Bob Jones University v. Simon

Bob Jones University v. Simon, 416 U. S. 725 (1974), is a decision made by the Supreme Court of the United States holding that Bob Jones University, which had its 501(c)(3) status revoked by the Internal Revenue Service for practicing "racially discriminatory admissions policies" towards African Americans, could not sue for an injunction to prevent losing its tax exempt status. The question of Bob Jones University's tax exempt status was ultimately resolved in Bob Jones University v. United States, in which the court ruled that the First Amendment did not protect discriminatory organizations from losing tax exempt status.

Bob Jones University is devoted to the teaching of fundamentalist religious beliefs, one of which is that God intended that people of different races live separately and not intermarry. When the university was founded in 1927, it denied admission to black students. Until 1970, the Internal Revenue Service (IRS) granted tax exempt status to all private schools, regardless of their admissions policies. Section 501(c)(3) of the Internal Revenue Code of 1954 lists organizations that qualify for tax exempt status and includes those which are charitable, religious, or for educational purposes. The IRS then notified Bob Jones University of its intention to revoke the university's tax exempt status because of the university's racially discriminatory admissions policy. Bob Jones University filed suit to block the IRS from revoking its tax exempt status, alleging "irreparable injury in the form of substantial federal income tax liability." but in 1973 the United States Court of Appeals for the Fourth Circuit reversed that decision. The Court of Appeals relied on the Anti Injunction Act, which states that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court." A party cannot stop the government from collecting taxes. The Supreme Court granted a petition for certiorari to determine whether the Anti Injunction Act barred Bob Jones University's suit to enjoin the IRS from revoking its tax exempt status.

The case of Bob Jones University v. Simon was presided over by Chief Justice Warren Burger and Associate Justices William O. Douglas, William J. Brennan, Jr., Potter Stewart, Byron R. White, Thurgood Marshall, Harry A. Blackmun, Lewis F. Powell, Jr., and William H. Rehnquist. Arguing on behalf of Bob Jones University was John D. "J. D." Todd Jr., a lawyer from Greenville, South Carolina, who served on the South Carolina Bar Board of Governors. The United States Treasury was represented by Assistant Attorney General Scott P. Crampton, with Solicitor General Robert Bork accompanying on the brief. Inclusion on the list of tax exempt organizations was essential to receive donations from foundations and individuals, and Bob Jones argued that removal from this list constituted irreparable harm to the university. Lastly, the Court admits to recognizing the "harsh regime" in which § 7421(a) has placed on §501 (c)(3) organizations threatened with loss of tax exempt status and withdrawal of advanced assurance of deductibility of contributions. But, the Court stated that "this matter is for Congress, which is the appropriate body to weigh the relevant, policy laden considerations, such as the harshness of the present law." Additionally under the Internal Revenue Code of 1954, for organizations that had their 501(c)(3) status revoked, a provision allowed for litigation concerning the legality of the IRS's action after the assessment and attempted collection of taxes. A legal suit could also be brought forward in a federal District Court or in the Court of Claims following the collection of any federal tax and the denial of a refund by the IRS. Furthermore, the courts have interpreted the principle language of the act to serve as "the protection of the Government's need to assess and collect taxes as expeditiously as possible with a minimum of pre enforcement judicial interference." (b) even if the plaintiff would owe no federal income taxes because of possible deductions for depreciation of plant and equipment, the plaintiff would still be liable for federal social security and unemployment taxes, which taxes were also contemplated by the Anti Injunction Act,

Following the trial, the Internal Revenue Service clarified its anti discrimination guidelines for public and church operated private schools. In order to gain tax exempt status, private schools were required to publicize their non discrimination policies for selecting students and employees. On January 19, 1976, the IRS revoked Bob Jones University's tax exempt status. Subsequently, the university paid the Federal Unemployment Tax Act (FUTA) tax of $21 on one of its employees for that year in order to not come under the purview of the Anti Injunction Act. At the time, the school had already begun changing its admission policy by extending admission to unmarried blacks (married black people had already been admitted in 1971). The IRS refused to reinstate the university's tax exempt status, arguing that the dating policies violated its nondiscriminatory requirements. The US District Court for the District of South Carolina ordered the IRS to restore the university's tax exempt status on the grounds that the IRS policies violated the Free Exercise and Establishment Clause. In 1980, the Court of Appeals for the Fourth Circuit, in a split decision, determined that the dating policy, even if founded on religious conviction, violated its nondiscriminatory public policy.

Bob Jones University v. Simon has been cited in multiple cases in the Court of Appeals and Supreme Court since its 1974 ruling. The exceptions to the Anti Injunction Act laid out in Bob Jones University v. Simon have been followed in several cases, notably in its "companion case" Alexander v. "Americans United" Inc. In Alexander, the Supreme Court considered the exemptions in determining that a non profit organization's suit against the IRS based on constitutional claims would not continue under the Anti Injunction Act. The rulings in Bob Jones University v. Simon and Alexander are considered a stricter reading of the Anti Injunction Act for limiting the kinds of suits allowed to proceed before the enforcement of taxation by the IRS. When the case came before the Second Circuit Court of Appeals, the exceptions put forth by Bob Jones Univ. v. Simon were used in part to determine the case. More recently, Bob Jones Univ. v. Simon has been cited and considered in a suite of cases concerning the legislation of the Patient Protection and Affordable Care Act. In cases such as Commonwealth ex rel. Cuccinelli v. Sebelius and Halbig v. Sebelius, injunctions against the IRS in regards to tax policies related to the Affordable Care Act were not granted by the District Courts. In the lower court rulings of Thomas More Law Center v. Obama and Hobby Lobby Stores Inc. v. Sebelius, the Anti Injunction Act was found to be not applicable in either case. In the Supreme Court case National Federation of Independent Business v. Sebelius, the Court requested arguments to be made concerning the Anti Injunction Act and its possible application to the Affordable Care Act by an outside attorney, as neither the government nor the plaintiffs wished to argue its potential implications. In each of these cases the Anti Injunction Act was not applied primarily due to the use of the term 'penalties' in the language of the Affordable Care Act, which the language of the Anti Injunction Act does not explicitly cover.

In the 1984 ruling of South Carolina v. Regan, Justice William Brennan delivered the Supreme Court's opinion detailing that the Anti Injunction Act could not be used to prevent a legal suit if there did not exist a judicial process through which a plaintiff could make their case. This occurred due to the state of South Carolina lacking a direct method of challenging the removal of bearer bonds. The ruling therefore expanded on the instances in which the Anti Injunction Act was not applicable, beyond the two exceptions set out by Bob Jones Univ. v. Simon and the earlier court case Enochs v. Williams Packing Co., and thus partially overruling Bob Jones Univ. v. Simon with the modifications to the use of the Anti Injunction Act concerning future suits. Several cases have also criticized the criteria for exemption as discussed in Bob Jones University v. Simon. In the dissenting opinion of Alexander v. "Americans United" Inc., Justice Harry Blackmun argued that the use of the Anti Injunction Act to prevent suits based on constitutional arguments until after the IRS had acted disrupted the "system of checks and balances provided by judicial review." Another such case is that of Kahn v. United States, in which the Third Circuit Court of Appeals considered the three criteria test provided by Mathews v. Eldridge to determine whether a lawsuit should be allowed to be litigated before policy enforcement by the IRS, even if a suit could be brought afterwards. The three criteria test is considered by some legal scholars to be valid in any case concerning the application of due process, including those of taxation.