Tax Expenditures, Social Justice and Civil Rights: Expanding the Scope of Civil Rights Laws to Apply to Tax-Exempt Charities

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In recent years, courts have decided a number of cases in which private organizations discriminated against people based solely on their race, gender, sexual orientation, or other immutable traits. For example, in 2000, the Boy Scouts of America revoked a New Jersey man's membership in the Boy Scouts because he was gay. New Jersey's supreme court held that the Boy Scouts' action violated New Jersey's anti-discrimination law. Notwithstanding the state court's holding, the United States Supreme Court concluded that the First Amendment prevented any court from forcing the Boy Scouts to keep a gay man as a member of its private group.

A great number of discriminating private organizations, like the Boy Scouts, are tax-exempt charities that receive significant government and public financial support as a result of their eligibility for various tax benefits. What if the Boy Scouts, like many private white supremacist groups, decided that black people are not entitled to membership? What about handicapped people? The elderly? Women? The issue is, should we permit our tax system to fund groups that engage in invidious discrimination based on race, gender, disability, age, or sexual orientation? Many would agree that private groups (whether tax-supported or not) should have the freedom to decide on the membership of their organizations by use of certain preferences, such as those allowed under lawful affirmative action plans. However, most would also undoubtedly agree that we should not allow tax monies to fund private groups that discriminate in such harmful ways against minority groups. Unfortunately, as currently interpreted, federal laws that define eligibility for the type of tax benefits received by charities like the Boy Scouts do not clearly, explicitly, and effectively prohibit harmful discriminatory behavior by these groups. Indeed, despite calls for an end to tax benefits for the Boys Scouts in the wake of the recent Supreme Court ruling, the Boy Scouts still receive tax benefits and still exclude gays from membership.

To combat harmful discrimination by private tax-supported groups, society should, at a minimum, maximize use of all currently existing legal tools. One such tool used by the federal government against private groups (whether tax-supported or not) is the conditioning, under civil rights laws, of the receipt of federal financial assistance (FFA) on the recipient's agreement not to discriminate. However, these civil rights laws have not been interpreted broadly enough to apply to private, tax-supported organizations based solely on their receipt of tax benefits. Instead, one must show that the organization, in addition to its tax support, receives other types of federal financial support (such as government grants or loans) that may constitute FFA.

The scope of coverage of these statutory civil rights laws could be significantly increased by adopting an express policy that prohibits particular tax-supported groups, like tax-exempt charities, from engaging in wrongful discrimination. If Congress were ever to consider the matter again, it could adopt such a policy by enacting appropriate federal legislation. But even without new legislation, there is sound basis to interpret existing federal tax and civil rights laws as supporting the proposition that charities, solely by virtue of their preferred tax status, receive FFA and are thus prohibited from engaging in invidious discrimination. This article explains why such an interpretation is appropriate as public policy, consistent with the underlying purposes of existing civil rights legislation, and sound tax policy.

Original languageAmerican English
Pages (from-to)167-228
JournalBYU Law Review
Issue number1
StatePublished - Jan 1 2001


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