In 1970, the IRS decided that it would no longer grant tax-exempt status to private schools that practiced racial discrimination under the theory that this sort of discrimination failed to be “charitable” within the bounds defined in the Internal Revenue Code sections 170 (allowing deductions for contributions to nonprofits) and 501(c)(3) (granting tax exempt status to certain nonprofits). Bob Jones University maintained a policy forbidding admission to anyone who practiced or advocated interracial marriage or dating. On the basis of this policy, the IRS revoked its tax exempt status.
Under challenge, the Supreme Court decided 8-1 to uphold the IRS’ decision. The Court applied the strict scrutiny analysis1 to conclude that the government had a “fundamental, overriding interest in eradicating racial discrimination in education” which outweighed the burdens of BJU losing its tax exempt status. Despite being a slightly odd way to apply this standard, the Court was clear to emphasize that this ruling affected only religious schools, not churches or other institutions it deemed “purely religious.”
Read more about Bob Jones University v. United States (1983) here.
That is, the requirement that the government’s action be narrowly tailored to advance a compelling interest. ↩