BOB JONES UNIVERSITY v. SIMON, SECRETARY OF THE TREASURY, ET AL.
No. 72-1470
Supreme Court of the United States
Argued January 7, 1974—Decided May 15, 1974
416 U.S. 725
J. D. Todd, Jr., argued the cause for petitioner. With him on the briefs were Wesley M. Walker and Oscar Jackson Taylor, Jr.
Assistant Attorney General Crampton argued the cause for respondents. With him on the brief were Solicitor General Bork, Stuart A. Smith, Grant W. Wiprud, and Leonard J. Henzke, Jr.
MR. JUSTICE POWELL delivered the opinion of the Court.
This case and Commissioner v. “Americans United” Inc., post, p. 752, involve the application of the Anti-
I
“Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.”
As a practical matter, an organization hoping to solicit tax-deductible contributions may not rely solely on technical compliance with the language of
Because of the importance of inclusion in the Cumulative List, revocation of a
The pressures operating on organizations facing revocation of
In the present case, the Court of Appeals for the Fourth Circuit followed the majority view. Bob Jones University v. Connally, 472 F. 2d 903, petition for rehearing denied, 476 F. 2d 259 (1973). In light of the contrary result reached by the Court of Appeals for the District of Columbia Circuit in “Americans United” Inc. v. Walters, 155 U. S. App. D. C. 284, 477 F. 2d 1169 (1973), rev‘d sub nom. Commissioner v. “Americans United” Inc., post, p. 752, we granted Bob Jones University‘s petition for certiorari. 414 U. S. 817 (1973).
II
Petitioner refers to itself as “the world‘s most unusual university.” Founded in 1927 and now located in Greenville, South Carolina, the University is devoted to the teaching and propagation of its fundamentalist religious beliefs. All classes commence and close with prayer,
In 1942, the Service issued petitioner a ruling letter under § 101 (6) of the Internal Revenue Code of 1939, the predecessor of
Petitioner brought these administrative proceedings to a halt by filing suit in the United States District Court for the District of South Carolina for preliminary and permanent injunctive relief preventing the Service from revoking or threatening to revoke petitioner‘s tax-exempt status. Petitioner alleged irreparable injury in the form of substantial federal income tax liability and the loss of
The District Court rejected a motion to dismiss for lack of jurisdiction, and it preliminarily enjoined the Service from revoking or threatening to revoke petitioner‘s tax-exempt status and from withdrawing advance assurance of the deductibility of contributions made to petitioner. Bob Jones University v. Connally, 341 F. Supp. 277 (1971). The Court of Appeals for the Fourth Circuit reversed, with one judge dissenting. 472 F. 2d 903, reh. den., 476 F. 2d 259 (1973). That court held that petitioner‘s suit was barred by the Anti-Injunction Act as interpreted by this Court in Enochs v. Williams Packing & Navigation Co., 370 U. S. 1 (1962).
III
The Anti-Injunction Act apparently has no recorded legislative history,9 but its language could scarcely be more explicit—“no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court . . . .” The Court has interpreted the principal purpose of this language to be the protection of the Government‘s need to assess and collect taxes as expeditiously as possible with a minimum of pre-enforcement judicial interference, “and to require that the legal right to the disputed sums be determined in a suit for refund.” Enochs v. Williams Packing & Navi-
In furtherance of these goals, the Court in its most recent reading gave the Act almost literal effect. In Williams Packing, an employer sought to enjoin the collection of FICA and FUTA taxes that the employer alleged were not owed and would destroy its business. The Court held unanimously that the suit was barred by the Act. Only upon proof of the presence of two factors could the literal terms of
Perhaps in recognition of the stringent nature of the Williams Packing standard and its implications for this case, petitioner makes little effort to argue that it can meet that test. Rather, it asserts that the Anti-Injunction Act, properly construed, is not applicable, that Williams Packing is not the controlling reading of the Act, and that rejection of both these contentions would work a denial of due process of law. We find these arguments unpersuasive.
First, petitioner contends that the Act is inapplicable because this is not a suit “for the purpose of restraining the assessment or collection of any tax . . . .” Under petitioner‘s theory, its suit is intended solely to compel the Service to refrain from withdrawing petitioner‘s
Petitioner‘s complaint and supporting documents filed in the District Court belie any notion that this is not a suit to enjoin the assessment or collection of federal taxes from petitioner. In support of its claim of irreparable injury, petitioner alleged in part that it would be subject to “substantial” federal income tax liability if the Service were allowed to carry out its threatened action. App. 6. Petitioner buttressed this contention with sworn affidavits alleging federal income tax liability of three-quarters of a million dollars for one year and in excess of half a million dollars for another and stressing the detrimental effect such tax liability would have on petitioner‘s capacity to operate its institution, to support its personnel, and to continue with its expansion plans. Id., at 10-11, 43-44. These allegations leave little doubt that a primary purpose of this lawsuit is to prevent the Service from assessing and collecting income taxes from petitioner.
We recognize that petitioner‘s assertions that it will owe federal income taxes should its
Petitioner further contends that the Service‘s actions do not represent an effort to protect the revenues but an attempt to regulate the admissions policies of private universities. Under this line of argument, the Anti-
The Service bases its present position with regard to the tax status of segregative private schools on its interpretation of the Code.11 There is no evidence that that position does not represent a good-faith effort to enforce the technical requirements of the tax laws, and, without indicating a view as to whether the Service‘s interpretation is correct, we cannot say that its position has no legal basis or is unrelated to the protection of the revenues. The Act is therefore applicable. Petitioner‘s attribution of non-tax-related motives to the Service ignores the fact that petitioner has not shown that the Service‘s action is without an independent basis in the requirements of the Code. Moreover, petitioner‘s argument fails to give appropriate weight to Bailey v. George, 259 U. S. 16 (1922). In that case, the Court held that the Act blocked a pre-enforcement suit to enjoin collection of the federal Child Labor Tax, although the tax was challenged as a regulatory measure beyond the taxing power of Congress. Significantly, the Court announced Bailey v. George on the same day that it issued Bailey v. Drexel Furniture Co., 259 U. S. 20
Petitioner also argues that
B
Petitioner next argues that Enochs v. Williams Packing & Navigation Co., supra, does not constitute an all-encompassing reading of the Act. Petitioner contends, on the basis of prior precedents, that
During the first half century of the Act‘s existence, the Court gave it literal force, without regard to the character of the tax, the nature of the pre-enforcement challenge to it, or the status of the plaintiff. See State Railroad Tax Cases, 92 U. S., at 613-614; Snyder v. Marks, 109 U. S. 189 (1883); Pacific Steam Whaling Co. v. United States, 187 U. S. 447 (1903); Dodge v. Osborn, 240 U. S. 118 (1916); Bailey v. George, 259 U. S. 16 (1922).16 Occasionally, however, the Court noted in
Standard Nut was such a significant deviation from precedent that it was referred to by a commentator at the time as “a tribute to the tenacity of the American taxpayer” and “little short of phenomenal.”18 Read literally, the Court‘s opinion effectively repealed the Act, since the Act was viewed as requiring nothing more than equity doctrine had demanded before the Act‘s passage. The incongruity of this position has not escaped notice.19 It undoubtedly led directly to the Court‘s re-
Williams Packing switched the focus of the extraordinary and exceptional circumstances test from a showing of the degree of harm to the plaintiff absent an injunction to the requirement that it be established that the Service‘s action is plainly without a legal basis. The Court in essence read Standard Nut not as an instance of irreparable injury but as a case where the Service had no chance of success on the merits. 370 U. S., at 7. And the Court explicitly held that the Act may not be evaded “merely because collection would cause an irreparable injury, such as the ruination of the taxpayer‘s enterprise.” Id., at 6. Yet petitioner‘s argument that we should find Williams Packing inapplicable turns, in the last analysis, on its claim that to do otherwise would subject it to great harm. The Court rejected that consideration in Williams Packing itself, and we reject it as a reason for finding that case not controlling. Under the language of the Act, the degree of harm is not a factor, and as a matter of judicial construction, it does not provide a meaningful stopping point between Standard Nut and Williams Packing. Acceptance of petitioner‘s irreparable injury argument would simply
C
Assuming, arguendo, the applicability of
This is not a case in which an aggrieved party has no access at all to judicial review. Were that true, our conclusion might well be different. If, as alleged in its complaint, petitioner will have taxable income upon the withdrawal of its
We do not say that these avenues of review are the best that can be devised. They present serious problems of delay, during which the flow of donations to an organization will be impaired and in some cases perhaps even terminated. But, as the Service notes, some delay may be an inevitable consequence of the fact that disputes between the Service and a party challenging the Service‘s actions are not susceptible of instant resolution through litigation. And although the congressional restriction to postenforcement review may place an organization claiming tax-exempt status in a precarious financial position, the problems presented do not rise to the level of constitutional infirmities, in light of the powerful governmental interests in protecting the administration of the tax system from premature judicial interference, e. g., Cheatham v. United States, 92 U. S., at 88-89;
IV
Since we hold that Williams Packing governs this case, the remaining issue is whether petitioner has met the standards of that case. Without deciding the
In holding that
The judgment is affirmed.
It is so ordered.
MR. JUSTICE DOUGLAS took no part in the decision of this case.
MR. JUSTICE BLACKMUN; concurring in the result.
I concur in the Court‘s judgment and agree with much of the reasoning in its opinion for this case. As the Court notes, ante, at 738, the University‘s obtaining an injunction would directly prevent the collection of what it says are $750,000 in income taxes for 1971 and of over $500,000 for 1972. On the basis of this fact alone, the “purpose” of the suit is indeed to restrain “the
Since the anti-injunction statute is applicable, we must consider whether the University comes within the statute‘s exception recognized in Enochs v. Williams Packing & Navigation Co., 370 U. S. 1 (1962). As to this, I join Part IV of the Court‘s opinion to the effect that it has not been shown that “under no circumstances could the Government ultimately prevail.” Id., at 7.
Notes
“Charitable contribution defined.—For purposes of this section, the term ‘charitable contribution’ means a contribution or gift to or for the use of—
“(2) A corporation, trust, or community chest, fund, or foundation—
“(A) created or organized in the United States or in any possession thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States;
“(B) organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals;
“(C) no part of the net earnings of which inures to the benefit of any private shareholder or individual; and
“(D) no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.”
The organizations set forth in
Section 3.01 of Rev. Proc. 72-39, 1972-2 Cum. Bull. 818, provides:
“Where an organization listed in [the Cumulative List] ceases to qualify as an organization contributions to which are deductible under section 170 of the Code and the Service subsequently revokes a ruling or a determination letter previously issued to it, contributions made to the organization by persons unaware of the changes in the status of the organization generally will be considered allowable if made on or before the date of publication of the Internal Revenue Bulletin announcing that contributions are no longer deductible. However, the Service is not precluded from disallowing a deduction for any contribution made after an organization ceases to qualify under section 170, where the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for, or was aware of, the activities or deficiencies on the part of the organization that gave rise to the loss of qualification.”
This is particularly so with respect to tax-exempt private foundations, because they are subject to tax liability if they contribute funds to an organization that does not qualify under
In recognition of the significance of such a change in status, the Service provides several stages of internal administrative review. If the Service indicates, pursuant to prescribed procedures, that cause for revocation exists, the affected organization is entitled to submit written protests and to have conferences at both the District Director and National Office level. § 11, Rev. Proc. 72-4, 1972-1 Cum. Bull., at 708; § 4, Rev. Proc. 72-39, 1972-2 Cum. Bull., at 818-819.
An organization may lose its
See Act of Mar. 2, 1867, § 10, 14 Stat. 475; Rev. Stat. § 3224 (1874); Int. Rev. Code of 1939, § 3653.
“Except as provided in sections 6212 (a) and (c), 6213 (a), and 7426 (a) and (b) (1), no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.” (Emphasis added.)
The italicized portion of
The congressional antipathy for premature interference with the assessment or collection of any federal tax also extends to declaratory judgments. In 1935, one year after the enactment of the Declaratory Judgment Act, 48 Stat. 955, now
Ҥ 2201. Creation of Remedy.
“In a case of actual controversy within its jurisdiction, except with respect to Federal taxes, any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.” (Emphasis added.)
Ҥ 2202. Further relief.
“Further necessary or proper relief based on a declaratory judgment or decree may be granted, after reasonable notice and hearing, against any adverse party whose rights have been determined by such judgment.”
Some have noted that the federal tax exception to the Declaratory Judgment Act may be more sweeping than the Anti-Injunction Act. E. g., E. Borchard, Declaratory Judgments 855 (2d ed. 1941); Bittker & Kaufman, supra, n. 6, at 58. See S. Rep. No. 1240, 74th Cong., 1st Sess., 11 (1935). The Service takes that position in this case, arguing that any suit for an injunction is also an action for a declaratory judgment and thus is barred by the literal terms of the Declaratory Judgment Act, without regard to the independent force of
Several courts have reached the same result under the federal tax exception to the Declaratory Judgment Act, set forth in n. 7, supra. E. g., Liberty Amendment Committee of the U. S. A. v. United States, Civil Action No. 70-721 (CD Cal. June 19, 1970) (unpublished), aff‘d per curiam, No. 26507 (CA9 July 7, 1972) (unpublished), cert. denied, 409 U. S. 1076 (1972); Mitchell v. Riddell, 402 F. 2d 842 (CA9 1968), appeal dismissed and cert. denied, 394 U. S. 456 (1969); Jolles Foundation, Inc. v. Moysey, 250 F. 2d 166 (CA2 1957); Kyron Foundation v. Dunlap, 110 F. Supp. 428 (DC 1952).
See Note, Enjoining the Assessment and Collection of Federal Taxes Despite Statutory Prohibition, 49 Harv. L. Rev. 109 n. 9 (1935); Gorovitz, Federal Tax Injunctions and the Standard Nut Cases, 10 Taxes 446 n. 6 (1932).
See n. 6, supra. Petitioner argues that the revenues will be unaffected by the loss of its
The argument is too speculative to be persuasive. It presumes that all donors who take
See Rev. Rul. 71-447, 1971-2 Cum. Bull. 230. The question of whether a segregative private school qualifies under
In support of its argument that this case does not involve a “tax” within the meaning of
The currently prevailing ruling-letter program of the Service commenced in 1940, see Caplin, Taxpayer Rulings Policy of the Internal Revenue Service: A Statement of Principles, NYU 20th Inst. on Fed: Tax 1, 2, 4-5 (1962), although its formal announcement did not take place until 1953. Rev. Rul. 10, 1953-1 Cum. Bull. 488.
The most recent re-enactment, in the
In addition to repeatedly re-enacting the Anti-Injunction Act, Congress reaffirmed the Act‘s purpose by adding the federal tax exception to the Declaratory Judgment Act. See n. 7, supra.
The Anti-Injunction Act was written against the background of general equitable principles disfavoring the issuance of federal injunctions against taxes, absent clear proof that available remedies at law were inadequate. E. g., Dows v. City of Chicago, 11 Wall. 108, 109-110 (1871); Shelton v. Platt, 139 U. S. 591 (1891); Pittsburgh & C. R. Co. v. Board of Pub. Works, 172 U. S. 32 (1898). See California v. Latimer, 305 U. S. 255, 261-262 (1938) (Brandeis, J., for a unanimous Court):
“[The delay inherent in pursuing remedies at law], it is urged, is a special circumstance which justifies resort to a suit for an injunction in order that the question of liability may be promptly deter-mined. If the delay incident to such proceedings justified refusal to pay a tax, the federal rule that a suit in equity will not lie to restrain collection on the sole ground that the tax is illegal, could have little application. For possible delay of that character is the common incident of practically every contest over the validity of a federal tax.” (Footnote omitted.)
Since equitable principles militating against the issuance of federal injunctions in tax cases existed independently of the Anti-Injunction Act, it is most unlikely that Congress would have chosen the stringent language of the Act if its purpose was mere‘y to restate existing law and not to compel litigants to make use solely of the avenues of review opened by Congress. For this reason, it is not surprising that the early cases interpreting the Act read it at face value.
As noted earlier, the Court has also abandoned the view that bright-line distinctions exist between regulatory and revenue-raising taxes. See n. 12, supra.
Gorovitz, Federal Tax Injunctions and the Standard Nut Cases, 10 Taxes 446 (1932). Mr. Justice Stone, joined in dissent by Mr. Justice Brandeis, underlined the tension between Standard Nut and prior precedent: “Enacted in 1867, [the Anti-Injunction Act], for more than sixty years, has been consistently applied as precluding. relief, whatever the equities alleged.” 284 U. S., at 511.
E. g., Lenoir, Congressional Control Over Suits to Restrain the Assessment or Collection of Federal Taxes, 3 Ariz. L. Rev. 177, 195 (1961).
“In effect [Standard Nut] says that if special circumstances exist which bring the case within some acknowledged head of equity jurisdiction, [the Anti-Injunction Act] does not apply, and the Court may issue an injunction. But in the absence of such circumstances the Court will lack equity jurisdiction because there will be no basis for such jurisdiction. To say that [the Act] applies only in such cases seems a little absurd. It is tantamount to saying that [the Act] forbids the courts to issue injunctions only when they would not have the authority to issue them anyway! It denies any force whatever to [the Act] except as declaratory of an equitable rule previously followed by the courts.”
See Dodge v. Osborn, 240 U. S. 118, 122 (1916):
“There is a contention that the provisions requiring an appeal to the Commissioner of Internal Revenue after payment of the taxes and giving a right to sue in case of his refusal to refund are wanting in due process and therefore there is jurisdiction [to issue injunctive relief prior to the assessment or collection of any tax]. But we think it suffices to state that contention to demonstrate its entire want of merit.”
Because of the availability of FICA and FUTA refund actions, we need not address the adequacy of another possible means of seeking postenforcement judicial review—the “friendly donor” refund suit. Under this approach, there must be a donor willing to file a refund action claiming a
Petitioner did not bring this case as a refund action. Accordingly, we have no occasion to decide whether the Service is correct in asserting that a district court may not issue an injunction in such a suit, but is restricted in any tax case to the issuance of money judgments against the United States. Brief for Respondents 37 n. 35. We note, however, that the Service‘s position with regard to the range of relief available in a refund suit raises several considerations not presented by a pre-enforcement suit for an injunction. For example, it may be possible to conclude that a suit for a refund is not “for the purpose of restraining the assessment or collection of any tax . . . ,” and thus that neither the literal terms nor the principal purpose of
The Service indicates that “its normal practice is to issue a favorable ruling upon the application of an organization which has prevailed in a court suit.” Brief for Respondents 35 n. 31. When the Service adheres to that position following a refund suit decided in favor of the plaintiff, there is of course little likelihood that injunctive relief would be necessary or appropriate. But our decision today that
See Thrower, IRS Is Considering Far Reaching Changes in Ruling on Exempt Organizations, 34 J. Taxation 168 (1971):
“There is no practical possibility of quick judicial appeal at the present. If we deny tax exemption or the benefit to the organization of its donors having the assurance of deductibility of contributions, the organization must either create net taxable income or other tax liability for itself as a litigable issue, or find a donor who as a guinea pig is willing to make a contribution, have it disallowed, and litigate the disallowance. Assuming the readiness of the organization or donor to litigate, the issue under the best of circumstances could hardly come before a court until at least a year after the tax year in which the issue arises. Ordinarily, it would take much longer for the case of the organization‘s status to be tried. . . . While all of this time is passing, the organization is dormant for lack of contributions and those otherwise interested in its program lose their interest and move on to other organizations blessed with the Internal Revenue Service imprimatur; and the right to judicial review is not pursued.
. . .
“This is an extremely unfortunate situation for several reasons. First, it offends my sense of justice for undue delay to be imposed on one who needs a prompt decision. Second, in practical effect it gives a greater finality to IRS decisions than we would want or Congress intended. Third, it inhibits the growth of a body of case law interpretative of the exempt organization provisions that could guide the IRS in its further deliberations.”