The Power of the Treasury: Racial Discrimination, Public Policy and Charity in Contemporary Society

Abstract:     
In Bob Jones University v. United States, the Court concluded that Treasury is empowered to enforce established public policy with respect to charities by revoking 501(c)(3) tax-exempt status of charities that violate established policy. Under this public policy power, Treasury has revoked the tax exemption of charities that discriminated against blacks, whose members engaged in civil disobedience against war, and that were involved in illegal activity. However, the point at which a public policy is sufficiently established for purposes of the public policy power is unclear. For example, could the Treasury, relying on recent anti-affirmative action decisions, revoke a charity's 501(c)(3) tax-exempt status on the ground that the organization violated established public policy by engaging in affirmative action? Probably not. This Article, using affirmative action as the example, highlights some of the problems and possible dangers with Treasury's public policy power. The Article's thesis is that the Court reached the correct result in Bob Jones by opposing invidious discrimination against blacks. However, in so doing the Court gave the Treasury unreasonably broad power that lacks a sound legal basis and could inhibit appropriate affirmative action efforts. The Article concludes that Congress should offer a legislative solution.

Accepted Paper Series