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. 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 corporation operates a school with an enrollment of approximately 5,000 students, from kindergarten through college and graduate school. Petitioners accordingly argue that the IRS overstepped its lawful bounds in issuing its 19 rulings. Congress, the source of IRS authority, can modify IRS rulings it considers improper; and courts exercise review over IRS actions. This Court has long held the Free Exercise Clause of the First Amendment to be an absolute prohibition against governmental regulation of religious beliefs, at 402-403. The governmental interest at stake here is compelling. 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. 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, at 611. 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.
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 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. Bob Jones University is not affiliated with any religious denomination, but is dedicated to the teaching and propagation of its fundamentalist Christian religious beliefs. 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. The same provision, so essential to efficient and fair administration of the tax laws, has appeared in Tax Codes ever since, 177 U. In the first instance, however, the responsibility [p597] for construing the Code falls to the IRS. Guided, of course, by the Code, the IRS has the responsibility, in the first instance, to determine whether a particular [p598] entity is "charitable" for purposes of § 170 and § 501(c)(3). However, [n]ot all burdens on religion are unconstitutional. As discussed in Part II-B, -- discrimination that prevailed, with official approval, for the first 165 years of this Nation's constitutional history. The Court's opinion does not warrant that interpretation. (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. A charitable contribution shall be allowable as a deduction only if verified [p614] under regulations prescribed by the Secretary.
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.
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. Instead, they argue that, if an institution falls within one or more of [p586] 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. , taken by themselves, and literally construed, without regard to the object in view, would seem to sanction the claim of the plaintiff. 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. But there can no longer be any doubt that racial discrimination in education violates deeply and widely accepted views of elementary justice. 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.
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 . 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. Prior to 1954, public education in many places still was conducted under the pall of [p593] 347 U. An unbroken line of cases following 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. is indeed so fundamental and pervasive that it is embraced in the concept of due process of law.
or educational purposes" are entitled to tax exemption. 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." at 469. Even more significant is the fact that both Reports focus on this Court's affirmance of at 7-8, and n. These references in congressional Committee Reports on an enactment denying tax exemptions to racially discriminatory private social clubs cannot be read [p602] 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. 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. In 1894, when the first charitable exemption provision was enacted, racially segregated educational institutions would not have been regarded as against public policy. 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. 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. With undeniable clarity, Congress has explicitly defined the requirements for § 501(c)(3) status. 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; . The first general income tax law was passed by Congress in the form of the Tariff Act of 1894. The income tax portion of the 1894 Act was held unconstitutional by this Court, 158 U. 601 (1895), but a similar exemption appeared in the Tariff Act of 1909 which imposed a tax on corporate income. 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, [p616] no part of the net income of which inures to the benefit of any private stockholder or individual. 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. 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. 997 (1971), and in the face of a preliminary injunction, [p620] the IRS changed its position and adopted the view of the plaintiffs. 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 19 rulings." 381 U. 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 [p621] provide for" racial discrimination. 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. 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.'" The Court fails to note that Congressman Ashbrook also said: The IRS has no authority to create public policy. 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.
Because of this admissions policy, the IRS revoked the University's tax-exempt status. 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). This contention presents claims not heretofore considered by this Court in precisely this context. The state may justify a limitation on religious liberty by showing that it is essential to accomplish an overriding governmental interest. The Court found no constitutional infirmity in "excluding [Jehovah's Witness children] from doing there what no other children may do." Denial of tax benefits will inevitably have a substantial [p604] impact on the operation of private religious schools, but will not prevent those schools from observing their religious tenets. 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. 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. 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. 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. For this reason, I would reverse the Court of Appeals.
Syllabus Section 501(c)(3) of the Internal Revenue Code of 1954 (IRC) provides that "[c]orporations . 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). 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. Racially discriminatory educational institutions cannot be viewed as conferring a public benefit within the "charitable" concept discussed earlier, [p596] or within the congressional intent underlying § 170 and § 501(c)(3). [p603] 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. 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. (1959); Bogert § 369, at 65-67; 4 Scott § 368, at 2855-2856. This I am sure is no accident, for there is nothing in the language [p613] of § 501(c)(3) that supports the result obtained by the Court. Nowhere is there to be found some additional, undefined public policy requirement. 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. 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 . This, of course, is of considerable significance in determining the intended meaning of the statute. 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.