Bob Jones University v. United States

Under such a definition of charity--as benefiting the common good--it was clear that Bob Jones University did not meet the requirements due to its policy of racial discrimination. The Court had long held that discrimination in public education was contrary to federal policy, and thus the university was not pursuing an aim that would benefit the public. As for the petitioners' claim that only Congress was able to alter the tax laws, not the IRS, Burger cited the legislative body's tendency to accord the IRS broad powers in making and carrying out tax policy.

The petitioner also addressed the argument that to censure an institution for its sincerely held religious beliefs was a violation of religious freedom under the First Amendment. Burger again cited a host of cases showing that, where the exercise of religious belief is contrary to "an overriding governmental interest," the government had authority to justify limits on religious freedom. An example was the case of Prince v. Massachusetts (1944), in which the Jehovah's Witnesses' policy of putting children to work distributing literature came into conflict with child labor laws. As Burger quoted, "The Court found no constitutional infirmity in `excluding [Jehovah's Witness children] from doing . . . what no other children may do'." And in any case, as the chief justice pointed out, the case revolved not around the abridgement of freedom, but rather the abridgement of tax exemption. (This is rather akin to the arguments in the late 1980s over public funding of controversial artwork. The pro-funding side portrayed it as a question of censorship when in fact the debate revolved around giving or withholding funds.)

Given these considerations, therefore, the Court found that the IRS had acted correctly in its interpretation of 501(c)(3), and it affirmed the judgments of the court of appeals. In his opinion, Chief Justice Burger was joined by the entire Court except for Justices Powell and Rehnquist. Justice Powell concurred with all parts of the decision except certain aspects of the government's right to abridge religious freedom in view of an overriding interest. As for Justice Rehnquist, he agreed with the Court's observation that "there is a strong national policy in this country opposed to racial discrimination." His problem with the decision was that, in his view, it was the job of Congress--and not the IRS or the courts--to decide that organizations which practice racial discrimination are not eligible for 501(c)(3) exemption.