CHIEF JUSTICE BURGER delivered the opinion of the Court.
We granted certiorari to decide whether petitioners, nonprofit private schools that prescribe and enforce racially discriminatory admissions standards on the basis of religious doctrine, qualify as tax-exempt organizations under 501(c) (3) of the Internal Revenue Code of 1954.
Until 1970, the Internal Revenue Service granted tax-exempt status to private schools, without regard to their racial admissions policies, under 501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3), and granted charitable deductions for contributions to such schools under 170 of the Code, 26 U.S.C. 170.
January 12, 1970, a three-judge District Court for the
June 30, 1971, the three-judge District Court issued its opinion on the merits
The revised policy on discrimination was formalized in Revenue Ruling 71-447, 1971-2 Cum. Bull. 230:
"Both the courts and the Internal Revenue Service have long recognized that the statutory requirement of being Ďorganized and operated exclusively for religious, charitable, . . . or educational purposesí was intended to express the basic common law concept [of Ďcharityí]. . . . 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."
on the "national policy to discourage racial discrimination in
education," the IRS ruled that "a [private] school not having a
racially nondiscriminatory policy as to students is not Ďcharitableí within the
common law concepts reflected in sections 170 and 501(c)(3) of the Code."
The application of the IRS construction of these provisions to petitioners, two private schools with racially discriminatory admissions policies, is now before us.
The sponsors of the University genuinely believe that the Bible forbids interracial dating and marriage. To effectuate these views, Negroes were completely excluded until 1971. From 1971 to May 1975, the University accepted no applications from unmarried Negroes,5 but did accept applications from Negroes married within their race.
Following the decision of the United States Court of Appeals for the Fourth Circuit in McCrary v. Runyon, 515 F.2d 1082 (1975), affíd, 427 U.S. 160 (1976), prohibiting racial exclusion from private schools, the University revised its policy. Since May 29, 1975, the University has permitted unmarried Negroes to enroll; but a disciplinary rule prohibits interracial dating and marriage. That rule reads:
"There is to be no interracial dating.
"1. Students who are partners in an interracial marriage will be expelled.
"2. Students who are members of or affiliated with any group or organization which holds as one of its goals or advocates interracial marriage will be expelled.
"3. Students who date outside of their own race will be expelled.
"4. Students who espouse, promote, or encourage others to violate the Universityís dating rules and regulations will be expelled." App. in No. 81-3, p. A197.
University continues to deny admission to applicants engaged in an interracial
marriage or known to advocate interracial marriage or dating.
1970, the IRS extended tax-exempt status to
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 schoolís tax-exempt status. That suit culminated in Bob Jones University v. Simon, 416 U.S. 725 (1974), in which this Court held that the Anti-Injunction Act of the Internal Revenue Code, 26 U.S.C. 7421(a), prohibited the University from obtaining judicial review by way of injunctive action before the assessment or collection of any tax.
Thereafter, on April 16, 1975, the IRS notified the University of the proposed revocation of its tax-exempt status. On January 19, 1976, the IRS officially revoked the Universityís tax-exempt status, effective as of December 1, 1970, the day after the University was formally notified of the change in IRS policy. The University subsequently filed returns under the Federal Unemployment Tax Act for the period from December 1, 1970, to December 31, 1975, and paid a tax totalling $21 on one employee for the calendar year of 1975. After its request for a refund was denied, the University instituted the present action, seeking to recover the $21 it had paid to the IRS. The Government counterclaimed for unpaid federal unemployment taxes for the taxable years 1971 through 1975, in the amount of $489,675.59, plus interest.
The United States District Court for the District of South Carolina held that revocation of the Universityís tax-exempt status exceeded the delegated powers of the IRS, was improper under the IRS rulings and procedures, and violated the Universityís rights under the Religion Clauses of the First Amendment. 468 F. Supp. 890, 907 (1978). The court accordingly ordered the IRS to pay the University the $21 refund it claimed and rejected the IRSís counterclaim.
Court of Appeals for the Fourth Circuit, in a divided opinion, reversed. 639 F.2d 147 (1980). Citing Green v. Connally,
330 F. Supp. 1150 (DC 1971), with approval, the Court of Appeals concluded that
501(c)(3) must be read against the background of
charitable trust law. To be eligible for an exemption under that section, an
institution must be "charitable" in the common-law sense, and
therefore must not be contrary to public policy. In the courtís view,
81-1, Goldsboro Christian Schools, Inc. v.
its incorporation in 1963,
District Court for the Eastern District of North Carolina decided the action on
cross-motions for summary judgment. 436 F. Supp. 1314 (1977).
In addressing the motions for summary judgment, the court assumed that
Court of Appeals for the Fourth Circuit affirmed, 644 F.2d 879 (1981) (per curiam). That court found an "identity for present
purposes" between the
We granted certiorari in both cases, 454 U.S. 892 (1981), and we affirm in each.
In Revenue Ruling 71-447, the IRS formalized the policy, first announced in 1970, that 170 and 501(c)(3) embrace the common-law "charity" concept. Under that view, to qualify for a tax exemption pursuant to 501(c)(3), an institution must show, first, that it falls within one of the eight categories expressly set forth in that section, and second, that its activity is not contrary to settled public policy.
Section 501(c)(3) provides that "[c]orporations . . . organized and operated exclusively for religious, charitable . . . or educational purposes" are entitled to tax exemption. Petitioners argue that the plain language of the statute guarantees them tax-exempt status. They emphasize the absence of any language in the statute expressly requiring all exempt organizations to be "charitable" in the common-law sense, and they contend that the disjunctive "or" separating the categories in 501(c)(3) precludes such a reading. Instead, they argue that if an institution falls within one or more of the specified categories it is automatically entitled to exemption, without regard to whether it also qualifies as "charitable." The Court of Appeals rejected that contention and concluded that petitionersí interpretation of the statute "tears section 501(c)(3) from its roots." 639 F.2d, at 151.
It is a well-established canon of statutory construction that a court should go beyond the literal language of a statute if reliance on that language would defeat the plain purpose of the statute:
"The general words used in the clause . . ., taken by themselves, and literally construed, without regard to the object in view, would seem to sanction the claim of the plaintiff. But this mode of expounding a statute has never been adopted by any enlightened tribunal - because it is evident that in many cases it would defeat the object which the Legislature intended to accomplish. 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, but will take in connection with it the whole statute . . . and the objects and policy of the law. . . ." Brown v. Duchesne, 19 How. 183, 194 (1857) (emphasis added).
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. 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.
This "charitable" concept appears explicitly in 170 of the Code. That section contains a list of organizations virtually identical to that contained in 501(c)(3). It is apparent that Congress intended that list to have the same meaning in both sections. In 170, Congress used the list of organizations in defining the term "charitable contributions." On its face, therefore, 170 reveals that Congressí intention was to provide tax benefits to organizations serving charitable purposes. The form of 170 simply makes plain what common sense and history tell us: in enacting both 170 and 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.
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
More than a century ago, this Court announced the caveat that is critical in this case:
"[I]t has now become an established principle of American law, that courts of chancery will sustain and protect . . . a gift . . . to public charitable uses, provided the same is consistent with local laws and public policy. . . ." Perin v. Carey, 24 How. 465, 501 (1861) (emphasis added).
Soon after that, in 1877, the Court commented:
charitable use, where neither law nor public policy forbids, may be applied to
almost any thing that tends to promote the well-doing and well-being of social
man." Ould v.
also, e. g., Jackson v. Phillips, 96
"ĎCharityí in its legal sense comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads." Commissioners v. Pemsel, 1891. A. C. 531, 583 (emphasis added).
See, e. g., 4 A. Scott, Law of Trusts 368, pp. 2853-2854 (3d ed. 1967) (hereinafter Scoot). These statements clearly reveal the legal background against which Congress enacted the first charitable exemption statute in 1894:14 charities were to be given preferential treatment because they provide a benefit to society.
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. See, e. g., 26 Cong. Rec. 585-586 (1894); id., at 1727. 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." 55 Cong. Rec. 6728.
See also, e. g., 44 Cong. Rec. 4150 (1909); 50 Cong. Rec. 1305-1306 (1913). In 1924, this Court restated the common understanding of the charitable exemption provision:
the exemption is made in recognition of the benefit which the public derives
from corporate activities of the class named, and is intended to aid them when
not conducted for private gain." Trinidad v. Sagrada
In enacting the Revenue Act of 1938, ch. 289, 52 Stat. 447, Congress expressly reconfirmed this view with respect to the charitable deduction provision:
"The exemption from taxation of money or property devoted to charitable and other purposes is based upon the theory that the Government is compensated for the loss of revenue by its relief from financial burdens which would otherwise have to be met by appropriations from other public funds, and by the benefits resulting from the promotion of the general welfare." H. R. Rep. No. 1860, 75th Cong., 3d Sess., 19 (1938).
A corollary to the public benefit principle is the requirement, long recognized in the law of trusts, that the purpose of a charitable trust may not be illegal or violate established public policy. In 1861, this Court stated that a public charitable use must be "consistent with local laws and public policy," Perin v. Carey, 24 How., at 501. Modern commentators and courts have echoed that view. See, e. g., Restatement (Second) of Trusts 377, Comment c (1959); 4 Scott 377, and cases cited therein; Bogert 378, at 191-192.
When the Government grants exemptions or allows deductions all taxpayers are affected; the very fact of the exemption or deduction for the donor means that other taxpayers can be said to be indirect and vicarious "donors." 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 institutionís purpose must not be so at odds with the common community conscience as to undermine any public benefit that might otherwise be conferred.
are bound to approach these questions with full awareness that determinations
of public benefit and public policy are sensitive matters with serious
implications for the institutions affected; a declaration that a given
institution is not "charitable" should be made only where there can
be no doubt that the activity involved is contrary to a fundamental public
policy. But there can no longer be any doubt that racial discrimination in
education violates deeply and widely accepted views of elementary justice.
Prior to 1954, public education in many places still was conducted under the
pall of Plessy v.
An unbroken line of cases following Brown v. Board of Education establishes beyond doubt this Courtís view that racial discrimination in education violates a most fundamental national public policy, as well as rights of individuals.
right of a student not to be segregated on racial grounds in schools . . . is
indeed so fundamental and pervasive that it is embraced in the concept of due
process of law." Cooper v. Aaron, 358
"[A] private school - even one that discriminates - fulfills an important educational function; however, . . . [that] legitimate educational function cannot be isolated from discriminatory practices . . . . [D]iscriminatory treatment exerts a pervasive influence on the entire educational process." (Emphasis added.)
also Runyon v. McCrary, 427 U.S. 160 (1976);
in Titles IV and VI of the Civil Rights Act of 1964, Pub. L. 88-352, 78 Stat.
241, 42 U.S.C. 2000c, 2000c-6, 2000d, clearly expressed its agreement that
racial discrimination in education violates a fundamental public policy. Other
sections of that Act, and numerous enactments since then, testify to the public
policy against racial discrimination. See, e. g., the Voting Rights Act of
1965, Pub. L. 89-110, 79 Stat. 437, 42 U.S.C. 1973 et seq. (1976 ed. and Supp.
V); Title VIII of the Civil Rights Act of 1968, Pub. L. 90-284, 82 Stat. 81, 42
U.S.C. 3601 et seq. (1976 ed. and Supp. V); the
The Executive Branch has consistently placed its support behind eradication of racial discrimination. Several years before this Courtís decision in Brown v. Board of Education, supra, President Truman issued Executive Orders prohibiting racial discrimination in federal employment decisions, Exec. Order No. 9980, 3 CFR 720 (1943-1948 Comp.), and in classifications for the Selective Service, Exec. Order No. 9988, 3 CFR 726, 729 (1943-1948 Comp.). In 1957, President Eisenhower employed military forces to ensure compliance with federal standards in school desegregation programs. Exec. Order No. 10730, 3 CFR 389 (1954-1958 Comp.). And in 1962, President Kennedy announced:
granting of Federal assistance for . . . 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 the
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. See, e. g., Exec. Order No. 11197, 3 CFR 278 (1964-1965 Comp.); Exec. Order No. 11478, 3 CFR 803 (1966-1970 Comp.); Exec. Order No. 11764, 3 CFR 849 (1971-1975 Comp.); Exec. Order No. 12250, 3 CFR 298 (1981).
Few social or political issues in our history have been more vigorously debated and more extensively ventilated than the issue of racial discrimination, particularly in education. Given the stress and anguish of the history of efforts to escape from the shackles of the "separate but equal" doctrine of Plessy v. Ferguson, 163 U.S. 537 (1896), it cannot be said that educational institutions that, for whatever reasons, practice racial discrimination, are institutions exercising "beneficial and stabilizing influences in community life," Walz v. Tax Commín, 397 U.S. 664, 673 (1970), or should be encouraged by having all taxpayers share in their support by way of special tax status.
can thus be no question that the interpretation of 170 and 501(c)(3) announced by the IRS in 1970 was correct. That it may
be seen as belated does not undermine its soundness. 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
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). Petitioners accordingly argue that the IRS overstepped its lawful bounds in issuing its 1970 and 1971 rulings.
Yet ever since the inception of the Tax Code, Congress has seen fit to vest in those administering the tax laws very broad authority to interpret those laws. 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. Indeed as early as 1918, Congress expressly authorized the Commissioner "to make all needful rules and regulations for the enforcement" of the tax laws. Revenue Act of 1918, ch. 18, 1309, 40 Stat. 1143. The same provision, so essential to efficient and fair administration of the tax laws, has appeared in Tax Codes ever since, see 26 U.S.C. 7805(a); and this Court has long recognized the primary authority of the IRS and its predecessors in construing the Internal Revenue Code, see, e. g., Commissioner v. Portland Cement Co. of Utah, 450 U.S. 156, 169 (1981); United States v. Correll, 389 U.S. 299, 306-307 (1967); Boske v. Comingore, 177 U.S. 459, 469-470 (1900).
Congress, the source of IRS authority, can modify IRS rulings it considers improper; and courts exercise review over IRS actions. In the first instance, however, the responsibility for construing the Code falls to the IRS. 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. Administrators, like judges, are under oath to do so.
170 and 501(c)(3), Congress has identified categories
of traditionally exempt institutions and has specified certain additional
requirements for tax exemption. Yet the need for continuing interpretation of
those statutes is unavoidable. For more than 60 years, the IRS and its
predecessors have constantly been called upon to interpret these and comparable
provisions, and in doing so have referred consistently to principles of
charitable trust law. In Treas. Regs.
45, Art. 517(1) (1921), for example, the IRSís
predecessor denied charitable exemptions on the basis of proscribed political
activity before the Congress itself added such conduct as a disqualifying
element. 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. See, e. g., Crellin
v. Commissioner, 46 B. T. A. 1152, 1155-1156 (1942); James Sprunt
Benevolent Trust v. Commissioner, 20 B. T. A. 19, 24-25 (1930). See also
Treas. Reg. 1.501(c)(3)-1(d)(1)(ii) (1959). Some years
before the issuance of the rulings challenged in these cases, the IRS also
ruled that contributions to community recreational facilities would not be
deductible and that the facilities themselves would not be entitled to
tax-exempt status, unless those facilities were open to all on a racially
nondiscriminatory basis. See Rev. Rul. 67-325, 1967-2
Cum. Bull. 113. These rulings reflect the Commissionerís continuing duty to
interpret and apply the Internal Revenue Code. See also Textile Mills Securities
Corp. v. Commissioner, 314
Guided, of course, by the Code, the IRS has the responsibility, in the first instance, to determine whether a particular entity is "charitable" for purposes of 170 and 501(c)(3). 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. We emphasize, however, that these sensitive determinations should be made only where there is no doubt that the organizationís activities violate fundamental public policy.
On the record before us, there can be no doubt as to the national policy. In 1970, when the IRS first issued the ruling challenged here, the position of all three branches of the Federal Government was unmistakably clear. The correctness of the Commissionerís conclusion that a racially discriminatory private school "is not Ďcharitableí within the common law concepts reflected in . . . the Code," Rev. Rul. 71-447, 1971-2 Cum. Bull., at 231, is wholly consistent with what Congress, the Executive, and the courts had repeatedly declared before 1970. Indeed, it would be anomalous for the Executive, Legislative, and Judicial Branches to reach conclusions that add up to a firm public policy on racial discrimination, and at the same time have the IRS blissfully ignore what all three branches of the Federal Government had declared. Clearly an educational institution engaging in 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," Walz v. Tax Commín, 397 U.S., at 673, and is not "charitable," within the meaning of 170 and 501(c)(3). We therefore hold that the IRS did not exceed its authority when it announced its interpretation of 170 and 501(c)(3) in 1970 and 1971.
The actions of Congress since 1970 leave no doubt that the IRS reached the correct conclusion in exercising its authority. It is, of course, not unknown for independent agencies or the Executive Branch to misconstrue the intent of a statute; Congress can and often does correct such misconceptions, if the courts have not done so. Yet for a dozen years Congress has been made aware - acutely aware - of the IRS rulings of 1970 and 1971. As we noted earlier, few issues have been the subject of more vigorous and widespread debate and discussion in and out of Congress than those related to racial segregation in education. Sincere adherents advocating contrary views have ventilated the subject for well over three decades. Failure of Congress to modify the IRS rulings of 1970 and 1971, of which Congress was, by its own studies and by public discourse, constantly reminded, and Congressí awareness of the denial of tax-exempt status for racially discriminatory schools when enacting other and related legislation make out an unusually strong case of legislative acquiescence in and ratification by implication of the 1970 and 1971 rulings.
and quite appropriately, courts are slow to attribute significance to the
failure of Congress to act on particular legislation. See, e. g., Aaron v. SEC,
Nonaction by Congress is not often a useful guide, but the nonaction here is significant. During the past 12 years there have been no fewer than 13 bills introduced to overturn the IRS interpretation of 501(c)(3). Not one of these bills has emerged from any committee, although Congress has enacted numerous other amendments to 501 during this same period, including an amendment to 501(c)(3) itself. Tax Reform Act of 1976, Pub. L. 94-455, 1313(a), 90 Stat. 1730. It is hardly conceivable that Congress - and in this setting, any Member of Congress - was not abundantly aware of what was going on. In view of its prolonged and acute awareness of so important an issue, Congressí failure to act on the bills proposed on this subject provides added support for concluding that Congress acquiesced in the IRS rulings of 1970 and 1971. See, e. g., Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 379-382 (1982); Haig v. Agee, 453 U.S. 280, 300-301 (1981); Herman & MacLean v. Huddleston, 459 U.S. 375, 384-386 (1983); United States v. Rutherford, 442 U.S. 544, 554, n. 10 (1979).
The evidence of congressional approval of the policy embodied in Revenue Ruling 71-447 goes well beyond the failure of Congress to act on legislative proposals. Congress affirmatively manifested its acquiescence in the IRS policy when it enacted the present 501(i) of the Code, Act of Oct. 20, 1976, Pub. L. 94-568, 90 Stat. 2697. 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."26 Both the House and Senate Committee Reports on that bill articulated the national policy against granting tax exemptions to racially discriminatory private clubs. S. Rep. No. 94-1318, p. 8 (1976); H. R. Rep. No. 94-1353, p. 8 (1976).
Even more significant is the fact that both Reports focus on this Courtís affirmance of Green v. Connally, 330 F. Supp. 1150 (DC 1971), as having established that "discrimination on account of race is inconsistent with an educational institutionís tax-exempt status." S. Rep. No. 94-1318, supra, at 7-8, and n. 5; H. R. Rep. No. 94-1353, supra, at 8, and n. 5 (emphasis added). These references in congressional Committee Reports on an enactment denying tax exemptions to racially discriminatory private social clubs cannot be read 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.
Petitioners contend that, even if the Commissionerís 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. 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. This contention presents claims not heretofore considered by this Court in precisely this context.
Court has long held the Free Exercise Clause of the First Amendment to be an
absolute prohibition against governmental regulation of religious beliefs,
Wisconsin v. Yoder, 406 U.S. 205, 219 (1972); Sherbert
v. Verner, 374 U.S. 398, 402 (1963); Cantwell v.
Connecticut, 310 U.S. 296, 303 (1940). As interpreted by this Court, moreover,
the Free Exercise Clause provides substantial protection for lawful conduct
grounded in religious belief, see Wisconsin v. Yoder, supra, at 220; Thomas v.
Review Board of Indiana Employment Security Div., 450 U.S. 707 (1981); Sherbert v. Verner, supra, at
402-403. However, "[n]ot all burdens on religion
are unconstitutional. . . . The state may justify a limitation on religious
liberty by showing that it is essential to accomplish an overriding
occasion this Court has found certain governmental interests so compelling as
to allow even regulations prohibiting religiously based conduct. In Prince v.
Massachusetts, 321 U.S. 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. The
Court found no constitutional infirmity in "excluding [Jehovahís Witness
children] from doing there what no other children may do."
The governmental interest at stake here is compelling. As discussed in Part II-B, supra, the Government has a fundamental, overriding interest in eradicating racial discrimination in education29 - discrimination that prevailed, with official approval, for the first 165 years of this Nationís constitutional history. That governmental interest substantially outweighs whatever burden denial of tax benefits places on petitionersí exercise of their religious beliefs. The interests asserted by petitioners cannot be accommodated with that compelling governmental interest, see United States v. Lee, supra, at 259-260; and no "less restrictive means," see Thomas v. Review Board of Indiana Employment Security Div., supra, at 718, are available to achieve the governmental interest.
remaining issue is whether the IRS properly applied its policy to these
The judgments of the Court of Appeals are, accordingly,
JUSTICE POWELL, concurring in part and concurring in the judgment.
I join the Courtís 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 Courtís 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.
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 REHNQUISTís 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 (REHNQUIST, J., dissenting). Indeed, were we writing prior to the history detailed in the Courtís 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 IRSís construction of the Code as proscribing tax exemptions for schools that 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. 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 [IRSís] 1970 and 1971 rulings" with respect to racially discriminatory schools. Ante, at 599. In particular, Congressí enactment of 501(i) in 1976 is strong evidence of agreement with these particular IRS rulings.
I therefore concur in the Courtís 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 Courtís 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 institutionís 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).
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
Ďbeneficial and stabilizing influenc[e] in community
life,í . . . and is not Ďcharitable,í within the meaning of 170 and 501(c)(3)."
Ante, at 598-599 (quoting Walz v. Tax Commín, 397
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 Courtís 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.
the importance of our tradition of pluralism,4
"[t]he interest in preserving an area of untrammeled choice for private
philanthropy is very great."
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 agencyís 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:
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
The Courtís 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.
JUSTICE REHNQUIST, dissenting.
The Court points out that there is a strong national policy in this country against racial discrimination. To the extent that the Court states that Congress in furtherance of this policy could deny tax-exempt status to educational institutions that promote racial discrimination, I readily agree. 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 Congressí failure to legislate we are not constitutionally empowered to act for it.
In approaching this statutory construction question the Court quite adeptly avoids the statute it is construing. This I am sure is no accident, for there is nothing in the language of 501(c)(3) that supports the result obtained by the Court. 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." 26 U.S.C. 501(c)(3).
With undeniable clarity, Congress has explicitly defined the requirements for 501(c)(3) status. 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. Nowhere is there to be found some additional, undefined public policy requirement.
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. In setting forth the general rule, 170 states:
"There shall be allowed as a deduction any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary." 26 U.S.C. 170(a)(1).
The Court seizes the words "charitable contribution" and with little discussion concludes that "[o]n its face, therefore, 170 reveals that Congressí intention was to provide tax benefits to organizations serving charitable purposes," intimating that this implies some unspecified common-law charitable trust requirement. Ante, at 587.
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 Ďcharitable contributioní means a contribution or gift to or for the use of . . . [a] corporation, trust, or community chest, fund, or foundation . . . 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; . . . no part of the net earnings of which inures to the benefit of any private shareholder or individual; and . . . which is not disqualified for tax exemption under section 501(c) (3) by reason of attempting to influence legislation, 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." 26 U.S.C. 170(c).
Plainly, 170(c) simply tracks the requirements set forth in 501(c)(3). Since 170 is no more than a mirror of 501(c)(3) and, as the Court points out, 170 followed 501(c)(3) by more than two decades, ante, at 587, n. 10, it is at best of little usefulness in finding the meaning of 501(c)(3).
Making a more fruitful inquiry, the Court next turns to the legislative history of 501(c)(3) and finds that Congress intended in that statute to offer a tax benefit to organizations that Congress believed were providing a public benefit. I certainly agree. But then the Court leaps to the conclusion that this history is proof Congress intended that an organization seeking 501(c)(3) status "must fall within a category specified in that section and must demonstrably serve and be in harmony with the public interest." Ante, at 592 (emphasis added). To the contrary, I think that the legislative history of 501(c)(3) unmistakably makes clear that Congress has decided what organizations are serving a public purpose and providing a public benefit within the meaning of 501(c)(3) and has clearly set forth in 501(c)(3) the characteristics of such organizations. In fact, there are few examples which better illustrate Congressí effort to define and redefine the requirements of a legislative Act.
first general income tax law was passed by Congress in the form of the Tariff
Act of 1894. A provision of that Act provided an exemption for
"corporations, companies, or associations organized and conducted solely
for charitable, religious, or educational purposes."
the ratification of the Sixteenth Amendment, Congress again turned its
attention to an individual income tax with the Tariff Act of 1913. 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, no part of the net
income of which inures to the benefit of any private stockholder or
tax laws were overhauled by the Internal Revenue Code of 1939, but this
exemption was left unchanged.
One way to read the opinion handed down by the Court today leads to the conclusion that this long and arduous refining process of 501(c)(3) was certainly a waste of time, for when enacting the original 1894 statute Congress intended to adopt a common-law term of art, and intended that this term of art carry with it all of the common-law baggage which defines it. Such a view, however, leads also to the unsupportable idea that Congress has spent almost a century adding illustrations simply to clarify an already defined common-law term.
Another way to read the Courtís opinion leads to the conclusion that even though Congress has set forth some of the requirements of a 501(c)(3) organization, it intended that the IRS additionally require that organizations meet a higher standard of public interest, not stated by Congress, but to be determined and defined by the IRS and the courts. This view I find equally unsupportable. Almost a century of statutory history proves that Congress itself intended to decide what 501(c)(3) requires. Congress has expressed its decision in the plainest of terms in 501(c)(3) by providing that tax-exempt status is to be given to any corporation, or community chest, fund, or foundation that is organized for one of the eight enumerated purposes, operated on a nonprofit basis, and uninvolved in lobbying activities or political campaigns. The IRS certainly is empowered to adopt regulations for the enforcement of these specified requirements, and the courts have authority to resolve challenges to the IRSís exercise of this power, but Congress has left it to neither the IRS nor the courts to select or add to the requirements of 501(c)(3).
The Court suggests that unless its new requirement be added to 501(c)(3), nonprofit organizations formed to teach pickpockets and terrorists would necessarily acquire tax-exempt status. Ante, at 592, n. 18. Since the Court does not challenge the characterization of petitioners as "educational" institutions within the meaning of 501(c)(3), and in fact states several times in the course of its opinion that petitioners are educational institutions, see, e. g., ante, at 580, 583, 604, n. 29, 606, n. 32, it is difficult to see how this argument advances the Courtís reasoning for disposing of petitionersí cases.
But simply because I reject the Courtís heavyhanded creation of the requirement that an organization seeking 501(c)(3) status must "serve and be in harmony with the public interest," ante, at 592, does not mean that I would deny to the IRS the usual authority to adopt regulations further explaining what Congress meant by the term "educational." The IRS has fully exercised that authority in Treas. Reg. 1.501(c)(3)-1(d)(3), 26 CFR 1.501(c)(3)-1(d)(3) (1982), which provides:
"(3) Educational defined - (i) In general. The term Ďeducationalí, as used in section 501(c)(3), relates to -
"(a) The instruction or training of the individual for the purpose of improving or developing his capabilities; or
"(b) The instruction of the public on subjects useful to the individual and beneficial to the community.
"An organization may be educational even though it advocates a particular position or viewpoint so long as it presents a sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion. On the other hand, an organization is not educational if its principal function is the mere presentation of unsupported opinion.
"(ii) Examples of educational organizations. The following are examples of organizations which, if they otherwise meet the requirements of this section, are educational:
"Example (1). An organization, such as a primary or secondary school, a college, or a professional or trade school, which has a regularly scheduled curriculum, a regular faculty, and a regularly enrolled body of students in attendance at a place where the educational activities are regularly carried on.
"Example (2). An organization whose activities consist of presenting public discussion groups, forums, panels, lectures, or other similar programs. Such programs may be on radio or television.
"Example (3). An organization which presents a course of instruction by means of correspondence or through the utilization of television or radio.
"Example (4). Museums, zoos, planetariums, symphony orchestras, and other similar organizations."
have little doubt that neither the "
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. This, of course, is of
considerable significance in determining the intended meaning of the statute. NLRB v. Boeing Co., 412
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. 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). Then "[i]n the midst of this litigation," Green v. Connally, 330 F. Supp. 1150, 1156 (DC), summarily affíd sub nom. Coit v. Green, 404 U.S. 997 (1971), and in the face of a preliminary injunction, the IRS changed its position and adopted the view of the plaintiffs.
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." Rev. Rul. 71-447, 1971-2 Cum. Bull. 230. The IRS then concluded that a school that promotes racial discrimination violates public policy and therefore cannot qualify as a common-law charity. The circumstances under which this change in interpretation was made suggest that it is entitled to very little deference. But even if the circumstances were different, the latter-day wisdom of the IRS has no basis in 501(c)(3).
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 1970 and 1971 rulings." Ante, at 599. The Court relies
first on several bills introduced to overturn the IRS interpretation of 501(c)(3). Ante, at 600, and n. 25. But we have said before, and
it is equally applicable here, that this type of congressional inaction is of
virtually no weight in determining legislative intent. See
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 provide for" racial
discrimination. Ante, at 601. 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. Cf.
Commissioner v. Tellier, 383
The Court intimates that the Ashbrook and Dornan Amendments also reflect an intent by Congress to acquiesce in the new IRS position. Ante, at 602, n. 27. The amendments were passed to limit certain enforcement procedures proposed by the IRS in 1978 and 1979 for determining whether a school operated in a racially nondiscriminatory fashion. The Court points out that in proposing his amendment, Congressman Ashbrook stated: "ĎMy amendment very clearly indicates on its face that all the regulations in existence as of August 22, 1978, would not be touched.í" Ibid. The Court fails to note that Congressman Ashbrook also said:
"The IRS has no authority to create public policy. . . . So long as the Congress has not acted to set forth a national policy respecting denial of tax exemptions to private schools, it is improper for the IRS or any other branch of the Federal Government to seek denial of tax-exempt status. . . . There exists but a single responsibility which is proper for the Internal Revenue Service: To serve as tax collector." 125 Cong. Rec. 18444 (1979).
the same debate, Congressman Grassley asserted: "Nobody argues that racial
discrimination should receive preferred tax status in the
Court continuously has been hesitant to find ratification through inaction. See
I have no disagreement with the Courtís finding that there is a strong national policy in this country opposed to racial discrimination. 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. But as of yet Congress has failed to do so. Whatever the reasons for the failure, this Court should not legislate for Congress.
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). Petitionersí nonprofit status is uncontested. There is no indication that either petitioner has been involved in lobbying activities or political campaigns. 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. For this reason, I would reverse the Court of Appeals.