Bob Jones University v. United States

• Decision Date: 26 December 1978
• Docket Number: Civ. A. No. 76-775.
• Citation: 468 F. Supp. 890
• Parties: BOB JONES UNIVERSITY, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of South Carolina

468 F. Supp. 890

BOB JONES UNIVERSITY, Plaintiff, v. UNITED STATES of America, Defendant.

Civ. A. No. 76-775.

United States District Court, D. South Carolina, Greenville Division.

December 26, 1978.

COPYRIGHT MATERIAL OMITTED

Wesley M. Walker, Leatherwood, Walker, Todd & Mann, J. D. Todd, Jr., O. Jack Taylor, Jr., Greenville, S. C., for plaintiff.

Steven Shapiro, Martin B. Whitaker, Attys., John F. Murray, Chief, Civ. Trial Section, Southern Region, Tax Div., Dept. of Justice, Washington, D. C., J. D. McCoy, III, Asst. U. S. Atty., Greenville, S. C., for defendant.

FINDINGS OF FACT CONCLUSIONS OF LAW AND ORDER

CHAPMAN, District Judge.

Plaintiff instituted this action to recover the amount of $21.00 which it paid in federal income taxes under the Federal Unemployment Tax Act (F.U.T.A.). The sum that plaintiff seeks to be refunded belies the importance of this litigation, since resolution of the suit requires a determination of whether plaintiff qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3).

The controversy between plaintiff and the government originated in July, 1970, when the Internal Revenue Service publicly announced that it would no longer allow tax exempt status to private schools that practiced racial discrimination or allow gifts to such schools as charitable deductions. By letter dated November 30, 1970, the plaintiff was formally notified of this change and informed that the IRS would challenge the tax exempt status of private schools which practice racial discrimination in their admissions policies. Unable to procure an assurance of tax exemption through administrative means, the plaintiff, in September 1971, instituted an action in this court to enjoin the IRS from revoking its tax exempt status. That suit culminated in Bob Jones University v. Simon, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974), in which the Supreme Court held that the Anti-Injunction Act of the Internal Revenue Code of 1954, 26 U.S.C. § 7421(a), prohibited the plaintiff from obtaining judicial review by way of injunctive action before the assessment or collection of any tax. The Supreme Court went on to suggest that a proper procedure for plaintiff to gain judicial review would be for plaintiff to pay ". . . an installment of FICA Social Security of FUTA Federal Unemployment taxes, exhaust the Service's internal refund procedures, and then bring suit for a refund." 416 U.S. 725, 746, 94 S.Ct. 2038, 2051, 40 L.Ed.2d 496.

On April 16, 1975, the IRS notified plaintiff of the proposed revocation of its exempt status. Official revocation came on January 19, 1976, and was made effective from December 1, 1970. Subsequently, plaintiff filed FUTA returns for the period from December 1, 1970, to December 31, 1975, and paid a tax totalling $21.00 on one employee for the calendar year of 1975. The plaintiff's request for a refund was denied and plaintiff instituted this suit. In its answer to the amended complaint the government counterclaimed for approximately $490,000.00 that it had purportedly determined was due on the returns filed by plaintiff. In its Order filed October 6, 1977, this Court determined that the counterclaim was not dismissible under Rule 12(b)(6) of the Federal Rules of Civil Procedure but granted plaintiff's motion to sever, for a separate trial, those issues raised by defendant's counterclaim other than the tax status issue presented by plaintiff's amended complaint.

On May 10, 1978, the matter of plaintiff's tax exempt status was tried before the Court without a jury. After reviewing the testimony, depositions, admissions, interrogatories, exhibits, pleadings, and briefs of record and studying the applicable law, the Court, pursuant to Rule 52 of the Federal Rules of Civil Procedure, makes the following:

FINDINGS OF FACT

1. Plaintiff was founded in Florida in 1927, moving to its present location in Greenville, South Carolina in the late 1940's. Plaintiff was incorporated as an eleemosynary corporation under the laws of South Carolina on November 20, 1952, for the following purposes, as stated in its Preamble and contained in its Certificate of Incorporation:

The general nature and object of the corporation shall be to conduct an institution of learning for the general education of youth in the essentials of culture and in the arts and sciences, giving special emphasis to the Christian religion and the ethics revealed in the Holy Scriptures, combating all atheistic, agnostic, pagan and so-called scientific adulterations of the Gospel, unqualifiedly affirming and teaching the inspiration of the Bible (both Old and New Testaments); the creation of man by the direct act of God; the incarnation and virgin birth of our Lord and Saviour, Jesus Christ; His identification as the Son of God; His vicarious atonement for the sins of mankind by the shedding of His blood on the Cross; the resurrection of His body from the tomb; His power to save men from sin; the new birth through the regeneration by the Holy Spirit; and the gift of eternal life by the grace of God.

2. Plaintiff's constitution and bylaws provide that, in the event of the dissolution of plaintiff, its residual assets are to be turned over to another organization which has been determined to be exempt from Federal income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code, for use of one or more of its exempt purposes, or to the Federal, State or local government, for use of one or more public purposes.

3. Plaintiff is not affiliated with any religious denomination, and, in addition, receives no aid from local, state, or federal government. Plaintiff accepts students from kindergarten through college and graduate school, offering approximately fifty degrees. It also offers a nondegree, noncredit program entitled The Institute of Christian Service to teach the principles of the Bible and train Christian character. Plaintiff enrolls approximately 5,000 students nearly one half of which are studying for the ministry or preparing to teach in Christian schools.

4. The plaintiff is dedicated to the teaching and propagation of its fundamentalist religious beliefs. Everything taught at plaintiff is taught according to the Bible. Although students may be exposed to theories that are contrary to Biblical scripture, plaintiff's teachers instruct them to disregard these theories and teach the Bible's literal language as being the only true account. The cornerstone of plaintiff institution is Christian religious indoctrination, not isolated academics.

In attempting to accomplish its purpose of training Christian leadership, the plaintiff follows the teachings of the Bible in every instance where literature or philosophy vary from the "word of God" as set forth in the Bible. This is done so that a student can learn to distinguish between that which is of God and that which is of an "anti-God" mind and combat the latter. At plaintiff, every class, every cultural event, and every athletic contest opens with prayer. Fifteen minutes at the close of each day is devoted to gathering together in small groups for prayer. Every teacher, no matter what are his academic credentials, is required to be a "born again" Christian, who must testify to at least one saving experience with Jesus Christ, and who must consider his mission at plaintiff to be the training of Christian character. Any instructor, who fails to believe in or carry out the essentials of plaintiff's Preamble, is dismissed.

5. Student applicants to plaintiff are screened as to their religious beliefs. Plaintiff has extensively enacted a multitude of disciplinary rules in line with its religious beliefs. These rules appear in a student handbook and address almost every facet of a student's life at plaintiff. Upon entry into the plaintiff, the new student has these rules of conduct reviewed for him at a "rules meeting" and is required to sign a statement that he will abide by these rules and regulations. A small sample of these rules provides: The institution does not permit dancing, card playing, the use of tobacco, movie-going, and other such forms of indulgences in which wordly young people often engage; no student will release information of any kind to any local newspaper, radio station, or television station without first checking with the University Public Relations Director; students are expected to refrain from singing, playing, and, as far as possible, from "tuning-in" on the radio or playing on the record player jazz, rock-and-roll, folk rock, or any other types of questionable music; and, no young man may walk a girl on campus unless both of them have a legitimate reason for going in the same direction.

6. A primary fundamentalist conviction of the plaintiff is that the Scriptures forbid interracial dating and marriage. Detailed testimony was presented at trial elucidating the Biblical foundation for these beliefs. The Court finds and the defendant has admitted that plaintiff's beliefs against interracial dating and marriage are genuine religious beliefs.

7. From January 1, 1975, to May 29, 1975, plaintiff did not accept applications from unmarried black students unless the applicant had been a staff member of the University for four years or longer; married black students were permitted to enroll. During this period, plaintiff's religious beliefs were not against the admission of blacks, but barring unmarried blacks from enrollment was, in plaintiff's judgment, the safest, easiest, and most reliable method to protect its religious conviction against interracial dating and marriage. In response to the Supreme Court's decision that discriminatory admissions policies of private educational institutions were unlawful, plaintiff amended its admissions policy on May 29, 1975, to allow the admission of unmarried blacks. Plaintiff continues to adhere to its religious belief forbidding interracial...