Bob Jones University v. Simon – Oral Argument – January 07, 1974

Media for Bob Jones University v. Simon

Audio Transcription for Opinion Announcement – May 15, 1974 in Bob Jones University v. Simon

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Warren E. Burger:

Mr. Todd, I think you may proceed whenever you’re ready.

J. D. Todd, Jr.:

Mr. Chief Justice and may it please the Court.

We are here of course on certiorari to the Fourth Court of Appeals.

We represent Bob Jones University which is a unique university.

It has a slogan, “The world’s most unusual university.”

I think it can safely be said that that is true.

It is a university which has deep religious backgrounds, deep religious roots.

Its — every class is opened and closed with prayer.

The university admission’s policy requires an examination into the religious beliefs of those who apply and who are admitted.

One of the religious beliefs of the university is that the scriptures prohibit the intermarriage of the races and that it would be scripturally wrong for members of different races to marry.

Based upon that religious belief which has been its belief since the commencement of the university in 1927, I believe, it has refused admissions to blacks.

It has admitted a few Orientals under a rule that says those who are admitted cannot date members of other races while at the university.

The university feels that at the college level is when most romantic attachments are formed between parties and when their life’s partners are frequently chosen.

For that reason, it has adhered to the policy that no blacks are admitted to the university.

Now, certainly since 1942, the university has been an exempt organization under the provisions of 501 (c) (3).

It has met all the requirements of 501 (c) (3) as set forth by Congress.

Those requirements are briefly that the organization be one who’s chief activity is religious, educational, or charitable that its operations in Europe to the private profit of no one and that it not engage in any substantial lobbying activities.

There’s never been any question but at Bob Jones University, it met all of those requirements.

In the letter from the collector in 1943 or 42, it was stated that it was entitled to a tax exempt status and that such tax exempt status would continue unless there was some change in the operations of the university.

There has been no change in the —

Potter Stewart:

What was the situation between 1927, the date of its founding and 1942, was it the —

J. D. Todd, Jr.:

Yes, sir.

Potter Stewart:

— the date of the letter?

J. D. Todd, Jr.:

We are sure they had tax exempt status from the founding but we have not been able to trace that out.

We have the first and only thing that we find in the record of the university is the 1942 letter from the district collector of Internal Revenue at that time.

It operated in the same manner from its inception until 1942.

And 1942 was no different in the other year.

We just don’t have any proof that they were recognized as exempt by the Internal Revenue service prior to 1942.

Potter Stewart:

When did this practice of issuing letters such as these begin in the department that they’re not authorize or re — recognized by any statutes that I know of?

J. D. Todd, Jr.:

They — the exact time when it begun, I do not know.

J. D. Todd, Jr.:

They — of course 501 (c) (3) was — has a history of about 60 years or so.

Potter Stewart:

Yes.

J. D. Todd, Jr.:

And — but when the advance letters or assurance of deductibility was instituted, I cannot say it has been a practice for many, many years certainly since 1942. And when an organization receives such a letter, it is entitled to be listed in the cumulative index of such organization.

Potter Stewart:

Now even before it receives such a letter, that’s just as you’ve suggested it.

It probably, you say it’s been operating exactly the same way or certainly was exact — operating exactly the same way with the same policies from 1927 up through 1942 and beyond so presumably without a letter it was entitled to exactly the same tax treatment prior to 1942, wasn’t it?

J. D. Todd, Jr.:

I think that’s true and I think it did receive such treatment.

Potter Stewart:

That is and the — and that its benefactors also had their gifts deductible from their ordinary income for tax purposes prior to 1942.

J. D. Todd, Jr.:

I think that’s true, yes sir.

Warren E. Burger:

I take it you would agree that the practice of issuing the letter is beneficial to the recipients of these contributions.

J. D. Todd, Jr.:

No question about it.

It’s a great benefit and it’s a privilege, I understand that.

It’s a thing that an organization —

Warren E. Burger:

What it clears is the importance; I suppose is that it clears the air and removes any doubt from the part of donors.

J. D. Todd, Jr.:

That’s exactly (Voice Overlap)

Warren E. Burger:

I hope the donor will ask his lawyer, are they — will this be deductible and it’s a very simple matter for the lawyer to find out now, isn’t it?

J. D. Todd, Jr.:

That’s very true and while the individual donors don’t perhaps check it too much, certainly foundations do because if they make one contribution to an unauthorized or non-exempt organization, there deductibility would be withdrawn or probably would be withdrawn so it’s a vital importance to the foundations and such organizations as that.

Our record shows correspondence between us and the nationwide foundation, the insurance company in Ohio where they had been making matching grants and where they — in view of the questionable status of the university refused to make anymore matching grants.

Thurgood Marshall:

It’s not your letter, it’s the listing of the letter in this list, am I right?

J. D. Todd, Jr.:

That’s correct sir.

Thurgood Marshall:

And you can get on the list without the letter?

J. D. Todd, Jr.:

Oh, yes.

Well, I think that’s right.

I don’t think you can get on the list without the letter.

Thurgood Marshall:

But its —

J. D. Todd, Jr.:

Yes, sir.

Thurgood Marshall:

And its — if you’re on the list and that is of some benefit?

J. D. Todd, Jr.:

Yes, sir.

It’s of estimable benefit to an organization which is a non-profit organization which can exist only through donations of those who are impelled to give to that organization.

There is, of course, no requirement that anyone give an exempt organization.

It’s a matter of personal preference and choice for each person that happens to give.

Potter Stewart:

This whole practice however is extracurricular, extra-statutory, is it not?

J. D. Todd, Jr.:

I think that’s correct, yes sir.

Potter Stewart:

And is a — as far as the law goes, a donation is deductible from a donors of taxable income if the donee meets certain statutory requirements period, that drives us of any letters or any list.

J. D. Todd, Jr.:

That’s correct, sir.

That would be true.

Potter Stewart:

Now, what if there’d been no letter in this case, would you be entitled to go into a court and ask for an injunction, if you have a letter issued to you?

J. D. Todd, Jr.:

If there had been no letter.

If there had been no cumulative index or listing, I think no, I think not.

Potter Stewart:

Why not?

You’d be on the same position you are now because you wouldn’t be on the list.

J. D. Todd, Jr.:

Well —

Potter Stewart:

You say, being on the list is the essential qualification for you to maintain a viable existence as Bob Jones University.

J. D. Todd, Jr.:

That’s correct.

Being on the list is a vital importance because donors will presumably — well, actually we know, they won’t yield it if they are not.

Potter Stewart:

Alright.

So its and I’m assuming you had no letter and therefore we’re not on the list and you are operating just as you have operated since 1927 and right up through 1942, would you be entitled in your view to go into a Federal Court and ask for injunction, mandatory injunction requiring a Commissioner to issue you a letter, that you are tax exempt and if not, why not?

J. D. Todd, Jr.:

Well —

Potter Stewart:

Because if not you’d be in the same shape you are now, you wouldn’t be on the list.

J. D. Todd, Jr.:

If we ask for a mandatory injunction, the defense of sovereign immunity might apply which it doesn’t in this case because we ask for no affirmative relief against any Office of the United States.

We ask merely for an injunction.

That’s the only difference that concurs to me.

That is a defense that the Government pleaded in this case and advanced in the district level but now concedes as inapplicable to this particular case and not from the sovereign immunity.

William J. Brennan, Jr.:

Mr. Todd, as a matter of curiosity, does Bob Jones University still have its exempt status, has its ruling ever been withdrawn?

J. D. Todd, Jr.:

No, sir.

It has not been withdrawn.

Potter Stewart:

Despite the lower courts order?

J. D. Todd, Jr.:

That’s right, sir.

The District Court of course issued the injunction.

The Court of Appeals reversed but the advance assurance of deductibility has not been withdrawn.

Potter Stewart:

Not because it’s a stay outstanding or just hasn’t?

J. D. Todd, Jr.:

No sir.

There was no stay outstanding.

We applied for a stay and the Court did not see fit to grant it.

Potter Stewart:

But the service simply hasn’t withdrawn your exemption, is that it?

J. D. Todd, Jr.:

I think that’s right.

It was revoked —

Byron R. White:

Now, do you think your status is in jeopardy in the interim so that donors are not assured of their deductions?

J. D. Todd, Jr.:

Well, our deductions, our contributions, it fallen off some, I would not say that they have dried up but as long as we have that assurance of the advance assurance as they have not dried up and we have not suffered the irreparable harm that we would have suffered had not the District Court originally granted the injunction.

William H. Rehnquist:

Does the advance assurance a regulation by the Commissioner?

J. D. Todd, Jr.:

It’s a practice by the Commissioner.

There is no statutory justification point as I understand it.

Potter Stewart:

So you’re certainly in this good position as you would be if there had been no — never had been in that letter, aren’t you?

The fact is, you’re in a better position cause as of now you’re still on the so-called list.

J. D. Todd, Jr.:

We are on the so-called list, yes sir.

I don’t think we would’ve been on the so-called list had we not had the letter to start with.

Potter Stewart:

No, apparently not.

But if you hadn’t had the letter, you’d be in the just as bad position — worst position than you are now from the point of view of attracting the beneficence of supporters and benefactors (Voice Overlap).

Except that a — except that the Internal Revenue service by revoking your — purporting to revoke your clearance has in advanced announce that it doesn’t think that your organization qualifies.

J. D. Todd, Jr.:

That’s correct sir, it is.

Potter Stewart:

And the — so that the — any people who were thinking about giving money to you know they’re going to have a fight on their hands.

J. D. Todd, Jr.:

That — that’s correct and while as I say, as I’ve said a few minutes ago, the individual donors, of small individual donors, I don’t think that would make a lot of difference.

It does make a lot of difference to foundations.

I think that’s where the real damage came as a result of the announcement of the IRS that it would be withdrawn.

It’s sort of like one litigant having litigated with the IRS and lost.

One donor has litigated his tax return to the IRS as loss.

Other litigants, other possible donors are going to be put off a little.

J. D. Todd, Jr.:

I think that’s correct, yes sir.

I think other possible donors would approach it with caution and I think the donors that have given an interim or people who were firmly motivated to give and who are not altogether swayed by the deductibility of their contributions.

But as I say, donations and contributions have been much less free as it were before.

Now —

Potter Stewart:

You’ve mentioned the foundations a couple of times, do I understand and I think I have understood that if a gift is made a foundation to a — an institution that is not — that does not qualify, then the tax status of the foundation itself might come into question or be altered, is that it?

J. D. Todd, Jr.:

It would — we would come into to play.

Potter Stewart:

Unlike individual donors.

J. D. Todd, Jr.:

That’s correct sir.

That’s correct.

That’s a vital importance of the foundation not give any gift to anyone whose —

Potter Stewart:

Doesn’t qualify to the —

J. D. Todd, Jr.:

— eligibility on the —

Potter Stewart:

Right.

J. D. Todd, Jr.:

— 501 (c) (3) is in debt.

At any rate, this announcement from the IRS to the effect that the IRS could no longer grant advance assurance of deductibility to schools who practice a racially, discriminatory policy no matter why they had that policy resulted in this lawsuit.

There was no act of Congress that aided that provision to 501 (c) (3) as one of the conditions for an exempt organization.

Congress had very specifically set forth what was necessary to be an exempt organization and that didn’t happen to be one of the requirements that was set forth.

At any rate, and it’s our contention and the lower court held that the Commissioner exceeded the statutory authority given him that he has authority to promulgate regulations but not to change law and that that’s a matter for Congress to decide and we of course contend that that’s absolutely correct.

Now, it’s our — we must concede that Bob Jones University has a remedy at law.

Bob Jones University, if its exempt status is destroyed, will be in a position where it will have to pay not only unemployment taxes but income taxes as well.

And we —

Income taxes on what?

J. D. Todd, Jr.:

On the income from operating the university sir.

I see.

The tuitions, you mean on that?

J. D. Todd, Jr.:

Tuition and —

They’ll make a profit —

Yes.

J. D. Todd, Jr.:

Yes.

Well, I think it is one of the universities I have said —

That’s pretty hard to do, isn’t it?

J. D. Todd, Jr.:

Yes sir.

But this university as I said as the world’s most unusual university and it has made a profit which has been applied back into plant and other —

You mean after — after actually after depreciation?

J. D. Todd, Jr.:

No, not bothered about depreciation.

No, I didn’t think they had.

J. D. Todd, Jr.:

They haven’t been bothered by depreciation.

Well, haven’t you made the — some reference somewhere along here that your income taxes would be very substantial?

J. D. Todd, Jr.:

Yes, sir.

And do you know that in view of what you’ve just said about not using depreciation and the like?

J. D. Todd, Jr.:

We have been exempt so why bother with depreciation?

Their have bookkeeping procedures have not — the auditors have not bothered with depreciation at all because depreciation —

I know, but you say your income taxes “would be substantial.”

J. D. Todd, Jr.:

Yes, sir.

If you had to go about filing an income tax return, you certainly are going to start taking account of depreciation.

J. D. Todd, Jr.:

No question about that and perhaps they would not be as substantial as we think but we would still have to pay them and that —

Of what does your income consist beside tuition, certainly not your donations, your contributions are not income?

J. D. Todd, Jr.:

Tuition, room and board.

The operation of the student center and those things where they sell drinks and soft drinks, I might add –[Laughter]

— to the students and faculty.

And athletic program?

J. D. Todd, Jr.:

Not an inter — interscholastic.

They do have intramural athletics.

They have a (Voice Overlap) —

But nothing that earns money in the stadium or anything?

J. D. Todd, Jr.:

No, no, no sir.

Well, I suppose you have a — you’d be very unusual if you didn’t have investments on which you had income?

J. D. Todd, Jr.:

Well —

Any private institution that I know of learning and I am familiar with has, they never have enough but they have —

J. D. Todd, Jr.:

That’s correct.

They do have investments which they have realize income from.

Potter Stewart:

Certainly.

J. D. Todd, Jr.:

At any rate —

Warren E. Burger:

But is obviously as an institution, as a corporate entity organized not for profit, isn’t it — is that not so?

J. D. Todd, Jr.:

I don’t think there’s any question about that?

Its — the record so says and I don’t think there’s ever been any question but what it is, an organization operated not to anyone’s individual profit.

It inures to the profit of no individual.

The university is — believes it caused it some detriment.

It could not contentiously sign the certificate of compliance under the Civil Rights Act of 1964 and therefore it voluntarily has foregone all grants of any kind or nature.

It received no grants of any kind or nature from the Federal Government, any branch of the Federal Government or any branch of the State Government.

It absolutely goes it on its own with its own operation and its own donors.

It has no gifts or grants of any kind —

(Inaudible)

J. D. Todd, Jr.:

The —

What is the size of the student party?

J. D. Todd, Jr.:

3,500 and a faculty of about 650.

And all undergraduate?

No graduate school?

J. D. Todd, Jr.:

No graduate, all undergraduate.

Thurgood Marshall:

Mr. Todd, assuming they didn’t have the procedure of the letter and the listing?

And IRS issued a public statement that from now on we will not allow deduction for contributions to Bob Jones University.

What could you do?

J. D. Todd, Jr.:

We — that substantially is what this case is Your Honor except, we have the letter and we have this —

Thurgood Marshall:

Would you ask for an injunction?

J. D. Todd, Jr.:

Yes, sir.

Thurgood Marshall:

Against what?

J. D. Todd, Jr.:

Against the withdrawal of the exempt status of Bob Jones University.

Thurgood Marshall:

The withdrawal of the tax exemption, tax deduction rather to the contributor, you wouldn’t think that grant of file of the injunction statute?

J. D. Todd, Jr.:

No, sir.

I wouldn’t think so.

Thurgood Marshall:

Why not?

J. D. Todd, Jr.:

Because —

Thurgood Marshall:

It is Bob’s collection of the taxes.

J. D. Todd, Jr.:

It — as the District Court said in this case, it involved taxes only very remotely.

Thurgood Marshall:

I am not talking about this case.

I am talking about my hypothetical case.

J. D. Todd, Jr.:

No, sir.

Thurgood Marshall:

Wouldn’t that be barred by the injunction statute?

J. D. Todd, Jr.:

Under the literal times of the injunction statute, any case involving —

Thurgood Marshall:

Are you to agree that would be clearly a tax case?

J. D. Todd, Jr.:

I agree that it would be barred by the anti-injunction statute with no court rule such as —

Thurgood Marshall:

Now, you can get about the next question which is what’s the different in that list?

J. D. Todd, Jr.:

The difference in that and this is that the university —

Thurgood Marshall:

In 27, it didn’t have any letter and didn’t have any listing?

J. D. Todd, Jr.:

Yes.

Thurgood Marshall:

In 42, it had a letter and had a listing and now has no letter and no listing?

And that’s different from my hypothetical in what fashion?

J. D. Todd, Jr.:

For one thing, prospective donors without the letter, without the listing would not be inclined to donate.

I think that is the big difference.

Thurgood Marshall:

I’m talking about as to the anti-injunction statute.

J. D. Todd, Jr.:

As to the anti-injunction statute, I don’t suppose there is too much difference in the two situations except that without the letter and without the advance assurance of deductibility, we would’ve been paying taxes and our donors would’ve not have been — would not have been entitled to deductions from their income.

At any rate, if we read the terms of the anti-injunction statute literally, there is no exception, there is no exception.

This Court has recognized that there are exceptions.

It created exceptions.

In the Hill case, Hill against Wallace, it created exceptions.

In Miller against Standard Nut Margarine and it created an exception and Enochs against Williams Packing.

Now the Government suggested if the rule in Enochs against Williams Packing is to be changed that it should be by the legislature rather than by the Court, I respectfully invite the Court’s attention to the fact that rule of Enochs against Williams Packing is not a legislative rule, it’s a Court originated rule.

It’s a rule that the legislature had nothing to do with but the Court in (Inaudible) power to do justice between the Government and the citizens evolve the rule in Enochs against Williams.

Warren E. Burger:

That’s really then, it seem to me not the letters or the list that you’re concerned about but the letter and the list represent, that is, the letter and the list are merely declarative, one is a private communication and the other is a public communication stating what is the legal ruling of IRS, is that —

J. D. Todd, Jr.:

That in effect is correct but we abide —

Warren E. Burger:

And it’s the rules, it’s the rules that you’re — the ruling that you’re concerned about, isn’t it?

J. D. Todd, Jr.:

That — that’s right.

That’s right, sir.

The ruling is what we are vitally concerned about plus the publication of that ruling.

J. D. Todd, Jr.:

If the ruling is made in a vacuum, if it is not publicized, if the donors don’t know about the ruling and we can’t get it to him in any effective way, then of course, we are concerned about it.

We are concern —

Warren E. Burger:

You said earlier that the ruling — the publication and the letter are beneficial.

They’re beneficial I suppose, you mean or meant to say, they’re beneficial if they have the right contents.

J. D. Todd, Jr.:

Well, well, that’s right.

And the ruling issue does have the right contents and we are listed in the cumulative index of the — list of exempt organizations.

We are listed there and it is a benefit to the university.

The position of the university really is that the rule in Enochs against Williams Packing has no real application to exempt organizations as was pointed out in one of the previous arguments.

The — any injunction statute was passed in 1867 long before we had any question about exempt organizations, charitable deductions, or income tax for that matter.

And —

William H. Rehnquist:

And there’s been no hesitation in applying the anti-injunction statute to income taxes, even though income taxes were —

J. D. Todd, Jr.:

No.

No question about that Your Honor.

It does apply to income taxes and it does apply to exempt organizations as the IRS attempts to enforce it but we think that as far as exempt organizations are concerned who — source of revenue can be dried up by a mere withdrawing of that advance assurance of deductibility who can face one as a — the amici brief in the Americans United case pointed out and it’s a matter that Mr. Thrall who was Commissioner at the time, made a speech in Dallas, have said, “We understand and realize that our mere refusal to rule on an application can doom an organization that under those circumstances, under those circumstances, a different rule than the one applied in Williams Packing should be adopted.”

Obviously, Williams Packing goes a long ways to protect the Internal Revenue Service and the receipt of the Government revenues and obviously —

Potter Stewart:

So, the statute going up, is it not?

J. D. Todd, Jr.:

No, that’s right.

The statute went that far.

It went farther but I think —

Potter Stewart:

Yes.

And — but even went farther, didn’t it?

J. D. Todd, Jr.:

That’s right.

It certainly did.

Potter Stewart:

So what — you’re asking us to repeal the statute, is that it?

J. D. Todd, Jr.:

No, sir.

I’m asking the Court to exercise and hear the jurisdiction of the Court.

To fall — fashion a remedy that would be fair and applicable to the Internal Revenue Service and to the charitable or exempt organizations.

Potter Stewart:

Your fundamental aim is to keep your letter enforced so that the Internal Revenue Service according to its usual practice would be forbidden or at least would refrain from collecting taxes from your donors.

J. D. Todd, Jr.:

That’s correct sir.

And the —

Potter Stewart:

And so the heart of the case is whether the Internal Revenue Service should or shouldn’t be permitted to collect taxes from your donors based on their gifts.

J. D. Todd, Jr.:

That — that’s correct Your Honor.

And I don’t think that involves a question of assessment or collection of a tax against Bob Jones University as is apparent from the record in this case.

Bob Jones University can pay every tax that the Government intends to assess and collect against it by purely and simply abandon its religious convictions and changing its admissions policy.

The record is clear from the deposition of Mr. Connick (ph), the Assistant Collector of Internal Revenue in charge of exempt organizations to the effect that, if Bob Jones University changes its admissions policy, we would not revoke its advance assurance of deductibility.

So, really we are not talking, in my opinion, we’re not talking about taxes.

We are talking about as Mr. Crampton remarked in the previous case, some people try to use the Internal Revenue Service as a club against those that they don’t like or with whom they have differences.

We’re attempting to keep the Internal Revenue Service from using the club of withdrawing our advance assurance of deductibility to adopt an admissions policy which is not dictated by any act of Congress on admission policy which is contrary to the firm and publicly stated and long-held religious beliefs of the university.

That’s —

Warren E. Burger:

Mr. Todd, you’re down to four minutes now, so if you want to save some rebuttal time —

J. D. Todd, Jr.:

Well, alright.

Warren E. Burger:

— you need to do that.

Mr. Crampton.

Scott P. Crampton:

Mr. Chief Justice, may it please the Court.

Byron R. White:

Is there any real — any real difference in the issues on these two cases, Mr. Crampton?

Scott P. Crampton:

No, I think that the fundamental procedure issue is the same and I think that the — this case perhaps even — more strongly emphasizes the need for the application of the injunction —

Byron R. White:

This involves (c) (4), 501 (c) (3)?

Scott P. Crampton:

No, (c) (4) is not in this case.

Its —

Byron R. White:

Or in the other one either?

Scott P. Crampton:

Oh, yes.

The other one was exempt under 501 (c) (4) in Americans United.

So this one is — we — is not exempt under 501 (c) (4).

Byron R. White:

I see.

Scott P. Crampton:

And the questions whether to exempt under 501 (c) (3) —

Byron R. White:

Well, both have grants so their — the exemption on those — these organizations isn’t exempt under either your claim is.

Scott P. Crampton:

That’s our position, that’s the position the Commissioner probably would take, I say it, there were certain administrative seps — steps that were still to be explored but the injunction stopped all that.

Byron R. White:

Yes.

Scott P. Crampton:

But a —

Potter Stewart:

But was this institution, the Commissioner would probably hold was itself taxable —

Scott P. Crampton:

That’s right.

Potter Stewart:

— on its own, that income, unlike the previous case?

Scott P. Crampton:

Right.

And that’s the point I’d like to make here.

I was somewhat shocked as I think Mr. Justice White indicated this tax apparent not only was making money.

The accountant who would handle its records for some 25 years has filed here in an affidavit saying that this corporation would owe $750,000.00 in tax for one year and $500,000.00 in tax for another year simply income tax.

And the purpose of this act is to stop the Commissioner of Internal Revenue from attempting to assess that and I say this comes in squarely under the taxpayers is trying to stop the assessment of tax and the Williams Packing case — the exceptions in the Williams Packing case do not apply here.

And it seems to me that the — there’s no question but what — there is a chance here of the Commissioner prevailing so that possibility is a — would not exude.

Thurgood Marshall:

Mr. Crampton?

Scott P. Crampton:

Yes.

Thurgood Marshall:

When did this letter business start, do you know?

Scott P. Crampton:

[Laughter] I’m not sure either.

Thurgood Marshall:

(Voice Overlap)

Scott P. Crampton:

(Voice Overlap) We’re looking at it on the — you first asked this question, there —

Thurgood Marshall:

Did you find that?

Scott P. Crampton:

No, I didn’t find it but I did find that there is a — we have cited in the briefs and a historical review of this ruling process, its in one of the New York University Institute, tax institutes and an article that was prepared by former Commissioner of Internal Revenue, Mortimer Caplin.

Thurgood Marshall:

Right.

Scott P. Crampton:

And I don’t have that with me, but I think that will answer that.

My recollection is that it must go back into the 20’s anyway but —

Byron R. White:

Do you still have the one year waiting period for a new non-profit corporation?

Scott P. Crampton:

I thought — I believe that was changed by a statute awhile back.

You can come in and make a preliminary showing of what you plan to do and then as I recall, you commend with a sort of a follow-up situation, say, we did do it but —

Byron R. White:

This is true but you still don’t go on the list for a year as I recall.

At least that was the case at one time when I was trying to (Voice Overlap).

Scott P. Crampton:

That used to be the case.

I’m not sure whether that’s true anymore.

I don’t — I didn’t think it had.

I wanted to answer a question that was asked before about whether or not this injunction had been revoked.

It has not.

The District Court entered the injunction and when it went to the Court of Appeals, there was an application for a stay after the Court of Appeals handed down its opinion.

Scott P. Crampton:

That was denied and then when it went — the matter got back to the District Court, a petition for certiorari had been filed, it was the position of the District Court that it no longer had jurisdiction and therefore as it stands now, if the Commissioner of Internal Revenue attempted to do anything, he would run the risk of being in contempt of court.

Byron R. White:

That’s why it hasn’t in fact been withdrawn, is that it?

Scott P. Crampton:

That’s right.

Yes, it hasn’t been and so this folks have been having an advantage for three years that this has been pending of being able to remain on the list and get the benefit of the tax exempt dollars from their donors.

Potter Stewart:

Excuse me, I didn’t mean to interrupt.

Scott P. Crampton:

I’m through.

Potter Stewart:

You say, as the Commissioner attempt to do anything, he would be — run the risk of being in contempt of court, you know that’s a little bit broad.

Scott P. Crampton:

Well, I mean anything in the contrary to the injunction order.

Potter Stewart:

Well, what is the injunction?

Or is it in the appendix?

I mean in other words, could you attempt to disallow a deduction for a taxpayer who may had made a gift in some previous years to Bob Jones University without being in contempt?

Scott P. Crampton:

Oh, not for our previous year because they’d been on the list and under that list, any donor could look to that list and that’s his license so to speak to make a contribution.

That’s the practice, isn’t it?

Potter Stewart:

It’s the practice but its not —

Scott P. Crampton:

Well, I think the Internal Revenue Services sort of held out; you think that’s estoppel?

I would think so.

I think it would be a very poor tax administration (Voice Overlap).

Well, that isn’t what I asked you, whether it’s legally permissible as what Mr. Justice — do you think it’s legally — would it be legally permissible for them to go back and attempt to litigate a deduction for a prior year that a donor had taken?

Scott P. Crampton:

After they had in effect held out to the donor that if he relied on that —

This was with respect to an organization on the list.

Scott P. Crampton:

I think estoppel would play there.

There’d be a reliance on an act to a detriment of the — now, whether a estoppel goes against the Government, you’d get into a difference — perhaps a little different set of rules but —

There are cases that say it does not, are they not?

Scott P. Crampton:

Yes there are.

And that’s why I kind of —

And certainly the service has been known to change its mind?

Scott P. Crampton:

Yes.

But I don’t think you have found the service changing its mind with respect to rulings when they have been made and under such circumstances, the taxpayers were entitled to rely on them.

That is, the service has issued rulings, will say to taxpayer A and then when taxpayer B comes in, they said, “No, we’ve changed our mind.”

But they still will not go back and assess the deficiency against taxpayer A who may have acted in reliance on that ruling under, maybe a corporate reorganization or something of that nature.

Let’s make it specific — suppose a taxpayer asserts a deduction that he made to Bob Jones University in 1973, and in ’73 returned yet to be filed.

This took place since the Court of Appeals’ ruling.

I take it down the service fields, it cannot challenge that deduction because it’s — the university is still on the list.

Scott P. Crampton:

That would be my position and I have taken —

I’m just looking at the injunction, where is it?

Scott P. Crampton:

At page 1 — 8128.

Potter Stewart:

Right.

You are hereby enjoined (Inaudible) from revoking or threatening to revoke the tax exempt status of the plaintiff and further enjoined (Inaudible) withdrawing advance assurance deductibility of contributions solely because the admissions policy of the plaintiff pending a final hearing, determination of this cause and theirs.

And you have the feeling, at least are operating under the impression that that injunction still extend against the service, is that it?

Scott P. Crampton:

Yes.

And why is that — it was reversed in the Court of Appeals?

Scott P. Crampton:

Yes and they came to this Court for a stay and I believe Mr. Justice Burger denied the stay and went back to the — Mr. Chief Justice Burger, went down and say, went back to the lower court and by that time it was in the Supreme Court in a petition for certiorari and the District Court said, we know, I feel I no longer have jurisdiction so he refused to revoke the order which he had entered.

There isn’t any in terms of outstanding, is there really?

Scott P. Crampton:

Well, that’s —

In the reversal?

Scott P. Crampton:

What?

I thought that was the Court of Appeals’ reversal, how is it an injunction?

Scott P. Crampton:

Well,–

And state reversal?

Scott P. Crampton:

This is the position the District Court took.

But the —

William H. Rehnquist:

And they never come down from the Fourth Circuit?

Scott P. Crampton:

Yes.

I believe it did.

But —

I would think the District Court’s perhaps read it, it’s out of its —

Scott P. Crampton:

Out of its jurisdiction.

— its out of here jurisdiction but that’s within the jurisdiction of another court that they reversed it.

Scott P. Crampton:

Well, anyway, it’s a practical matter, we have — the Commissioner hasn’t done anything and —

Whether or not you can, you have it?

Scott P. Crampton:

We have it.

Warren E. Burger:

This is a — if nothing else, as you — at least a matter deference to the importance of the problem or that’s pending in the courts.

Scott P. Crampton:

That’s right and that’s why we are here hoping that this Court will give us some guidance that we can use and I say we’ve had a multitude of these cases coming along.

We feel the proper role of this injunction procedure is a very important one in the administration of the tax laws and the — we think that the remedy here is legislation and it is not allowance of injunctions because I think we’re — as I have indicated earlier that will only lead to chaos.

I think I have covered the point.

I hope the Court put a little time and yield it now. [Laughter]

Warren E. Burger:

You have about three minutes more Mr. Todd.

J. D. Todd, Jr.:

I don’t believe there’s any question but what the IRS can apply the laws of deductibility retroactively, they don’t have to do it but I believe they have the authority to do it.

I believe the Court have so held in many cases.

And the IRS has done it on occasions.

This —

Warren E. Burger:

Certainly.

J. D. Todd, Jr.:

— field that even if Williams Packing is the law, even if it applies to exempt organizations that we come within Williams Packing.

The District Court and the Court of Appeals both held that we had irreparable entry.

That we would lo — loose deductions which we could never recover and —

But you can’t — quite apart from any statute, you — there can’t even be an injunction unless there is an irreparable injury.

I mean, if that were the only —

J. D. Todd, Jr.:

That — that’s right.

— test, well, there wouldn’t be — need to be any statute because that’s a well-known and well settled equitable doctrine.

J. D. Todd, Jr.:

No — no question about that.

But in addition we feel that we meet the other test.

We do not believe that the Government can prevail ultimately in this case.

And our feeling for that is because the action of the IRS in effect is an attempt to place a tax upon the exercise of a religious belief.

It’s an exaction upon religious belief which we feel runs absolutely contrary to Sherbet against Verner, which runs contrary to Murdock against Pennsylvania, which runs con —

Or maybe granting a — maybe doing this as an establishment.

J. D. Todd, Jr.:

Well, sir, I don’t believe we are an establishment and I don’t believe that the tax exempt status put a —

But it’s a substantial benefit the Government’s conferring on, isn’t it?

J. D. Todd, Jr.:

Well, sir, I believe it — this Court said it was a action of benevolent neutrality and the —

It was a —

J. D. Todd, Jr.:

To say that’s it’s not a substantial —

It’s a property tax.

J. D. Todd, Jr.:

Sir?

That was property tax.

That’s was an exemption.

J. D. Todd, Jr.:

Yes, sir but the opinion also discusses income tax and says its in the same category and I’ll admit that the amount involved will be considerably different as well as income tax and property tax is concerned but its still a question of the benevolent neutrality in Wallace case, we think and its an attempt to tax the exercise of the religious belief which we feel is violate – is in violation of the First Amendment of the Constitution and the Government cannot ultimately prevail on the merits.

If we prevail on the merits and our deductibility has been withdrawn two to three years, we have lost all the donations that we would’ve gotten during that period of time.

There are serious matters as long we are concern.

Who is the — and this is pure curiosity, who was the — who is or was the Bob Jones after whom this university was named?

J. D. Todd, Jr.:

Well, the original Bob Jones was the founder of the university.

He died at the age of some 85, three or four years ago.

His son, Bob Jones, Jr. was the president of the university until his father’s death and at his father’s death, his son, Bob Jones, III is the president of the university.

That’s it.

It’s named after the founder in other words.

J. D. Todd, Jr.:

Named after the founder. Yes, sir.

Warren E. Burger:

How long has been in the (Voice Overlap).[Laughter]

How long has it been existence now altogether?

J. D. Todd, Jr.:

Since about 1927 or (Voice Overlap).

Warren E. Burger:

1927, that’s what I thought.

Thank you Mr. Todd.

Thank Mr. Crampton.

The case is submitted.