d

Sess., 19 (1938).{16} [461 U.S. 591]



A corollary to the public benefit principle is the requirement, long

recognized in the law of trusts, that the purpose of a charitable trust

may not be illegal or violate established public policy.  In 1861, this

Court stated that a public charitable use must be "consistent with local

laws and public policy," Perin v. Carey, 24 How. at 501.  Modern

commentators and courts have echoed that view.  See, e.g., Restatement

(Second) of Trusts  377, Comment c (1959); 4 Scott  377, and cases cited

therein; Bogert  378, at 191-192.{17}



When the Government grants exemptions or allows deductions all taxpayers

are affected; the very fact of the exemption or deduction for the donor

means that other taxpayers can be said to be indirect and vicarious

"donors."  Charitable exemptions are justified on the basis that the

exempt entity confers a public benefit -- a benefit which the society or

the community may not itself choose or be able to provide, or which

supplements and advances the work of public institutions already

supported by tax revenues.{18}  History buttresses [461 U.S. 592] logic

to make clear that, to warrant exemption under  501(c)(3), an

institution must fall within a category specified in that section and

must demonstrably serve and be in harmony with the public interest.{19} 

The institution's purpose must not be so at odds with the common

community conscience as to undermine any public benefit that might

otherwise be conferred. B



We are bound to approach these questions with full awareness that

determinations of public benefit and public policy are sensitive matters

with serious implications for the institutions affected; a declaration

that a given institution is not "charitable" should be made only where

there can be no doubt that the activity involved is contrary to a

fundamental public policy.  But there can no longer be any doubt that

racial discrimination in education violates deeply and widely accepted

views of elementary justice.  Prior to 1954, public education in many

places still was conducted under the pall of [461 U.S. 593] Plessy v.

Ferguson, 163 U.S. 537 (1896); racial segregation in primary and

secondary education prevailed in many parts of the country.  See, e.g.,

Segregation and the Fourteenth Amendment in the States (B. Reams & P.

Wilson eds.1975).{20}  This Court's decision in Brown v. Board of

Education, 347 U.S. 483 (1954), signalled an end to that era.  Over the

past quarter of a century, every pronouncement of this Court and myriad

Acts of Congress and Executive Orders attest a firm national policy to

prohibit racial segregation and discrimination in public education.



An unbroken line of cases following Brown v. Board of Education

establishes beyond doubt this Court's view that racial discrimination in

education violates a most fundamental national public policy, as well as

rights of individuals. The right of a student not to be segregated on

racial grounds in schools . . . is indeed so fundamental and pervasive

that it is embraced in the concept of due process of law. Cooper v.

Aaron, 358 U.S. 1, 19 (1958).  In Norwood v. Harrison, 413 U.S. 455,

(1973), we dealt with a nonpublic institution: [A] private school --

even one that discriminates -- fulfills an important educational

function; however, . . . [that] legitimate educational function cannot

be isolated from [461 U.S. 594] discriminatory practices. . . . 

[D]iscriminatory treatment exerts a pervasive influence on the entire

educational process. (Emphasis added.)  See also Runyon v. McCrary, 427

U.S. 160 (1976); Griffin v. County School Board, 377 U.S. 218 (1964).



Congress, in Titles IV and VI of the Civil Rights Act of 1964, Pub.L.

88-352, 78 Stat. 241, 42 U.S.C.  2000c, 2000c-6, 2000d, clearly

expressed its agreement that racial discrimination in education violates

a fundamental public policy.  Other sections of that Act, and numerous

enactments since then, testify to the public policy against racial

discrimination.  See, e.g., the Voting Rights Act of 1965, Pub.L.

89-110, 79 Stat. 437, 42 U.S.C.  1973 et seq. (1976 ed. and Supp. V);

Title VIII of the Civil Rights Act of 1968, Pub.L. 90-284, 82 Stat. 81,

42 U.S.C.  3601 et seq. (1976 ed. and Supp. V); the Emergency School Aid

Act of 1972, Pub.L. 92-318, 86 Stat. 354 (repealed effective Sept. 30,

1979; replaced by similar provisions in the Emergency School Aid Act of

1978, Pub.L. 95-561, 92 Stat. 2252, 20 U.S.C.  3191-3207 (1976 ed.,

Supp. V)).



The Executive Branch has consistently placed its support behind

eradication of racial discrimination.  Several years before this Court's

decision in Brown v. Board of Education, supra, President Truman issued

Executive Orders prohibiting racial discrimination in federal employment

decisions, Exec.Order No. 9980, 3 CFR 720 (1943-1948 Comp.), and in

classifications for the Selective Service, Exec.Order No. 9988, 3 CFR

726, 729 (1943-1948 Comp.).  In 1957, President Eisenhower employed

military forces to ensure compliance with federal standards in school

desegregation programs.  Exec.Order No. 10730, 3 CFR 389 (1954-1958

Comp.).  And in 1962, President Kennedy announced: [T]he granting of

Federal assistance for . . . housing and related facilities from which

Americans are excluded because of their race, color, creed, or national

origin is unfair, unjust, and inconsistent with the public policy of

[461 U.S. 595] the United States as manifested in its Constitution and

laws. Exec.Order No. 11063, 3 CFR 652 (1959-1963 Comp.).  These are but

a few of numerous Executive Orders over the past three decades

demonstrating the commitment of the Executive Branch to the fundamental

policy of eliminating racial discrimination.  See, e.g., Exec.Order No.

11197, 3 CFR 278 (1964-1965 Comp.); Exec.Order No. 11478, 3 CFR 803

(1966-1970 Comp.); Exec.Order No. 11764, 3 CFR 849 (1971-1975 Comp.);

Exec.Order No. 12250, 3 CFR 298 (1981).



Few social or political issues in our history have been more vigorously

debated and more extensively ventilated than the issue of racial

discrimination, particularly in education.  Given the stress and anguish

of the history of efforts to escape from the shackles of the "separate

but equal" doctrine of Plessy v. Ferguson, 163 U.S. 537 (1896), it

cannot be said that educational institutions that, for whatever reasons,

practice racial discrimination, are institutions exercising "beneficial

and stabilizing influences in community life," Walz v. Tax Comm'n, 397

U.S. 664, 673 (1970), or should be encouraged by having all taxpayers

share in their support by way of special tax status.



There can thus be no question that the interpretation of  170 and 

501(c)(3) announced by the IRS in 1970 was correct.  That it may be seen

as belated does not undermine its soundness.  It would be wholly

incompatible with the concepts underlying tax exemption to grant the

benefit of tax-exempt status to racially discriminatory educational

entities, which "exer[t] a pervasive influence on the entire educational

process."  Norwood v. Harrison, supra, at 469.  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.  Racially discriminatory educational institutions cannot

be viewed as conferring a public benefit within the "charitable" concept

discussed earlier, [461 U.S. 596] or within the congressional intent

underlying  170 and  501(c)(3).{21} C



Petitioners contend that, regardless of whether the IRS properly

concluded that racially discriminatory private schools violate public

policy, only Congress can alter the scope of  170 and  501(c)(3). 

Petitioners accordingly argue that the IRS overstepped its lawful bounds

in issuing its 1970 and 1971 rulings.



Yet ever since the inception of the Tax Code, Congress has seen fit to

vest in those administering the tax laws very broad authority to

interpret those laws.  In an area as complex as the tax system, the

agency Congress vests with administrative responsibility must be able to

exercise its authority to meet changing conditions and new problems. 

Indeed, as early as 1918, Congress expressly authorized the Commissioner

"to make all needful rules and regulations for the enforcement" of the

tax laws.  Revenue Act of 1918, ch. 18,  1309, 40 Stat. 1143.  The same

provision, so essential to efficient and fair administration of the tax

laws, has appeared in Tax Codes ever since, see 26 U.S.C.  7805(a); and

this Court has long recognized the primary authority of the IRS and its

predecessors in construing the Internal Revenue Code, see, e.g.,

Commissioner v. Portland Cement Co. of Utah, 450 U.S. 156, 169 (1981);

United States v. Correll, 389 U.S. 299, (1967); Boske v. Comingore, 177

U.S. 459, 469-470 (1900).



Congress, the source of IRS authority, can modify IRS rulings it

considers improper; and courts exercise review over IRS actions.  In the

first instance, however, the responsibility [461 U.S. 597] for

construing the Code falls to the IRS.  Since Congress cannot be expected

to anticipate every conceivable problem that can arise or to carry out

day-to-day oversight, it relies on the administrators and on the courts

to implement the legislative will.  Administrators, like judges, are

under oath to do so.



In  170 and  501(c)(3), Congress has identified categories of

traditionally exempt institutions and has specified certain additional

requirements for tax exemption.  Yet the need for continuing

interpretation of those statutes is unavoidable.  For more than 60

years, the IRS and its predecessors have constantly been called upon to

interpret these and comparable provisions, and in doing so have referred

consistently to principles of charitable trust law.  In Treas.Regs. 45,

Art. 517(1) (1921), for example, the IRS's predecessor denied charitable

exemptions on the basis of proscribed political activity before the

Congress itself added such conduct as a disqualifying element.  In other

instances, the IRS has denied charitable exemptions to otherwise

qualified entities because they served too limited a class of people,

and thus did not provide a truly "public" benefit under the common law

test.  See, e.g., Crellin v. Commissioner, 46 B. T. A. 1152, 1155-1156

(1942); James Sprunt Benevolent Trust v. Commissioner, 20 B. T. A.19,

24-25 (1930).  See also Treas.Reg.  1.501(c)(3)(d)(1)(ii) (1959).  Some

years before the issuance of the rulings challenged in these cases, the

IRS also ruled that contributions to community recreational facilities

would not be deductible, and that the facilities themselves would not be

entitled to tax-exempt status, unless those facilities were open to all

on a racially nondiscriminatory basis.  See Rev.Rul. 67-325, 1967-2

Cum.Bull. 113.  These rulings reflect the Commissioner's continuing duty

to interpret and apply the Internal Revenue Code.  See also Textile

Mills Securities Corp. v. Commissioner, 314 U.S. 326, 337-338 (1941).



Guided, of course, by the Code, the IRS has the responsibility, in the

first instance, to determine whether a particular [461 U.S. 598] entity

is "charitable" for purposes of  170 and  501(c)(3).{22}  This in turn

may necessitate later determinations of whether given activities so

violate public policy that the entities involved cannot be deemed to

provide a public benefit worthy of "charitable" status.  We emphasize,

however, that these sensitive determinations should be made only where

there is no doubt that the organization's activities violate fundamental

public policy.



On the record before us, there can be no doubt as to the national

policy.  In 1970, when the IRS first issued the ruling challenged here,

the position of all three branches of the Federal Government was

unmistakably clear.  The correctness of the Commissioner's conclusion

that a racially discriminatory private school "is not `charitable'

within the common law concepts reflected in . . . the Code," Rev.Rul.

71-447, 1971-2 Cum.Bull., at 231, is wholly consistent with what

Congress, the Executive, and the courts had repeatedly declared before

1970.  Indeed, it would be anomalous for the Executive, Legislative, and

Judicial Branches to reach conclusions that add up to a firm public

policy on racial discrimination, and at the same time have the IRS

blissfully ignore what all three branches of the Federal Government had

declared.{23}  Clearly an educational institution engaging in [461 U.S.

599] practices affirmatively at odds with this declared position of the

whole Government cannot be seen as exercising a "beneficial and

stabilizing influenc[e] in community life," Walz v. Tax Comm'n, 397 U.S.

at 673, and is not "charitable," within the meaning of  170 and 

501(c)(3).  We therefore hold that the IRS did not exceed its authority

when it announced its interpretation of  170 and  501(c)(3) in 1970 and

1971.{24} D



The actions of Congress since 1970 leave no doubt that the IRS reached

the correct conclusion in exercising its authority.  It is, of course,

not unknown for independent agencies or the Executive Branch to

misconstrue the intent of a statute; Congress can and often does correct

such misconceptions, if the courts have not done so.  Yet, for a dozen

years, Congress has been made aware -- acutely aware -- of the IRS

rulings of 1970 and 1971.  As we noted earlier, few issues have been the

subject of more vigorous and widespread debate and discussion in and out

of Congress than those related to racial segregation in education. 

Sincere adherents advocating contrary views have ventilated the subject

for well over three decades.  Failure of Congress to modify the IRS

rulings of 1970 and 1971, of which Congress was, by its own studies and

by public discourse, constantly reminded, and Congress' awareness of the

denial of tax-exempt status for racially discriminatory schools when

enacting other and related legislation make out an unusually strong case

of legislative acquiescence in and ratification by implication of the

1970 and 1971 rulings. [461 U.S. 600]



Ordinarily, and quite appropriately, courts are slow to attribute

significance to the failure of Congress to act on particular

legislation.  See, e.g., Aaron v. SEC, 446 U.S. 680, 694, n. 11 (1980). 

We have observed that "unsuccessful attempts at legislation are not the

best of guides to legislative intent," Red Lion Broadcasting Co. v. FCC,

395 U.S. 367, 382, n. 11 (1969).  Here, however, we do not have an

ordinary claim of legislative acquiescence.  Only one month after the

IRS announced its position in 1970, Congress held its first hearings on

this precise issue.  Equal Educational Opportunity:  Hearings before the

Senate Select Committee on Equal Educational Opportunity, 91st Cong., 2d

Sess., 1991 (1970).  Exhaustive hearings have been held on the issue at

various times since then.  These include hearings in February. 1982,

after we granted review in this case.  Administration's Change in

Federal Policy Regarding the Tax Status of Racially Discriminatory

Private Schools:  Hearing before the House Committee on Ways and Means,

97th Cong., 2d Sess. (1982).



Nonaction by Congress is not often a useful guide, but the nonaction

here is significant.  During the past 12 years. there have been no fewer

than 13 bills introduced to overturn the IRS interpretation of 

501(c)(3).{25}  Not one of these bills has emerged from any committee,

although Congress has enacted numerous other amendments to  501 during

this same period, including an amendment to  501(c)(3) itself.  Tax

Reform Act of 1976, Pub.L. 94-455,  1313(a), 90 Stat. 1730.  It is

hardly conceivable that Congress -- and in this setting, any Member of

Congress -- was not abundantly [461 U.S. 601] aware of what was going

on.  In view of its prolonged and acute awareness of so important an

issue, Congress' failure to act on the bills proposed on this subject

provides added support for concluding that Congress acquiesced in the

IRS rulings of 1970 and 1971.  See, e.g., Merrill Lynch, Pierce, Fenner

& Smith, Inc. v. Curran, 456 U.S. 353, (1982); Haig v. Agee, 453 U.S.

280, (1981); Herman & MacLean v. Huddleston, 459 U.S. 375, (1983);

United States v. Rutherford, 442 U.S. 544, 554, n. 10 (1979).



The evidence of congressional approval of the policy embodied in Revenue

Ruling 71-447 goes well beyond the failure of Congress to act on

legislative proposals.  Congress affirmatively manifested its

acquiescence in the IRS policy when it enacted the present  501(i) of

the Code, Act of Oct. 20, 1976, Pub.L. 94-568, 90 Stat. 2697.  That

provision denies tax-exempt status to social clubs whose charters or

policy statements provide for "discrimination against any person on the

basis of race, color, or religion."{26}  Both the House and Senate

Committee Reports on that bill articulated the national policy against

granting tax exemptions to racially discriminatory private clubs. 

S.Rep. No. 94-1318, p. 8 (1976); H.R.Rep. No. 94-1353, p. 8 (1976).



Even more significant is the fact that both Reports focus on this

Court's affirmance of Green v. Connally, 330 F.Supp. 1150 (DC 1971), as

having established that "discrimination on account of race is

inconsistent with an educational institution's tax-exempt status." 

S.Rep. No. 94-1318, supra, at 7-8, and n. 5; H.R.Rep. No. 94-1353, supra

at 7-8, and n. 5 (emphasis added).  These references in congressional

Committee Reports on an enactment denying tax exemptions to racially

discriminatory private social clubs cannot be read [461 U.S. 602] other

than as indicating approval of the standards applied to racially

discriminatory private schools by the IRS subsequent to 1970, and

specifically of Revenue Ruling 71-447.{27} III



Petitioners contend that, even if the Commissioner's policy is valid as

to nonreligious private schools, that policy cannot constitutionally be

applied to schools that engage in racial discrimination on the basis of

sincerely held religious beliefs.{28}  [461 U.S. 603] As to such

schools, it is argued that the IRS construction of  170 and  501(c)(3)

violates their free exercise rights under the Religion Clauses of the

First Amendment.  This contention presents claims not heretofore

considered by this Court in precisely this context.



This Court has long held the Free Exercise Clause of the First Amendment

to be an absolute prohibition against governmental regulation of

religious beliefs, Wisconsin v. Yoder, 406 U.S. 205, 219 (1972);

Sherbert v. Verner, 374 U.S. 398, 402 (1963); Cantwell v. Connecticut,

310 U.S. 296, 303 (1940).  As interpreted by this Court, moreover, the

Free Exercise Clause provides substantial protection for lawful conduct

grounded in religious belief, see Wisconsin v. Yoder, supra, at 220;

Thomas v. Review Board of Indiana Employment Security Div., 450 U.S. 707

(1981); Sherbert v. Verner, supra, at   However, [n]ot all burdens on

religion are unconstitutional. . . .  The state may justify a limitation

on religious liberty by showing that it is essential to accomplish an

overriding governmental interest. United States v. Lee, 455 U.S. 252,

(1982).  See, e.g., McDaniel v. Paty, 435 U.S. 618, 628, and n. 8

(1978); Wisconsin v. Yoder, supra, at 215; Gillette v. United States,

401 U.S. 437 (1971).



On occasion, this Court has found certain governmental interests so

compelling as to allow even regulations prohibiting religiously based

conduct.  In Prince v. Massachusetts, 321 U.S. 158 (1944), for example,

the Court held that neutrally cast child labor laws prohibiting sale of

printed materials on public streets could be applied to prohibit

children from dispensing religious literature.  The Court found no

constitutional infirmity in "excluding [Jehovah's Witness children] from

doing there what no other children may do."  Id. at 171.  See also

Reynolds v. United States, 98 U.S. 145 (1879); United States v. Lee,

supra; Gillette v. United States, supra.  Denial of tax benefits will

inevitably have a substantial [461 U.S. 604] impact on the operation of

private religious schools, but will not prevent those schools from

observing their religious tenets.



The governmental interest at stake here is compelling.  As discussed in

Part II-B, supra, the Government has a fundamental, overriding interest

in eradicating racial discrimination in education{29} -- discrimination

that prevailed, with official approval, for the first 165 years of this

Nation's constitutional history.  That governmental interest

substantially outweighs whatever burden denial of tax benefits places on

petitioners' exercise of their religious beliefs.  The interests

asserted by petitioners cannot be accommodated with that compelling

governmental interest, see United States v. Lee, supra, at  and no "less

restrictive means," see Thomas v. Review Board of Indiana Employment

Security Div., supra, at 718, are available to achieve the governmental

interest.{30} [461 U.S. 605] IV



The remaining issue is whether the IRS properly applied its policy to

these petitioners.  Petitioner Goldsboro Christian Schools admits that

it "maintain[s] racially discriminatory policies," Brief for Petitioner

in No. 81-1, p. 10, but seeks to justify those policies on grounds we

have fully discussed.  The IRS properly denied tax-exempt status to

Goldsboro Christian Schools.



Petitioner Bob Jones University, however, contends that it is not

racially discriminatory.  It emphasizes that it now allows all races to

enroll, subject only to its restrictions on the conduct of all students,

including its prohibitions of association between men and women of

different races, and of interracial marriage.{31}  Although a ban on

intermarriage or interracial dating applies to all races, decisions of

this Court firmly establish that discrimination on the basis of racial

affiliation and association is a form of racial discrimination, see,

e.g., Loving v. Virginia, 388 U.S. 1 (1967); McLaughlin v. Florida, 379

U.S. 184 (1964); Tillman v. Wheaton-Haven Recreation Assn., 410 U.S. 431

(1973).  We therefore find that the IRS properly applied Revenue Ruling

71-447 to Bob Jones University.{32}



The judgments of the Court of Appeals are, accordingly,



Affirmed. [461 U.S. 606] POWELL, J., concurring



JUSTICE POWELL, concurring in part and concurring in the judgment.



I join the Court's judgment, along with Part III of its opinion, holding

that the denial of tax exemptions to petitioners does not violate the

First Amendment.  I write separately because I am troubled by the

broader implications of the Court's opinion with respect to the

authority of the Internal Revenue Service (IRS) and its construction of 

170(c) and 501(c)(3) of the Internal Revenue Code. I



Federal taxes are not imposed on organizations "operated exclusively for

religious, charitable, scientific, testing for public safety, literary,

or educational purposes. . . ."  26 U.S.C.  501(c)(3).  The Code also

permits a tax deduction for contributions made to these organizations. 

170(c).  It is clear that petitioners, organizations incorporated for

educational purposes, fall within the language of the statute.  It also

is clear that the language itself does not mandate refusal of tax-exempt

status to any private school that maintains a racially discriminatory

admissions policy.  Accordingly, there is force in JUSTICE REHNQUIST's

argument that  170(c) and 501(c)(3) should be construed as setting forth

the only criteria Congress has established for qualification as a

tax-exempt organization.  See post at (REHNQUIST, J., dissenting). 

Indeed, were we writing prior to the history detailed in the Court's

opinion, this could well be the construction I would adopt.  But there

has been a decade of acceptance that is persuasive in the circumstances

of these cases, and I conclude that there are now sufficient reasons for

accepting the IRS's construction of the Code as proscribing [461 U.S.

607] tax exemptions for schools that discriminate on the basis of race

as a matter of policy.



I cannot say that this construction of the Code, adopted by the IRS in

1970 and upheld by the Court of Appeals below, is without logical

support.  The statutory terms are not self-defining, and it is plausible

that, in some instances, an organization seeking a tax exemption might

act in a manner so clearly contrary to the purposes of our laws that it

could not be deemed to serve the enumerated statutory purposes.  And, as

the Court notes, if any national policy is sufficiently fundamental to

constitute such an overriding limitation on the availability of

tax-exempt status under  501(c)(3), it is the policy against racial

discrimination in education.  See ante at   Finally, and of critical

importance for me, the subsequent actions of Congress present "an

unusually strong case of legislative acquiescence in and ratification by

implication of the [IRS's] 1970 and 1971 rulings" with respect to

racially discriminatory schools.  Ante at 599.  In particular, Congress'

enactment of  501(i) in 1976 is strong evidence of agreement with these

particular IRS rulings. [461 U.S. 608] II



I therefore concur in the Court's judgment that tax-exempt status under 

170(c) and 501(c)(3) is not available to private schools that concededly

are racially discriminatory.  I do not agree, however, with the Court's

more general explanation of the justifications for the tax exemptions

provided to charitable organizations.  The Court states: Charitable

exemptions are justified on the basis that the exempt entity confers a

public benefit -- a benefit which the society or the community may not

itself choose or be able to provide, or which supplements and advances

the work of public institutions already supported by tax revenues. 

History buttresses logic to make clear that, to warrant exemption under 

501(c)(3), an institution must fall within a category specified in that

section, and must demonstrably serve and be in harmony with the public

interest.  The institution's purpose must not be so at odds with the

common community conscience as to undermine any public benefit that

might otherwise be conferred. Ante at (footnotes omitted).  Applying

this test to petitioners, the Court concludes that [c]learly an

educational institution engaging in practices affirmatively at odds with

[the] declared position of the whole Government cannot be seen as

exercising a "beneficial and stabilizing influenc[e] in community life,"

. . . and is not "charitable," within the meaning of  170 and 

501(c)(3). Ante at (quoting Walz v. Tax Comm'n, 397 U.S. 664, 673

(1970)).



With all respect, I am unconvinced that the critical question in

determining tax-exempt status is whether an individual organization

provides a clear "public benefit" as defined by the Court.  Over 106,000

organizations filed  501(c)(3) returns in 1981.  Internal Revenue

Service, 1982 Exempt [461 U.S. 609] Organization/Business Master File. 

I find it impossible to believe that all or even most of those

organizations could prove that they "demonstrably serve and [are] in

harmony with the public interest," or that they are "beneficial and

stabilizing influences in community life."  Nor am I prepared to say

that petitioners, because of their racially discriminatory policies,

necessarily contribute nothing of benefit to the community.  It is clear

from the substantially secular character of the curricula and degrees

offered that petitioners provide educational benefits.



Even more troubling to me is the element of conformity that appears to

inform the Court's analysis.  The Court asserts that an exempt

organization must "demonstrably serve and be in harmony with the public

interest," must have a purpose that comports with "the common community

conscience," and must not act in a manner "affirmatively at odds with

[the] declared position of the whole Government."  Taken together, these

passages suggest that the primary function of a tax-exempt organization

is to act on behalf of the Government in carrying out governmentally

approved policies.  In my opinion, such a view of  501(c)(3) ignores the

important role played by tax exemptions in encouraging diverse, indeed

often sharply conflicting, activities and viewpoints.  As JUSTICE

BRENNAN has observed, private, nonprofit groups receive tax exemptions

because "each group contributes to the diversity of association,

viewpoint, and enterprise essential to a vigorous, pluralistic society."

 Walz, supra, at 689 (concurring opinion).  Far from representing an

effort to reinforce any perceived "common community conscience," the

provision of tax exemptions to nonprofit groups is one indispensable

means of limiting the influence of governmental orthodoxy on important

areas of community life. [461 U.S. 610]



Given the importance of our tradition of pluralism, "[t]he interest in

preserving an area of untrammeled choice for private philanthropy is

very great."  Jackson v. Statler Foundation, 496 F.2d 623, 639 (CA2

1974) (Friendly, J., dissenting from denial of reconsideration en banc).



I do not suggest that these considerations always are or should be

dispositive.  Congress, of course, may find that some organizations do

not warrant tax-exempt status.  In these cases, I agree with the Court

that Congress has determined that the policy against racial

discrimination in education should override the countervailing interest

in permitting unorthodox private behavior. [461 U.S. 611]



I would emphasize, however, that the balancing of these substantial

interests is for Congress to perform.  I am unwilling to join any

suggestion that the Internal Revenue Service is invested with authority

to decide which public policies are sufficiently "fundamental" to

require denial of tax exemptions.  Its business is to administer laws

designed to produce revenue for the Government, not to promote "public

policy."  As former IRS Commissioner Kurtz has noted, questions

concerning religion and civil rights "are far afield from the more

typical tasks of tax administrators -- determining taxable income." 

Kurtz, Difficult Definitional Problems in Tax Administration:  Religion

and Race, 23 Catholic Lawyer 301 (1978).  This Court often has expressed

concern that the scope of an agency's authorization be limited to those

areas in which the agency fairly may be said to have expertise, and this

concern applies with special force when the asserted administrative

power is one to determine the scope of public policy.  As JUSTICE

BLACKMUN has noted: [W]here the philanthropic organization is concerned,

there appears to be little to circumscribe the almost unfettered power

of the Commissioner.  This may be very well so long as one subscribes to

the particular brand of social policy the Commissioner happens to be

advocating [461 U.S. 612] at the time . . . , but application of our tax

laws should not operate in so fickle a fashion.  Surely, social policy

in the first instance is a matter for legislative concern. Commissioner

v. "Americans United" Inc., 416 U.S. 752, (1974) (dissenting opinion).

III



The Court's decision upholds IRS Revenue Ruling 71-447, and thus

resolves the question whether tax-exempt status is available to private

schools that openly maintain racially discriminatory admissions

policies.  There no longer is any justification for Congress to hesitate

-- as it apparently has -- in articulating and codifying its desired

policy as to tax exemptions for discriminatory organizations.  Many

questions remain, such as whether organizations that violate other

policies should receive tax-exempt status under  501(c)(3).  These

should be legislative policy choices.  It is not appropriate to leave

the IRS "on the cutting edge of developing national policy."  Kurtz,

supra, at 308.  The contours of public policy should be determined by

Congress, not by judges or the IRS. REHNQUIST, J., dissenting



JUSTICE REHNQUIST, dissenting.



The Court points out that there is a strong national policy in this

country against racial discrimination.  To the extent that the Court

states that Congress, in furtherance of this policy, could deny

tax-exempt status to educational institutions that promote racial

discrimination, I readily agree.  But, unlike the Court, I am convinced

that Congress simply has failed to take this action and, as this Court

has said over and over again, regardless of our view on the propriety of

Congress' failure to legislate, we are not constitutionally empowered to

act for it.



In approaching this statutory construction question, the Court quite

adeptly avoids the statute it is construing.  This I am sure is no

accident, for there is nothing in the language [461 U.S. 613] of 

501(c)(3) that supports the result obtained by the Court.  Section

501(c)(3) provides tax-exempt status for: Corporations, and any

community chest, fund, or foundation, organized and operated exclusively

for religious, charitable, scientific, testing for public safety,

literary, or educational purposes, or to foster national or

international amateur sports competition (but only if no part of its

activities involve the provision of athletic facilities or equipment),

or for the prevention of cruelty to children or animals, no part of the

net earnings of which inures to the benefit of any private shareholder

or individual, no substantial part of the activities of which is

carrying on propaganda, or otherwise attempting, to influence

legislation (except as otherwise provided in subsection (h)), and which

does not participate in, or intervene in (including the publishing or

distributing of statements), any political campaign on behalf of any

candidate for public office. 26 U.S.C.  501(c)(3).  With undeniable

clarity, Congress has explicitly defined the requirements for  501(c)(3)

status.  An entity must be (1) a corporation, or community chest, fund,

or foundation, (2) organized for one of the eight enumerated purposes,

(3) operated on a nonprofit basis, and (4) free from involvement in

lobbying activities and political campaigns.  Nowhere is there to be

found some additional, undefined public policy requirement.



The Court first seeks refuge from the obvious reading of  501(c)(3) by

turning to  170 of the Internal Revenue Code, which provides a tax

deduction for contributions made to  501(c)(3) organizations.  In

setting forth the general rule,  170 states: There shall be allowed as a

deduction any charitable contribution (as defined in subsection (c))

payment of which is made within the taxable year.  A charitable

contribution shall be allowable as a deduction only if verified [461

U.S. 614] under regulations prescribed by the Secretary. 26 U.S.C. 

170(a)(1).  The Court seizes the words "charitable contribution" and

with little discussion concludes that "[o]n its face, therefore,  170

reveals that Congress' intention was to provide tax benefits to

organizations serving charitable purposes," intimating that this implies

some unspecified common law charitable trust requirement.  Ante at 587.



The Court would have been well advised to look to subsection (c) where,

as  170(a)(1) indicates, Congress has defined a "charitable

contribution": For purposes of this section, the term "charitable

contribution" means a contribution or gift to or for the use of . . .

[a] corporation, trust, or community chest, fund, or foundation . . .

organized and operated exclusively for religious, charitable,

scientific, literary, or educational purposes, or to foster national or

international amateur sports competition (but only if no part of its

activities involve the provision of athletic facilities or equipment),

or for the prevention of cruelty to children or animals; . . . no part

of the net earnings of which inures to the benefit of any private

shareholder or individual; and . . . which is not disqualified for tax

exemption under section 501(c) (3) by reason of attempting to influence

legislation, and which does not participate in, or intervene in

(including the publishing or distributing of statements), any political

campaign on behalf of any candidate for public office. 26 U.S.C. 

170(c).  Plainly,  170(c) simply tracks the requirements set forth in 

501(c)(3).  Since  170 is no more than a mirror of  501(c)(3) and, as

the Court points out,  170 followed  501(c)(3) by more than two decades,

ante at 587, n. 10, it is, at best, of little usefulness in finding the

meaning of  501(c)(3).



Making a more fruitful inquiry, the Court next turns to the legislative

history of  501(c)(3) and finds that Congress intended [461 U.S. 615] in

that statute to offer a tax benefit to organizations that Congress

believed were providing a public benefit.  I certainly agree.  But then

the Court leaps to the conclusion that this history is proof Congress

intended that an organization seeking  501(c)(3) status "must fall

within a category specified in that section and must demonstrably serve

and be in harmony with the public interest."  Ante at 592 (emphasis

added).  To the contrary, I think that the legislative history of 

501(c)(3) unmistakably makes clear that Congress has decided what

organizations are serving a public purpose and providing a public

benefit within the meaning of  501(c)(3), and has clearly set forth in 

501(c)(3) the characteristics of such organizations.  In fact, there are

few examples which better illustrate Congress' effort to define and

redefine the requirements of a legislative Act.



The first general income tax law was passed by Congress in the form of

the Tariff Act of 1894.  A provision of that Act provided an exemption

for "corporations, companies, or associations organized and conducted

solely for charitable, religious, or educational purposes."  Ch. 349, 

32, 28 Stat. 556 (1894).  The income tax portion of the 1894 Act was

held unconstitutional by this Court, see Pollock v. Farmers' Loan &

Trust Co., 158 U.S. 601 (1895), but a similar exemption appeared in the

Tariff Act of 1909 which imposed a tax on corporate income.  The 1909

Act provided an exemption for any corporation or association organized

and operated exclusively for religious, charitable, or educational

purposes, no part of the net income of which inures to the benefit of

any private stockholder or individual. Ch. 6,  38, 36 Stat. 113 (1909).



With the ratification of the Sixteenth Amendment, Congress again turned

its attention to an individual income tax with the Tariff Act of 1913. 

And again, in the direct predecessor of  501(c)(3), a tax exemption was

provided for any corporation or association organized and operated

exclusively for religious, charitable, scientific, or educational

purposes, [461 U.S. 616] no part of the net income of which inures to

the benefit of any private stockholder or individual. Ch. 16, II(G)(a),

38 Stat. 172 (1913).  In subsequent Acts, Congress continued to broaden

the list of exempt purposes.  The Revenue Act of 1918 added an exemption

for corporations or associations organized "for the prevention of

cruelty to children or animals."  Ch. 18,  231(6), 40 Stat. 1057, 1076

(1918).  The Revenue Act of 1921 expanded the groups to which the

exemption applied to include "any community chest, fund, or foundation"

and added "literary" endeavors to the list of exempt purposes.  Ch. 136,

 231(6), 42 Stat. 263 (1921).  The exemption remained unchanged in the

Revenue Acts of 1924, 1926, 1928, and 1932.  In the Revenue Act of 1934,

Congress added the requirement that no substantial part of the

activities of any exempt organization can involve the carrying on of

"propaganda" or "attempting to influence legislation."  Ch. 277, 

101(6), 48 Stat. 700 (1934).  Again, the exemption was left unchanged by

the Revenue Acts of 1936 and 1938.  The tax laws were overhauled by the

Internal Revenue Code of 1939, but this exemption was left unchanged. 

Ch. 1,  101(6), 53 Stat. 33 (1939).  When the 1939 Code was replaced

with the Internal Revenue Code of 1954, the exemption was adopted in

full in the present  501(c)(3) with the addition of "testing for public

safety" as an exempt purpose and an additional restriction that

tax-exempt organizations could not participate in, or intervene in

(including the publishing or distributing of statements), any political

campaign on behalf of any candidate for public office. Ch. 1,  501(c)

(3), 68A Stat. 163 (1954).  Then, in 1976, the statute was again amended

adding to the purposes for which an exemption would be authorized, "to

foster national or international amateur [461 U.S. 617] sports

competition," provided the activities did not involve the provision of

athletic facilities or equipment.  Tax Reform Act of 1976, Pub.L.

94-455,  1313(a), 90 Stat. 1730 (1976).



One way to read the opinion handed down by the Court today leads to the

conclusion that this long and arduous refining process of  501(c)(3) was

certainly a waste of time, for when enacting the original 1894 statute,

Congress intended to adopt a common law term of art, and intended that

this term of art carry with it all of the common law baggage which

defines it.  Such a view, however, leads also to the unsupportable idea

that Congress has spent almost a century adding illustrations simply to

clarify an already defined common law term.



Another way to read the Court's opinion leads to the conclusion that,

even though Congress has set forth some of the requirements of a 

501(c)(3) organization, it intended that the IRS additionally require

that organizations meet a higher standard of public interest, not stated

by Congress, but to be determined and defined by the IRS and the courts.

 This view I find equally unsupportable.  Almost a century of statutory

history proves that Congress itself intended to decide what  501(c)(3)

requires.  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 IRS

certainly is empowered to adopt regulations for the enforcement of these

specified requirements, and the courts have authority to resolve

challenges to the IRS's exercise of this power, but Congress has left it

to neither the IRS nor the courts to select or add to the requirements

of  501(c)(3).



The Court suggests that, unless its new requirement be added to 

501(c)(3), nonprofit organizations formed to teach pickpockets and

terrorists would necessarily acquire tax-exempt [461 U.S. 618] status. 

Ante at 592, n. 18.  Since the Court does not challenge the

characterization of petitioners as "educational" institutions within the

meaning of  501(c)(3), and in fact states several times in the course of

its opinion that petitioners are educational institutions, see, e.g.,

ante at 580, 583, 604, n. 29, 606, n. 32, it is difficult to see how

this argument advances the Court's reasoning for disposing of

petitioners' cases.



But simply because I reject the Court's heavy-handed creation of the

requirement that an organization seeking 501(c)(3) status must "serve

and be in harmony with the public interest," ante at 592, does not mean

that I would deny to the IRS the usual authority to adopt regulations

further explaining what Congress meant by the term "educational."  The

IRS has fully exercised that authority in Treas.Reg.  1.501(c)(3) -

1(d)(3), 26 CFR  1.501(c)(3) - 1(d)(3) (1982), which provides:



(3) Educational defined -- (i) In general.  The term "educational," as

used in section 501(c)(3), relates to --



(a) The instruction or training of the individual for the purpose of

improving or developing his capabilities; or



(b) The instruction of the public on subjects useful to the individual

and beneficial to the community.



An organization may be educational even though it advocates a particular

position or viewpoint so long as it presents a sufficiently full and

fair exposition of the pertinent facts as to permit an individual or the

public to form an independent opinion or conclusion.  On the other hand,

an organization is not educational if its principal function is the mere

presentation of unsupported opinion.



(ii) Examples of educational organizations.  The following are examples

of organizations which, if they otherwise meet the requirements of this

section, are educational: [461 U.S. 619]



Example (1).  An organization, such as a primary or secondary school, a

college, or a professional or trade school, which has a regularly

scheduled curriculum, a regular faculty, and a regularly enrolled body

of students in attendance at a place where the educational activities

are regularly carried on.



Example (2).  An organization whose activities consist of presenting

public discussion groups, forums, panels, lectures, or other similar

programs.  Such programs may be on radio or television.



Example (3).  An organization which presents a course of instruction by

means of correspondence or through the utilization of television or

radio.



Example (4).  Museums, zoos, planetariums, symphony orchestras, and

other similar organizations. I have little doubt that neither the "Fagin

School for Pickpockets" nor a school training students for guerrilla

warfare and terrorism in other countries would meet the definitions

contained in the regulations.



Prior to 1970, when the charted course was abruptly changed, the IRS had

continuously interpreted  501(c)(3) and its predecessors in accordance

with the view I have expressed above.  This, of course, is of

considerable significance in determining the intended meaning of the

statute.  NLRB v. Boeing Co., 412 U.S. 67, 75 (1973); Power Reactor

Development Co. v. Electrical Workers, 367 U.S. 396, 408 (1961).



In 1970, the IRS was sued by parents of black public school children

seeking to enjoin the IRS from according tax-exempt status under 

501(c)(3) to private schools in Mississippi that discriminated against

blacks.  The IRS answered, consistent with its longstanding position, by

maintaining a lack of authority to deny the tax exemption if the schools

met the specified requirements of  501(c)(3).  Then, "[i]n the midst of

this litigation," Green v. Connally, 330 F.Supp. 1150, 1156 (DC),

summarily aff'd sub nom. Coit v. Green, 404 U.S. 997 (1971), and in the

face of a preliminary injunction, [461 U.S. 620] the IRS changed its

position and adopted the view of the plaintiffs.



Following the close of the litigation, the IRS published its new

position in Revenue Ruling 71-447, stating that a school asserting a

right to the benefits provided for in section 501(c)(3) of the Code as

being organized and operated exclusively for educational purposes must

be a common law charity in order to be exempt under that section.

Rev.Rul. 71-447, 1971-2 Cum.Bull. 230.  The IRS then concluded that a

school that promotes racial discrimination violates public policy, and

therefore cannot qualify as a common law charity.  The circumstances

under which this change in interpretation was made suggest that it is

entitled to very little deference.  But even if the circumstances were

different, the latter-day wisdom of the IRS has no basis in  501(c)(3).



Perhaps recognizing the lack of support in the statute itself, or in its

history, for the 1970 IRS change in interpretation, the Court finds that

"[t]he actions of Congress since 1970 leave no doubt that the IRS

reached the correct conclusion in exercising its authority," concluding

that there is "an unusually strong case of legislative acquiescence in

and ratification by implication of the 1970 and 1971 rulings."  Ante at

599.  The Court relies first on several bills introduced to overturn the

IRS interpretation of  501(c)(3).  Ante at 600, and n. 25.  But we have

said before, and it is equally applicable here, that this type of

congressional inaction is of virtually no weight in determining

legislative intent.  See United States v. Wise, 370 U.S. 405, 411

(1962); Waterman S.S. Corp. v. United States, 381 U.S. 252, 269 (1965). 

These bills and related hearings indicate little more than that a

vigorous debate has existed in Congress concerning the new IRS position.



The Court next asserts that "Congress affirmatively manifested its

acquiescence in the IRS policy when it enacted the present  501(i) of

the Code," a provision that "denies tax-exempt status to social clubs

whose charters or policy statements [461 U.S. 621] provide for" racial

discrimination.  Ante at 601.  Quite to the contrary, it seems to me

that, in  501(i), Congress showed that, when it wants to add a

requirement prohibiting racial discrimination to one of the tax-benefit

provisions, it is fully aware of how to do it.  Cf. Commissioner v.

Tellier, 383 U.S. 687, 693, n. 10 (1966).



The Court intimates that the Ashbrook and Dornan Amendments also reflect

an intent by Congress to acquiesce in the new IRS position.  Ante at

602, n. 27. T he amendments were passed to limit certain enforcement

procedures proposed by the IRS in 1978 and 1979 for determining whether

a school operated in a racially nondiscriminatory fashion.  The Court

points out that, in proposing his amendment, Congressman Ashbrook

stated:  "`My amendment very clearly indicates on its face that all the

regulations in existence as of August 22, 1978, would not be touched.'" 

Ibid.  The Court fails to note that Congressman Ashbrook also said: The

IRS has no authority to create public policy. . . .  So long as the

Congress has not acted to set forth a national policy respecting denial

of tax exemptions to private schools, it is improper for the IRS or any

other branch of the Federal Government to seek denial of tax-exempt

status. . . .  There exists but a single responsibility which is proper

for the Internal Revenue Service:  To serve as tax collector. 125

Cong.Rec. 18444 (1979).  In the same debate, Congressman Grassley

asserted: Nobody argues that racial discrimination should receive

preferred tax status in the United States.  However, the IRS should not

be making these decisions on the agency's own discretion.  Congress

should make these decisions. Id. at 18448.  The same debates are filled

with other similar statements.  While on the whole these debates do not

show conclusively that Congress believed the IRS had exceeded its

authority with the 1970 change in position, they likewise are [461 U.S.

622] far less than a showing of acquiescence in and ratification of the

new position.



This Court continuously has been hesitant to find ratification through

inaction.  See United States v. Wise, supra.  This is especially true

where such a finding would result in a construction of the statute which

not only is at odds with the language of the section in question and the

pattern of the statute taken as a whole, but also is extremely far

reaching in terms of the virtually untrammeled and unreviewable power it

would vest in a regulatory agency. SEC v. Sloan, 436 U.S. 103, 121

(1978).  Few cases would call for more caution in finding ratification

by acquiescence than the present ones.  The new IRS interpretation is

not only far less than a longstanding administrative policy, it is at

odds with a position maintained by the IRS, and unquestioned by

Congress, for several decades prior to 1970.  The interpretation is

unsupported by the statutory language, it is unsupported by legislative

history, the interpretation has led to considerable controversy in and

out of Congress, and the interpretation gives to the IRS a broad power

which, until now, Congress had kept for itself.  Where in addition to

these circumstances Congress has shown time and time again that it is

ready to enact positive legislation to change the Tax Code when it

desires, this Court has no business finding that Congress has adopted

the new IRS position by failing to enact legislation to reverse it.



I have no disagreement with the Court's finding that there is a strong

national policy in this country opposed to racial discrimination.  I

agree with the Court that Congress has the power to further this policy

by denying  501(c)(3) status to organizations that practice racial

discrimination.  But as of yet, Congress has failed to do so.  Whatever

the reasons for the failure, this Court should not legislate for

Congress. [461 U.S. 623]



Petitioners are each organized for the "instruction or training of the

individual for the purpose of improving or developing his capabilities,"

26 CFR  1.501(c)(3) - 1(d)(3) (1982), and thus are organized for

"educational purposes" within the meaning of  501(c)(3).  Petitioners'

nonprofit status is uncontested.  There is no indication that either

petitioner has been involved in lobbying activities or political

campaigns.  Therefore, it is my view that, unless and until Congress

affirmatively amends  501(c)(3) to require more, the IRS is without

authority to deny petitioners  501(c)(3) status.  For this reason, I

would reverse the Court of Appeals. Footnotes BURGER, J., lead opinion

(Footnotes)



* Together with No. 81-1, Goldsboro Christian Schools, Inc. v.  United

States, also on certiorari to the same court.



1. Section 501(c)(3) lists the following organizations, which, pursuant

to  501(a), are exempt from taxation unless denied tax exemptions under

other specified sections of the Code: Corporations, and any community

chest, fund, or foundation, organized and operated exclusively for

religious, charitable, scientific, testing for public safety, literary,

or educational purposes, or to foster national or international amateur

sports competition (but only if no part of its activities involve the

provision of athletic facilities or equipment), or for the prevention of

cruelty to children or animals, no part of the net earnings of which

inures to the benefit of any private shareholder or individual, no

substantial part of the activities of which is carrying on propaganda,

or otherwise attempting, to influence legislation . . . and which does

not participate in, or intervene in (including the publishing or

distributing of statements), any political campaign on behalf of any

candidate for public office. (Emphasis added.)



2. Section 170(a) allows deductions for certain "charitable

contributions."  Section 170(c)(2)(B) includes within the definition of

"charitable contribution" a contribution or gift to or for the use of a

corporation "organized and operated exclusively for religious,

charitable, scientific, literary, or educational purposes. . . ."



3. Revenue Ruling 71-447, 1971-2 Cum.Bull. 230, defined "racially

nondiscriminatory policy as to students" as meaning that the school

admits the students of any race to all the rights, privileges, programs,

and activities generally accorded or made available to students at that

school, and that the school does not discriminate on the basis of race

in administration of its educational policies, admissions policies,

scholarship and loan programs, and athletic and other

school-administered programs.



4. Bob Jones University was founded in Florida in 1927.  It moved to

Greenville, S.C., in 1940, and has been incorporated as an eleemosynary

institution in South Carolina since 1952.



5. Beginning in 1973, Bob Jones University instituted an exception to

this rule, allowing applications from unmarried Negroes who had been

members of the University staff for four years or more.



6. According to the interpretation espoused by Goldsboro, race is

determined by descendance from one of Noah's three sons -- Ham, Shem,

and Japheth.  Based on this interpretation, Orientals and Negroes are

Hamitic, Hebrews are Shemitic, and Caucasians are Japhethitic.  Cultural

or biological mixing of the races is regarded as a  violation of God's

command.   App. in No. 81-1, pp. 40-41.



7. Goldsboro also asserted that it was not obliged to pay taxes on

lodging furnished to its teachers.  It does not ask this Court to review

the rejection of that claim.



8. By stipulation, the IRS agreed to abate its assessment for 1969 and

most of 1970 to reflect the fact that the IRS did not begin enforcing

its policy of denying tax-exempt status to racially discriminatory

private schools until November 30, 1970.  As a result, the amount of the

counterclaim was reduced to $116,190.99.  Id. at 104, 110.



9. After the Court granted certiorari, the Government filed a motion to

dismiss, informing the Court that the Department of the Treasury

intended to revoke Revenue Ruling 71-447 and other pertinent rulings and

to recognize  501(c)(3) exemptions for petitioners.  The Government

suggested that these actions were therefore moot.  Before this Court

ruled on that motion, however, the United States Court of Appeals for

the District of Columbia Circuit enjoined the Government from granting 

501(c)(3) tax-exempt status to any school that discriminates on the

basis of race.  Wright v. Regan, No. 80-1124 (Feb. 18, 1982) (per curiam

order).  Thereafter, the Government informed the Court that it would not

revoke the Revenue Rulings, and withdrew its request that the actions be

dismissed as moot.  The Government continues to assert that the IRS

lacked authority to promulgate Revenue Ruling 71-447, and does not

defend that aspect of the rulings below.



10. The predecessor of  170 originally was enacted in 1917, as part of

the War Revenue Act of 1917, ch. 63,  1201(2), 40 Stat. 330, whereas the

predecessor of  501(c)(3) dates back to the income tax law of 1894, Act

of Aug. 27, 1894, ch. 349, 28 Stat. 509, see n. 14, infra.  There are

minor differences between the lists of organizations in the two

sections, see generally Liles & Blum, Development of the Federal Tax

Treatment of Charities, 39 Law & Contemp. Prob. 6, 24-25 (No. 4, 1975)

(hereinafter Liles & Blum).  Nevertheless, the two sections are closely

related; both seek to achieve the same basic goal of encouraging the

development of certain organizations through the grant of tax benefits. 

The language of the two sections is in most respects identical, and the

Commissioner and the courts consistently have applied many of the same

standards in interpreting those sections.  See 5 J. Mertens, Law of

Federal Income Taxation  31.12 (1980); 6 id.  34.01-34.13 (1975); B.

Bittker & L. Stone, Federal Income Taxation 220-222 (5th ed.1980).  To

the extent that  170 "aids in ascertaining the meaning" of  501(c)(3),

therefore, it is "entitled to great weight," United States v. Stewart,

311 U.S. 60, 64-65 (1940).  See Harris v. Commissioner, 340 U.S. 106,

107 (1950).



11. The dissent suggests that the Court "quite adeptly avoids the

statute it is construing," post at 612, and "seeks refuge . . . by

turning to  170," post at 613.  This assertion dissolves when one sees

that  501(c)(3) and  170 are construed together, as they must be.  The

dissent acknowledges that the two sections are "mirror" provisions;

surely there can be no doubt that the Court properly looks to  170 to

determine the meaning of  501(c)(3).  It is also suggested that  170 is

"at best of little usefulness in finding the meaning of  501(c)(3),"

since " 170(c) simply tracks the requirements set forth in  501(c)(3),"

post at 614.  That reading loses sight of the fact that  170(c) defines

the term "charitable contribution."  The plain language of  170 reveals

that Congress' objective was to employ tax exemptions and deductions to

promote certain charitable purposes.  While the eight categories of

institutions specified in the statute are indeed presumptively

charitable in nature, the IRS properly considered principles of

charitable trust law in determining whether the institutions in question

may truly be considered "charitable" for purposes of entitlement to the

tax benefits conferred by  170 and  501(c)(3).



12. The form and history of the charitable exemption and deduction

sections of the various income tax Acts reveal that Congress was guided

by the common law of charitable trusts.  See Simon, The Tax-Exempt

Status of Racially Discriminatory Religious Schools, 36 Tax L.Rev. 477,

485-489 (1981) (hereinafter Simon).  Congress acknowledged as much in

1969.  The House Report on the Tax Reform Act of 1969, Pub.L. 91-172, 83

Stat. 487, stated that the  501(c)(3) exemption was available only to

institutions that served "the specified charitable purposes," H.R.Rep.

No. 91-413, pt. 1, p. 35 (1969), and described "charitable" as "a term

that has been used in the law of trusts for hundreds of years."  Id. at

43.  We need not consider whether Congress intended to incorporate into

the Internal Revenue Code any aspects of charitable trust law other than

the requirements of public benefit and a valid public purpose.



13. The draftsmen of the 1894 income tax law, which included the first

charitable exemption provision, relied heavily on English concepts of

taxation, and the list of exempt organizations appears to have been

patterned upon English income tax statutes.  See 26 Cong.Rec. 584-588,

6612-6615 (1894)



14. Act of Aug. 27, 1894, ch. 349,  32, 28 Stat. 556-557.  The income

tax system contained in the 1894 Act was declared unconstitutional,

Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601 (1895), for reasons

unrelated to the charitable exemption provision.  The terms of that

exemption were, in substance, included in the corporate income tax

contained in the Payne-Aldrich Tariff Act of 1909, ch. 6,  38, 36 Stat.

112.  A similar exemption has been included in every income tax Act

since the adoption of the Sixteenth Amendment, beginning with the

Revenue Act of 1913, ch. 16,  II(G), 38 Stat. 172.  See generally

Reiling, Federal Taxation:  What Is a Charitable Organization?, 44

A.B.A.J. 525 (1958); Liles & Blum.



15. That same year, the Bureau of Internal Revenue expressed a similar

view of the charitable deduction section of the estate tax contained in

the Revenue Act of 1918, ch. 18,  403(a)(3), 40 Stat. 1098.  The

Solicitor of Internal Revenue looked to the common law of charitable

trusts in construing that provision, and noted that "generally bequests

for the benefit and advantage of the general public are valid as

charities."  Sol.Op. 159, III-1 Cum.Bull. 480, 482 (1924).



16. The common law requirement of public benefit is universally

recognized by commentators on the law of trusts.  For example, the

Bogerts state: In return for the favorable treatment accorded charitable

gifts which imply some disadvantage to the community, the courts must

find in the trust which is to be deemed "charitable" some real

advantages to the public which more than offset the disadvantages

arising out of special privileges accorded charitable trusts. G. Bogert

& G. Bogert, Law of Trusts and Trustees  361, p. 3 (rev.2d ed.1977)

(hereinafter Bogert).  For other statements of this principle, see,

e.g., 4 Scott  348, at 2770; Restatement (Second) of Trusts  368,

Comment  (1959); E. Fisch, D. Freed, & E. Schachter, Charities and

Charitable Foundations  256 (1974)



17. Cf. Tank Truck Rentals, Inc. v. Commissioner, 356 U.S. 30, 35

(1958), in which this Court referred to "the presumption against

congressional intent to encourage violation of declared public policy"

in upholding the Commissioner's disallowance of deductions claimed by a

trucking company for fines it paid for violations of state maximum

weight laws.



18. The dissent acknowledges that "Congress intended . . . to offer a

tax benefit to organizations . . . providing a public benefit," post at 

but suggests that Congress itself fully defined what organizations

provide a public benefit, through the list of eight categories of exempt

organizations contained in  170 and  501(c)(3).  Under that view, any

nonprofit organization that falls within one of the specified categories

is automatically entitled to the tax benefits, provided it does not

engage in expressly prohibited lobbying or political activities.  Post

at 617.  The dissent thus would have us conclude, for example, that any

nonprofit organization that does not engage in prohibited lobbying

activities is entitled to tax exemption as an "educational" institution

if it is organized for the "`instruction or training of the individual

for the purpose of improving or developing his capabilities,'" 26 CFR 

1.501(c)(3) - 1(d)(3) (1982).  See post at 623.  As Judge Leventhal

noted in Green v. Connally, 330 F.Supp. 1150, 1160 (DC), summarily aff'd

sub nom. Coit v. Green, 404 U.S. 997 (1971), Fagin's school for

educating English boys in the art of picking pockets would be an

"educational" institution under that definition.  Similarly, a band of

former military personnel might well set up a school for intensive

training of subversives for guerrilla warfare and terrorism in other

countries; in the abstract, that "school" would qualify as an

"educational" institution.  Surely Congress had no thought of affording

such an unthinking, wooden meaning to  170 and  501(c)(3) as to provide

tax benefits to "educational" organizations that do not serve a public,

charitable purpose.



19. The Court's reading of  501(c)(3) does not render meaningless

Congress' action in specifying the eight categories of presumptively

exempt organizations, as petitioners suggest.  See Brief for Petitioner

in No. 811, pp. 18-24.  To be entitled to tax-exempt status under 

501(c)(3), an organization must first fall within one of the categories

specified by Congress, and in addition must serve a valid charitable

purpose.



20. In 1894, when the first charitable exemption provision was enacted,

racially segregated educational institutions would not have been

regarded as against public policy.  Yet contemporary standards must be

considered in determining whether given activities provide a public

benefit and are entitled to the charitable tax exemption.  In Walz v.

Tax Comm'r, 397 U.S. 664, 673 (1970), we observed: Qualification for tax

exemption is not perpetual or immutable; some tax-exempt groups lose

that status when their activities take them outside the classification

and new entities can come into being and qualify for exemption.

Charitable trust law also makes clear that the definition of "charity"

depends upon contemporary standards.  See, e.g., Restatement (Second) of

Trusts  374, Comment a (1959); Bogert  369, at 65-67; 4 Scott  368, at

2855-2856.



21. In view of our conclusion that racially discriminatory private

schools violate fundamental public policy and cannot be deemed to confer

a benefit on the public, we need not decide whether an organization

providing a public benefit and otherwise meeting the requirements of 

501(c)(3) could nevertheless be denied tax-exempt status if certain of

its activities violated a law or public policy.



22. In the present case, the IRS issued its rulings denying exemptions

to racially discriminatory schools only after a three-judge District

Court had issued a preliminary injunction.  See supra at



23. JUSTICE POWELL misreads the Court's opinion when he suggests that

the Court implies that the Internal Revenue Service is invested with

authority to decide which public policies are sufficiently "fundamental"

to require denial of tax exemptions, post at 611.  The Court's opinion

does not warrant that interpretation.  JUSTICE POWELL concedes that, if

any national policy is sufficiently fundamental to constitute such an

overriding limitation on the availability of tax-exempt status under 

501(c)(3), it is the policy against racial discrimination in education.

Post at 607.  Since that policy is sufficiently clear to warrant JUSTICE

POWELL's concession and for him to support our finding of longstanding

congressional acquiescence, it should be apparent that his concerns

about the Court's opinion are unfounded.



24. Many of the amici curiae, including amicus Wiilliam T. Coleman, Jr.

(appointed by the Court), argue that denial of tax-exempt status to

racially discriminatory schools is independently required by the equal

protection component of the Fifth Amendment.  In light of our resolution

of this litigation, we do not reach that issue.  See, e.g., United

States v. Clark, 445 U.S. 23, 27 (190); NLRB v. Catholic Bishop of

Chicago, 440 U.S. 490, 504 (1979).



25. H.R. 1096, 97th Cong., 1st Sess. (1981); H.R. 802, 97th Cong., 1st

Sess. (1981); H.R. 498, 97th Cong., 1st Sess. (1981); H.R. 332, 97th

Cong., 1st Sess. (1981); H.R. 95, 97th Cong., 1st Sess. (1981); S. 995,

96th Cong., 1st Sess. (1979); H.R.1905, 96th Cong., 1st Sess. (1979);

H.R. 96, 96th Cong., 1st Sess. (1979); H.R. 3225, 94th Cong., 1st Sess.

(1975); H.R. 1394, 93d Cong., 1st Sess. (1973); H.R. 5350, 92d Cong.,

1st Sess. (1971); H.R. 2352, 92d Cong., 1st Sess. (1971); H.R. 68, 92d

Cong., 1st Sess. (1971).



26. Prior to the introduction of this legislation, a three-judge

District Court had held that segregated social clubs were entitled to

tax exemptions.  McGlotten v. Connally, 338 F.Supp. 448 (DC 1972). 

Section 501(i) was enacted primarily in response to that decision.  See

S.Rep. No. 94-1318, pp. 7-8 (1976); H.R.Rep. No. 94-1353, p. 8 (1976).



27. Reliance is placed on scattered statements in floor debate by

Congressmen critical of the IRS's adoption of Revenue Ruling 71-447. 

See, e.g., Brief for Petitioner in No. 81-1, pp. 27-28.  Those views did

not prevail.  That several Congressmen, expressing their individual

views, argued that the IRS had no authority to take the action in

question is hardly a balance for the overwhelming evidence of

congressional awareness of and acquiescence in the IRS rulings of 1970

and 1971.  Petitioners also argue that the Ashbrook and Dornan

Amendments to the Treasury, Postal Service, and General Government

Appropriations Act of 1980, Pub.L. 96-74,  103, 614, 615, 93 Stat. 559,

562, 576-577, reflect congressional opposition to the IRS policy

formalized in Revenue Ruling 71-447.  Those amendments, however, are

directly concerned only with limiting more aggressive enforcement

procedures proposed by the IRS in 1978 and 1979 and preventing the

adoption of more stringent substantive standards.  The Ashbrook

Amendment,  103 of the Act, applies only to procedures, guidelines, or

measures adopted after August 22, 1978, and thus in no way affects the

status of Revenue Ruling 71-447.  In fact, both Congressman Dornan and

Congressman Ashbrook explicitly stated that their amendments would have

no effect on prior IRS policy, including Revenue Ruling 71-447, see 125

Cong.Rec. 18815 (1979) (Cong. Dornan:  "[M]y amendment will not affect

existing IRS rules which IRS has used to revoke tax exemptions of white

segregated academies under Revenue Ruling 71-447. . . ."); id. at 18446

(Cong. Ashbrook:  "My amendment very clearly indicates on its face that

all the regulations in existence as of August 22, 1978, would not be

touched").  These amendments therefore do not indicate congressional

rejection of Revenue Ruling 71-447 and the standards contained therein.



28. The District Court found, on the basis of a full evidentiary record,

that the challenged practices of petitioner Bob Jones University were

based on a genuine belief that the Bible forbids interracial dating and

marriage.  468 F.Supp. at 894.  We assume, as did the District Court,

that the same is true with respect to petitioner Goldsboro Christian

Schools.  See 436 F.Supp. at 1317.



29. We deal here only with religious schools -- not with churches or

other purely religious institutions; here, the governmental interest is

in denying public support to racial discrimination in education.  As

noted earlier, racially discriminatory schools "exer[t] a pervasive

influence on the entire educational process," outweighing any public

benefit that they might otherwise provide, Norwood v. Harrison, 413 U.S.

455, 469 (1973).  See generally Simon, 495-496.



30. Bob Jones University also contends that denial of tax exemption

violates the Establishment Clause by preferring religions whose tenets

do not require racial discrimination over those which believe racial

intermixing is forbidden.  It is well settled that neither a state nor

the Federal Government may pass laws which "prefer one religion over

another," Everson v. Board of Education, 330 U.S. 1, 15 (1947), but

"[i]t is equally true" that a regulation does not violate the

Establishment Clause merely because it "happens to coincide or harmonize

with the tenets of some or all religions."  McGowan v. Maryland, 366

U.S. 420, 442 (1961).  See Harris v. McRae, 448 U.S. 297, (1980).  The

IRS policy at issue here is founded on a "neutral, secular basis,"

Gillette v. United States, 401 U.S. 437, 452 (1971), and does not

violate the Establishment Clause.  See generally U.S. Comm'n on Civil

Rights, Discriminatory Religious Schools and Tax Exempt Status 10-17

(1982).  In addition, as the Court of Appeals noted, the uniform

application of the rule to all religiously operated schools avoids the

necessity for a potentially entangling inquiry into whether a racially

restrictive practice is the result of sincere religious belief. 639 F.2d

147, 155 (CA4 1980) (emphasis in original).  Cf. NLRB v. Catholic Bishop

of Chicago, 440 U.S. 490 (1979).  But see generally Note, 90 Yale L.J.

350 (1980).



31. This argument would, in any event, apply only to the final eight

months of the five tax years at issue in this case.  Prior to May, 1975,

Bob Jones University's admissions policy was racially discriminatory on

its face, since the University excluded unmarried Negro students while

admitting unmarried Caucasians.



32. Bob Jones University also argues that the IRS policy should not

apply to it, because it is entitled to exemption under  501(c)(3) as a

"religious" organization, rather than as an "educational" institution. 

The record in this case leaves no doubt, however, that Bob Jones

University is both an educational institution and a religious

institution.  As discussed previously, the IRS policy properly extends

to all private schools, including religious schools.  See n. 29, supra. 

The IRS policy thus was properly applied to Bob Jones University.

POWELL, J., concurring (Footnotes)



1. I note that the Court has construed other provisions of the Code as

containing narrowly defined public policy exceptions.  See Commissioner

v. Tellier, 383 U.S. 687, 693-694 (1966); Tank Truck Rentals, Inc. v.

Commissioner, 356 U.S. 30, 35 (1958).



2. The District Court for the District of Columbia in Green v. Connally,

330 F.Supp. 1150 (three-judge court), summarily aff'd sub nom. Coit v.

Green, 404 U.S. 997 (1971), held that racially discriminatory private

schools were not entitled to tax-exempt status.  The same District

Court, however, later ruled that racially segregated social clubs could

receive tax exemptions under  501(c)(7) of the Code.  See McGlotten v.

Connally, 338 F.Supp. 448 (1972) (three-judge court).  Faced with these

two important three-judge court rulings, Congress expressly overturned

the relevant portion of McGlotten by enacting  501(i), thus conforming

the policy with respect to social clubs to the prevailing policy with

respect to private schools.  This affirmative step is a persuasive

indication that Congress has not just silently acquiesced in the result

of Green.  Cf. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran,

456 U.S. 353, 402 (1982) (POWELL, J., dissenting) (rejecting theory

"that congressional intent can be inferred from silence, and that

legislative inaction should achieve the force of law").



3. Certainly  501(c)(3) has not been applied in the manner suggested by

the Court's analysis.  The 1,100-page list of exempt organizations

includes -- among countless examples -- such organizations as American

Friends Service Committee, Inc., Committee on the Present Danger,

Jehovahs Witnesses in the United States, Moral Majority Foundation,

Inc., Friends of the Earth Foundation, Inc., Mountain States Legal

Foundation, National Right to Life Educational Foundation, Planned

Parenthood Federation of America, Scientists and Engineers for Secure

Energy, Inc., and Union of Concerned Scientists Fund, Inc.  See Internal

Revenue Service, Cumulative List of Organizations Described in Section

170(C) of the Internal Revenue Code of 1954, Pp. 31, 221, 376, 518, 670,

677, 694, 795, 880, 1001, 1073 (Revised Oct.1981).  It would be

difficult indeed to argue that each of these organizations reflects the

views of the "common community conscience" or "demonstrably . . . [is]

in harmony with the public interest."  In identifying these

organizations, largely taken at random from the tens of thousands on the

list, I of course do not imply disapproval of their being exempt from

taxation.  Rather, they illustrate the commendable tolerance by our

Government of even the most strongly held divergent views, including

views that at least from time to time are "at odds" with the position of

our Government.  We have consistently recognized that such disparate

groups are entitled to share the privilege of tax exemption.



4. A distinctive feature of America's tradition has been respect for

diversity.  This has been characteristic of the peoples from numerous

lands who have built our country.  It is the essence of our democratic

system. Mississippi University for Women v. Hogan, 458 U.S. 718, 745

(1982) (POWELL, J., dissenting).  Sectarian schools make an important

contribution to this tradition, for they "have provided an educational

alternative for millions of young Americans" and "often afford wholesome

competition with our public schools."  Wolman v. Walter, 433 U.S. 229,

262 (1977) (POWELL, J., concurring in part, concurring in judgment in

part, and dissenting in part).



5. See, e.g., Community Television of Southern California v. Gottfried,

459 U.S. 498,  n. 17 (1983) ("[A]n agency's general duty to enforce the

public interest does not require it to assume responsibility for

enforcing legislation that is not directed at the agency"); Hampton v.

Mow Sun Wong, 426 U.S. 88, 114 (1976) ("It is the business of the Civil

Service Commission to adopt and enforce regulations which will best

promote the efficiency of the federal civil service.  That agency has no

responsibility for foreign affairs, for treaty negotiations, for

establishing immigration quotas or conditions of entry, or for

naturalization policies"); NAACP v. FPC, 425 U.S. 662, 670 (1976) ("The

use of the words `public interest' in the Gas and Power Acts is not a

directive to the [Federal Power] Commission to seek to eradicate

discrimination, but, rather, is a charge to promote the orderly

production of supplies of electric energy and natural gas at just and

reasonable rates"). REHNQUIST, J., dissenting (Footnotes)



1. See Revenue Act of 1924, ch. 234,  231(6), 43 Stat. 282; Revenue Act

of 1926, ch. 27,  231(6), 44 Stat. 40; Revenue Act of 1928, ch. 852, 

103(6), 45 Stat. 813; Revenue Act of 1932, ch. 209,  103(6), 47

Stat.193.



2. See Revenue Act of 1936, ch. 690,  101(6), 49 Stat. 1674; Revenue Act

of 1938, ch. 289,  101(6), 52 Stat. 481.



3. I agree with the Court that such a requirement would not infringe on

petitioners' First Amendment rights.



4. Because of its holding, the Court does not have to decide whether it

would violate the equal protection component of the Fifth Amendment for

Congress to grant  501(c)(3) status to organizations that practice

racial discrimination.  Ante at 599, n. 24.  I would decide that it does

not.  The statute is facially neutral; absent a showing of a

discriminatory purpose, no equal protection violation is established. 

Washington v. Davis, 426 U.S. 229, (1976).

