Abstract:
In 1982, the Treasury Department announced that the Internal Revenue Service would reverse a twelve-year-old policy and no longer deny tax-exempt status to schools that practiced racial discrimination. The argument, advanced by Reagan appointees in both Treasury and the Department of Justice, was that the IRS did not have the legal authority to deny tax exemptions to segregated schools without explicit guidance from Congress. As a result, Treasury further announced its intention to have the IRS grant tax-exempt status to Bob Jones University and Goldsboro Christian School, whose cases appealing past denials of tax exemptions were due to be reviewed by the Supreme Court. The announcement precipitated a storm of protest from the press, Congress, and civil rights groups. This case traces the legal history of the tax exemption issue and the Bob Jones case, and examines the process whereby the Reagan administration decided to reverse the longstanding IRS policy.
Learning Objective:
This case is useful for exploring the appropriate relationship between a president's wishes and an executive department's actions. In a different vein, this case serves as a vehicle for discussing the politics and management of the Justice Department and the relationship between law and public policy.
