•  
  •  
 
Florida Tax Review

Abstract

The judicial assault on constitutionally permissible social justice efforts including affirmative action for minorities and ending discrimination against homosexuals continues. Through the rubric of “neutrality,” “equality” and “free expression,” courts today are using constitutional law principles to arrest efforts by state and federal governments either to (1) remedy present effects of historical discrimination or (2) end current discrimination. Accordingly, various federal circuit courts have interpreted Equal Protection Clause strict scrutiny as prohibiting government from considering race as a factor when making university admissions decisions or granting scholarships. Thus, it is not inconceivable that the Supreme Court might soon rule that a state school’s consideration of race, in order to obtain a more diverse student body, violates Equal Protection Clause strict scrutiny—either because racial diversity is not “compelling” or because considering race is not “necessary.” Additionally, the Supreme Court invalidated, under the guise of free expression, state law attempts to lessen discrimination against homosexuals.

Though appealing on its face, this race-neutral and free expression trend in constitutional decision-making actually hinders efforts by government to achieve social justice through elimination of both current discrimination and lingering effects of past discrimination. For example, race-neutrality under the Equal Protection Clause’s strict scrutiny test does not generally permit government to make proper distinctions between different types of racial preferences like invidious discrimination against racial minorities and benign affirmative action for such minorities. Tax-exempt charities, because they generally are not government actors, are not ordinarily subject to the requirements of constitutional law principles like Equal Protection Clause strict scrutiny. Thus, even if the Supreme Court ultimately rules that the Constitution prohibits state schools from considering race in their admissions decisions, private schools that have 501(c)(3) tax-exemption would not necessarily be prohibited from considering race in their admissions decisions. However, these private schools, like all other charities, are subject to the public policy limitation which prohibits violations of “established public policy.” This Article examines the question of how the Service should rely on constitutional law principles when it applies the public policy limitation to particular tax-exempt charities such as private schools.

This Article expands the discussion of whether tax-exempt charities, for constitutional law purposes, should be treated as government actors, as private actors or as something in between. While government actors are subject to constitutional law restrictions concerning discrimination and free speech, private non-government actors are not generally subject to these same restrictions. Although tax-exempt charities are often thought of as sovereigns and, thus, government-like, the fact remains that charities are private entities created to serve public purposes. As private entities, charities—like all other private entities—are not necessarily bound by constitutional law principles. Still, the many “public” aspects of charities seem to dictate allegiance to some higher principle than merely being permitted to do what every other private entity may do. Hence, the Supreme Court ruled that charities may not violate a principle called “established public policy.” But what does this mean? Surely it does not mean that charities, because of the public policy limitation, are somehow transformed into government actors limited by constitutional law principles. Nor does it mean that charities are completely “free” of societal responsibility in the same sense that other private entities are “free.” Thus, charities exist in an undefined space somewhere between government and private in which constitutional law principles do not directly apply, but something constitutional-like (i.e., the public policy limitation) surely does apply. The question is: how is it applied?

Download

Share

COinS