Paul L. Caron
Dean




Thursday, May 21, 2015

Brunson: Will Supreme Court's Same-Sex Marriage Decision Cost BYU Its Tax Exemption?

BYU (2015)By Common Consent:  Obergefell and BYU’s Tax Exemption, by Samuel Brunson (Loyola-Chicago):

On April 28, the Supreme Court heard arguments in Obergefell v. Hodges, which challenged both the constitutionality of state bans on same-sex marriage and of states’ nonrecognition of same-sex marriages performed in other states.

By the end of June, the Justices will have decided and we’ll know the constitutional status of same-sex marriage bans in the United States. But that doesn’t mean all questions will be resolved; in fact, an exchange between Chief Justice Roberts, Justice Alito, and Solicitor General Verrilli piqued the interest of a lot of people, especially those invested in religious educational institutions. 

During the course of oral arguments, Chief Justice Roberts said to General Verrilli:

We have a concession from your friend that clergy will not be required to perform same-sex marriage, but there are going to be harder questions. Would a religious school that has married housing be required to afford such housing to same-sex couples?

A little later, Justice Alito followed up with this:

Well, in the Bob Jones case, the Court held that a college was not entitled to tax-exempt status if it opposed interracial marriage or interracial dating. So would the same apply to a university or a college if it opposed same-sex marriage?

General Verrilli responded,

You know, I—I don’t think I can answer that question without knowing more specifics, but it’s certainly going to be an issue. I—I don’t deny that. I don’t deny that, Justice Alito. It is—it is going to be an issue.

So is General Verrilli right? At least some corners of the media seem to think he is, that a ruling in favor of same-sex marriage will mark the end of religious schools’ tax exemption, if not of religious schools as we know them.

Is that right?

I mean, it’s not inconceivable, though it’s virtually impossible in the short term, unlikely in the middle term, and maybe unlikely, period. To understand why, though, we need to briefly look at the Supreme Court’s decision in Bob Jones, and the context of that decision.

The super-short version: Bob Jones University is a fundamentalist Christian university. It was also racist: prior to 1971, it didn’t admit African-American students. Between 1971 and 1975 (at least), it admitted African-Americans who were single or who were married to other African-Americans, but the school’s sponsors believed that the Bible forbade interracial dating; as a result, it didn’t admit students in interracial relationships, and it expelled students who entered into such relationships or who advocated interracial marriage.

The IRS revoked the school’s tax exemption, and the Supreme Court upheld the revocation, notwithstanding the school’s sincere religious beliefs. The reason? It’s a little technical, but, boiled down, it’s this: qualifying as tax-exempt[fn3] derives from the common law of charities. Under the common law, an entity that violated the law or a fundamental public policy didn’t qualify as charitable. And racial discrimination by schools violated a fundamental public policy. Therefore, racist schools did not qualify as tax-exempt.

So that’s what Justice Alito invoked, and what the Solicitor General believed would be an issue.

And he may be right. But it’s worth digging into the context of the Bob Jones decision—and its subsequence use—a little bit before we come to that conclusion. ...

Would that same logic carry over to schools that discriminate against students in same-sex relationships? There’s no compelling reason it couldn’t. But there are enough differences that I suspect it’s not as likely as some seem to believe.

I mean, there’s a real—and a long—history in the United States of discrimination against the LGBT community. And even if it isn’t now, I suspect that, in the near future, discrimination against gays and lesbians will violate a fundamental public policy.

But discrimination against the LGBT community didn’t play out in the form of separate schools, and people haven’t used discriminatory schools to somehow recreate a segregated educational experience. That is, schools aren’t a historic locus of discrimination here in the same way they were against African-Americans.

Moreover, until now, revocation for the violation of a fundamental public policy has been almost entirely limited to racial discrimination.[fn4]

And there’s more: the IRS’s Exempt Organizations group is on its heels after the Tea Party-gate brouhaha from a couple years ago. I suspect it’s in no mood to pick a fight, and I suspect it won’t be in the mood expand the scope of its public policy requirements in the near future.

Of course, I could be wrong, and if I am, BYU’s current policy on homosexuality looks pretty untenable, at least in light of Bob Jones. From BYU’s Honor Code:

Homosexual behavior is inappropriate and violates the Honor Code. Homosexual behavior includes not only sexual relations between members of the same sex, but all forms of physical intimacy that give expression to homosexual feelings.

So how worried should BYU (and other conservative religious schools) be? My gut feeling: not very. At least, not yet. While the Solicitor General is theoretically right, the historical roots of Bob Jones don’t line up squarely with conservative religious schools’ policies on same-sex marriage.

Still, it will be interesting to see this play out over the next couple decades.

(Hat Tip: Francine Lipman.)

https://taxprof.typepad.com/taxprof_blog/2015/05/brunson-will-supreme-courts-same-sex-marriage-decision.html

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Comments

Perhaps AMT, but these institutions are nonetheless organized as non-profits without shareholders or private inurement. Accordingly, I think what you really mean is that they should be deprived of 501(c)(3) status and the ability to receive contributions on a deductible basis. Of course this would be a serious deprivation with far-reaching consequences, but by no means does that mean you are wrong. I can argue it either way which is why I’m not inclined to quarrel with you. Nonetheless, I’m troubled by the hypothetical posed by Justices Roberts and Alito. Catholics, for instance, have a well-developed theology pertaining to the meaning and purpose of marriage, having to do with its interdependence with sex and children. This theology has nothing to do with gays as such, let alone any animus toward gay men or women, but necessarily operates to not only limit its understanding of marriage to “one man and one woman” but also to prevent the offering of housing to unmarried co-habitating couples. Depriving a Catholic institution of an otherwise broadly available benefit solely because if its theological teachings would seem to present disturbing free exercise clause implications.

Posted by: Mike Petrik | May 21, 2015 7:57:59 AM

Allowing any organizations which charge money for services to be tax exempt was a mistake. Congress should fix that mistake.

Posted by: AMTbuff | May 21, 2015 6:59:47 AM