The Sexual Integrity of Religious Schools and Tax Exemption

Abstract

Many private universities and other schools adhere to religiously grounded codes of conduct that embrace heterosexual monogamy as the sole moral context for sexual relationships. The federal income tax exemption of these schools has been questioned following the recent Supreme Court opinion of Obergefell v. Hodges. In Obergefell, the Supreme Court held that the right to marry is a fundamental constitutional right that same-sex couples may exercise. The relevance of this decision to the federal tax status of private religious schools arises from another Supreme Court decision, Bob Jones University v. United States. The Court in Bob Jones held that two schools with racially discriminatory policies as to students were not entitled to exemption from federal income tax because the policies violate established public policy. The issue now is whether the sexual conduct policies of private religious schools violate the established public policy of the United States following Obergefell. After reviewing Bob Jones and surveying the application of the public policy doctrine by the IRS and the courts, this article argues that, regardless of the factual context of a controversy in which the IRS seeks to invoke Bob Jones to deny or revoke federal income tax exemption, the public policy doctrine should be narrowly construed. Applying a suggested framework for limiting the public policy doctrine coherently, this Article argues that schools maintaining sexual conduct policies that prohibit sexual activity inconsistent with their religiously informed, traditional view of marriage remain tax-exempt after Obergefell. Apart from the proposed framework, this Article further explains why Obergefell’s analytical approach, language and tone are inconsistent with applying Bob Jones to the disadvantage of religious schools that maintain sexual conduct policies.