Thursday, January 19, 2023
Zhang: Anti-Discrimination and Tax Exemption
Alex Zhang (Legal Clerk, United States Court of Appeals for the Ninth Circuit; JD 2021, Yale), Anti-Discrimination and Tax Exemption107 Cornell L. Rev. 1381 (2022):
The Supreme Court held, in Bob Jones University v. USA, that violations of fundamental public policy, including racial discrimination in education, disqualify an entity for tax exemption. The case was widely celebrated and its results aligned with the ideals of progressive society: the government should not subsidize discrimination, particularly of marginalized groups. But nearly four decades later, the decision has never been fully realized for its liberal and anti-discrimination potential. The IRS has limited enforcement to the narrower facts of the case. The academic literature has not formulated a systematic description of how to enforce the Bob Jones regime, in light of the expansion of protections against discrimination and the Court’s reasoning that is deeply rooted in common law charity. At the same time, tax-exempt entities engage in some discriminatory activities, often with impunity.
This article advocates extending the application of bob jones to anti-discrimination on the basis of all protected features. It first shows, through an examination of the IRS’s written determinations, the agency’s inadequate scope of implementation, which has limited tax-exempt denials to racially discriminatory schools. Second, he argues that the objectives of anti-discrimination and common law charity coincide: both aim to ameliorate inequality by facilitating the entry of marginalized populations into the labor market. This affinity further justifies the Court’s decision that tax exemption requires compliance with the requirements of the charity and established public order. Third, it offers implementation strategies to minimize backlash and outlines a path toward an anti-discrimination enforcement administrative model. As the Biden Administration continues to implement Bostock in its efforts to strengthen the federal anti-discrimination regime, bob jones could serve as a powerful mechanism to promote the enforcement of civil rights.
https://taxprof.typepad.com/taxprof_blog/2023/01/zhang-antidiscrimination-and-tax-exemption.html
