Bob Jones University v. United States , 103 S. Ct. 2017 ( 1983 )

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 612-615 (Rehn-QUIST, 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 tax exemptions for schools thát 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.¹ 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 595-596. 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.²

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 591-592 (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 598-599 (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 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.³

Given the importance of our tradition of pluralism,⁴ “[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.

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,⁵ 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 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, 774-775 (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.

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, 510-511, 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”).