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. Whatever may be the rationale for such private schools' policies, racial discrimination in education is contrary to public policy. (c) The IRS did not exceed its authority when it announced its interpretation of § 501(c)(3) in 19. 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. The court permanently enjoined the Commissioner of [p579] Internal Revenue from approving tax-exempt status for any school in Mississippi that did not publicly maintain a policy of nondiscrimination. or educational purposes" was intended to express the basic common law concept [of "charity"]. Its purpose is "to conduct an institution [p580] 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. Entering students are screened as to their religious beliefs, and their public and private conduct is strictly regulated by standards promulgated by University authorities. 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. 725 (1974), in which this Court held that the Anti-Injunction Act of the Internal Revenue Code, 26 U. Thereafter, on April 16, 1975, the IRS notified the University of the proposed revocation of its tax-exempt status. 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 [p595] the United States as manifested in its Constitution and laws. In § 170 and § 501(c)(3), Congress has identified categories of traditionally exempt institutions and has specified certain additional requirements for tax exemption. 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. On the record before us, there can be no doubt as to the national policy. Clearly an educational institution engaging in [p599] 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," 397 U. at 673, and is not "charitable," within the meaning of § 170 and § 501(c)(3). Petitioner Goldsboro Christian Schools admits that it "maintain[s] racially discriminatory policies," Brief for Petitioner in No. 10, but seeks to justify those policies on grounds we have fully discussed. 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. 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). Such interpretation is wholly consistent with what Congress, the Executive, and the courts had previously declared. (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. (e) The IRS properly applied its policy to both petitioners. POWELL, J., filed an opinion concurring in part and concurring in the judgment, TOP Opinion BURGER, C. 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. The revised policy on discrimination was formalized in Revenue Ruling 71-447, 1971-2 Cum. 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, . The sponsors of the University genuinely believe that the Bible forbids interracial dating and marriage. The University continues to deny admission to applicants engaged in an interracial marriage or known to advocate interracial marriage or dating. 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. 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. And in 1962, President Kennedy announced: [T]he granting of Federal assistance for . Yet the need for continuing interpretation of those statutes is unavoidable. 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. In 1970, when the IRS first issued the ruling challenged here, the position of all three branches of the Federal Government was unmistakably clear. We therefore hold that the IRS did not exceed its authority when it announced its interpretation of § 170 and § 501(c)(3) in 19. 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." Both the House and Senate Committee Reports on that bill articulated the national policy against granting tax exemptions to racially discriminatory private clubs. The IRS properly denied tax-exempt status to Goldsboro Christian Schools. The form of § 170 simply makes plain what common sense and history tell us: in enacting both § 170 and [p588] § 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. 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. (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. (b) The IRS's 1970 interpretation of § 501(c)(3) was correct. That court approved the IRS's amended construction of the Tax Code. 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. It is both a religious and educational institution. 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. 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. 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. 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. Bull., at 231, is wholly consistent with what Congress, the Executive, and the courts had repeatedly declared before 1970. That governmental interest substantially outweighs whatever burden denial of tax benefits places on petitioners' exercise of their religious beliefs. 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. 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. In light of our resolution of this litigation, we do not reach that issue.
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. to public charitable uses, which has long been recognized as a leading authority in this country, Lord Mac Naghten stated: "Charity," in its legal sense, comprises four principal divisions: trusts for the relief of poverty; trusts 4 A. 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. 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.
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, 19 How. 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. The right of a student not to be segregated on racial grounds in schools .
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.
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.
organized and operated exclusively for religious, charitable . 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. 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. 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. 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. Yet contemporary standards must be considered in determining whether given activities provide a public benefit and are entitled to the charitable tax exemption. Charitable trust law also makes clear that the definition of "charity" depends upon contemporary standards. In approaching this statutory construction question, the Court quite adeptly avoids the statute it is construing. 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. [a] corporation, trust, or community chest, fund, or foundation . A provision of that Act provided an exemption for "corporations, companies, or associations organized and conducted solely for charitable, religious, or educational purposes." Ch. 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. 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. 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). 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. [p623] 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). There is no indication that either petitioner has been involved in lobbying activities or political campaigns.
This "charitable" concept appears explicitly in § 170 of the Code.