The Public Policy Doctrine and 501(c)(3) Organizations (CRS Report for Congress)
| Release Date |
Oct. 21, 2024 |
| Report Number |
IF12788 |
| Report Type |
In Focus |
| Authors |
Milan N. Ball |
| Source Agency |
Congressional Research Service |
Summary:
The Supreme Court first applied the public policy doctrine
to organizations exempt under Internal Revenue Code
(IRC) Section 501(c)(3) in a pair of cases, Bob Jones
University v. United States and Goldsboro Christian
Schools, Inc. v. United States, 461 U.S. 574 (1983)
(collectively Bob Jones). In Bob Jones, the Court
established that entitlement to 501(c)(3) status “depend[ed]
on meeting certain common-law standards of charity,”
which meant that a 501(c)(3) organization “must serve a
public purpose and not be contrary to established public
policy.” Then, the Court held that two schools with racially
discriminatory admissions policies did not qualify for
501(c)(3) status. Lower courts and the Internal Revenue
Service (IRS) had begun relying on common law concepts
of charity to deny tax-exempt status to organizations
discriminating based on race several years before the
Court’s decision. Despite Bob Jones’s noteworthiness, the
public policy doctrine has had limited application outside
racial discrimination in education. Courts only occasionally
reference the public policy doctrine as potential grounds for
revocation or denial of 501(c)(3) status, and the IRS rarely
asserts it as a basis to revoke or deny tax exemption.
This In Focus provides background on the public policy
doctrine and discusses its application.
