Bob Jones University v. United States

Bob Jones University v. United States, along with the companion case of Goldsboro Christian Schools v. United States, established the higher importance of the federal interest in ending racial discrimination over that of preserving the tax-exempt status of religious institutions.

Bob Jones University, located in Greenville, South Carolina, was a nondenominational and fundamentalist Christian educational institution. In line with its founders' segregationist beliefs, allegedly based on an interpretation of the Bible, the school practiced racial discrimination in admissions and prohibited African Americans from enrolling. At the same time, the school enjoyed tax-exempt status as a charitable institution under 501(c)(3) of the Internal Revenue Code (IRC) of 1954.

Then in 1970, in the case of Green v. Connally, a special three-judge district court ordered the Internal Revenue Service (IRS) to withhold tax exemption from private schools in Mississippi that continued to practice racial discrimination in their admissions policy. The Supreme Court upheld the decision on appeal, in Coit v. Green (1971). Therefore the IRS issued Revenue Bulletin 71-447, which revoked tax exemption for any private school that discriminated against applicants on the basis of race. Not only did the new rule require such schools to pay federal taxes, it also removed the tax deduction for individuals who made donations to the school. In 1970, Bob Jones University was informed that it would lose its tax-exempt status, but the school continued to maintain that it was entitled to such status.

In 1975, the Court of Appeals of the Fourth Circuit outlawed racial discrimination by all private schools, a decision upheld by the Supreme Court in Runyon v. McCrary (1976). Therefore Bob Jones University was required to open its doors to non-white applicants, and it did allow unmarried black applicants to enroll--but the school maintained a policy of punishing interracial dating with expulsion. In 1976, the university filed tax returns for the period from 1 December 1970 to 31 December 1975, and paid a tax of $21 on one employee for the calendar year of 1975. The IRS responded by informing the school that it owed $489,675.59 in taxes, plus interest.

The U.S. District Court for the District of South Carolina held that by revoking the school's tax exemption, the IRS had overstepped its delegated powers and ordered the IRS to pay back Bob Jones' $21. The Fourth Circuit Court of Appeals, however, reversed the decision in a divided opinion. Citing Green v. Connally, it held that Bob Jones did not meet the commonly understood requirements for a charity, since it practiced racial discrimination.