The most notable exchange during the argument last month in the same-sex marriage case before the Supreme Court, Obergefell v. Hodges, likely occurred between Justice Samuel Alito and Solicitor General Donald Verrilli.
“Well, in the Bob Jones case,” began Alito, “the Court held that a college was not entitled to tax-exempt status if it opposed interracial marriage or interracial dating.” In fact, as Alito and Verrilli of course know, what the Court held in Bob Jones was that the Internal Revenue Service acted within its authority in revoking the school’s tax-exempt status. Alito continued: “So would the same apply to a university or a college if it opposed same-sex marriage?” That is, would the IRS be acting within its authority if it decided it could revoke the tax-exempt status of a school opposed to same-sex marriage?
Verrilli’s response was, “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.”
What to make of that answer, which Verrilli has yet to clarify, and probably never will?
While unlikely in the extreme, what if, for Verrilli, the reason “it is going to be an issue” lies in doubts inside the administration about the validity of the Bob Jones ruling? What if Verrilli believes the case was wrongly decided and that Justice William Rehnquist, writing in solitary dissent, had the better argument—that in fact the IRS exceeded its authority in the matter?
Some background: Until 1970 the IRS granted tax-exempt status to private schools, including Bob Jones University, regardless of whether they had racial admissions policies. A year later, as a result of litigation in which the agency was prohibited from extending tax-exempt status to private schools in Mississippi, the IRS changed its position in a “revenue ruling”: Henceforth, the agency would not approve tax-exempt status for any school without a policy against racial discrimination.
Enter Bob Jones University, which prohibited interracial dating and marriage; the school denied that those practices, which it said were based on its religious beliefs, were discriminatory. When the IRS advised the university of its intention to enforce the new ruling, and thus challenge the school’s tax-exempt status, Bob Jones initiated its lawsuit, which dragged on for a dozen years before ending in 1983 with an opinion for the Court written by Chief Justice Warren Burger.
The Court approved the agency’s construction of the tax code: that an entity granted a tax exemption must be a charitable institution, and that under the common law of charitable trusts an entity that acted contrary to public policy was not charitable. The Court also affirmed the agency’s judgment that eradicating racial discrimination in education was a “fundamental public policy.” Furthering that policy, said the Court, “substantially outweighs whatever burden denial of tax benefits places on [the university’s] exercise of [its] religious beliefs.” That Congress refused to intervene, the Court said, was proof that it approved of the agency’s construction of the statute. “We therefore hold that the IRS did not exceed its authority when it announced its [new] interpretation” of the tax code.
Rehnquist agreed that there was such a fundamental policy against racial discrimination, and that it could indeed be enforced against “educational institutions that promote racial discrimination”—but only if Congress said so. And that was the problem: “Unlike the Court, I am convinced that Congress simply has failed to take this action.” The IRS took the action, with an interpretation of the tax code that gives it “a broad power which until now Congress has kept for itself.”
Again, it is hard to imagine that administration lawyers actually question Bob Jones. After all, they work for a president notorious for his frequent resort to unilateral executive action, spurning Congress time and again. Yet the speculation is a useful exercise, for if you agree with Rehnquist in Bob Jones, then the right venue for deciding whether “a university or a college . . . opposed to same-sex marriage” (to use Alito’s words) could be denied tax exemption is Congress, not the IRS. Not incidentally, the tax code says nothing about same-sex marriage.