CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 81-3 Argued: October 12, 1982 --- Decided: May 24, 1983 [*]

CHIEF JUSTICE BURGER delivered the opinion of the Court.

We granted certiorari to decide whether petitioners, nonprofit private schools that prescribe and enforce racially discriminatory admissions standards on the basis of religious doctrine, qualify as tax-exempt organizations under § 501(c)(3) of the Internal Revenue Code of 1954.

I

A

Until 1970, the Internal Revenue Service granted tax-exempt status to private schools, without regard to their racial admissions policies, under § 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3), [n1] and granted charitable [p578] deductions for contributions to such schools under § 170 of the Code, 26 U.S.C. § 170. [n2]

On January 12, 1970, a three-judge District Court for the District of Columbia issued a preliminary injunction prohibiting the IRS from according tax-exempt status to private schools in Mississippi that discriminated as to admissions on the basis of race. Green v. Kennedy, 309 F.Supp. 1127, appeal dismd sub nom. Cannon v. Green, 398 U.S. 956 (1970). Thereafter, in July, 1970, the IRS concluded that it could no longer legally justify allowing tax-exempt status [under § 501(c)(3)] to private schools which practice racial discrimination. IRS News Release, July 7, 1970, reprinted in App. in No. 81-3, p. A235. At the same time, the IRS announced that it could not treat gifts to such schools as charitable deductions for income tax purposes [under § 170]. Ibid. By letter dated November 30, 1970, the IRS formally notified private schools, including those involved in this litigation, of this change in policy, applicable to all private schools in the United States at all levels of education. See id. at A232.

On June 30, 1971, the three-judge District Court issued its opinion on the merits of the Mississippi challenge. Green v. Connally, 330 F.Supp. 1150, summarily affd sub nom. Coit v. Green, 404 U.S. 997 (1971).