The Supreme Courtroom precedent permitting the IRS to revoke a college’s tax-exempt standing is a textualist’s nightmare.
The previous few days have seen a dramatic escalation within the Trump administration’s brawl with universities usually and with Harvard particularly. In response to a number of stories, the IRS has begun planning to revoke the college’s tax-exempt standing. Shedding exemption from revenue taxation can be disastrous for Harvard. Not solely does exemption save universities monumental quantities of cash that may in any other case be taxed; additionally it is important for fundraising, as a result of it permits donors to take charitable deductions.
What’s the rationale for the IRS revisiting Harvard’s exemption standing? A idea is required, as a result of part 501(c)(3) of the federal tax code says that a company “shall”—not “might”—be exempt from taxation if it meets standards listed within the statute. A kind of standards is for an establishment to be organized solely for “academic functions.”
The Trump administration—which shoots first and theorizes later—has not stated a lot. However an mental agenda has been constructing just lately to problem the exempt standing of universities and different organizations seen as left-leaning. (You’ll be able to see that momentum gathering steam on the Wall Avenue Journal editorial web page right here, right here, and right here.) The unifying idea of this motion is to make expansive new use of a 1983 Supreme Courtroom resolution, Bob Jones College v. United States.
Bob Jones was (and is) a conservative-Christian college with a historical past of racial discrimination, which the college as soon as claimed was rooted in biblical ideas. After a protracted and tangled back-and-forth, the IRS revoked the college’s tax-exempt standing within the Seventies, and the college challenged that revocation. In an interesting and elusive 8–1 resolution, the Supreme Courtroom upheld the IRS resolution as in line with the tax code and the Structure. Why? As a result of, however the language about “academic functions,” the Courtroom held that, to qualify for the exemption, a company should present “that its exercise isn’t opposite to settled public coverage.” The Courtroom presupposed to deduce help for that normal from the general goal of the tax code.
Strikingly, the IRS has made nearly no try to wield this seemingly expansive “public coverage” restriction within the years since Bob Jones was determined—and the Supreme Courtroom has due to this fact had no event to make clear the bounds of its fuzzy doctrine. That is all for good motive. Conservatives, particularly, must be cautious of far-reaching claims of administrative authority to resolve what’s inside “settled public coverage” and what’s not.
One motive is the straightforward potential for tit-for-tat reprisal. Donald Trump and his allies aren’t the primary to name for increasing Bob Jones. Some left-leaning students have argued for making use of the precedent to organizations that discriminate on the premise of different traits, reminiscent of sexual orientation and gender id. Historically, due to this fact, spiritual organizations have been notably involved with the obscure contours of the Bob Jones case. Within the oral argument over same-sex marriage, for instance, Justice Samuel Alito requested whether or not establishing it as a constitutional proper would possibly put organizations that opposed it in jeopardy of dropping their tax-exempt standing. “It’s actually going to be a problem,” the solicitor common conceded.
This fear was evident within the Bob Jones resolution itself. In a memorable concurrence, Justice Lewis Powell drew consideration to the “aspect of conformity” that almost all’s opinion would possibly produce. “The supply of tax exemptions to nonprofit teams,” he noticed, “is one indispensable technique of limiting the affect of governmental orthodoxy on vital areas of neighborhood life.” A broad “public coverage” restrict is particularly regarding as a result of, in a pluralistic society that cares about particular person rights, elementary public insurance policies inevitably battle. Rules of antidiscrimination are clearly elementary. However so are ideas of free affiliation and spiritual liberty. How ought to we reconcile them, and who ought to resolve? Historically, conservatives have been reluctant to provide federal directors extra discretion on this area.
Hand-wringing about pluralism and what some hypothetical future Democratic administration may do may appear naive within the age of Trump. However there’s a second motive conservatives ought to concern the growth of Bob Jones: It’s only a horrible case for contemporary textualists.
The lone holdout in that lopsided 8–1 Bob Jones end result was none apart from William Rehnquist, an early hero to the fashionable conservative authorized motion. Rehnquist’s dissent makes some extent that ought to nonetheless resonate with at this time’s conservative majority on the Courtroom: Aligning the tax code with nationwide coverage objectives is Congress’s job—not the Courtroom’s, and never the manager department’s. Bob Jones’s discriminatory practices might need been odious, however the faculty was additionally clearly an “academic” establishment beneath the plain language of the statute. That statute, furthermore, was not the form of doc that oozed with administrative discretion. It was, as Rehnquist put it, the form of legislation wherein Congress itself “explicitly outlined the necessities” for exempt standing.
Rehnquist’s language can be straightforward to replace for at this time’s conservative majority. A free-floating company discretion to resolve what’s or isn’t within the public curiosity, the place the stakes are a minimum of the purposeful destruction of organizations which have trusted exemption? That begins to sound rather a lot just like the form of “main query” that Congress supposed to maintain for itself—not fob off to bureaucrats or fence off from the oversight of an impartial judiciary.
Regardless of its sensible obsolescence, after all, Bob Jones nonetheless stays the legislation of the land—mendacity round like a loaded weapon for an government department keen to miss its flaws. However there are good causes that it has by no means been picked up earlier than. Conservatives, greater than anybody, ought to oppose its impetuous new use.
