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Officially, the IRS revoked the university's tax exempt status on January 19, 1976. The university paid $21 in unemployment taxes for one employee for tax year 1975 and then filed for a refund in the United States District Court for the District of South Carolina.
Bob Jones University appealed the decision to the Supreme Court. In Goldsboro, the Federal District Court in North Carolina ruled in favor of the Service on a claim for refund of FICA and FUTA taxes based on a finding that Goldsboro was not described in IRC 501(c)(3) as it maintained a racially discriminatory admissions policy.
Jul 6, 2021 · The majority opinion, written by Warren E. Burger, reinforced the IRS’s decision to revoke Bob Jones University’s tax-exempt status because it violates public policy and, thus, cannot be eligible for tax exemption.
Jul 18, 2024 · The university was asked to pay a portion of federal unemployment taxes for a year, and then filed a refund action in federal District Court; the IRS filed a countersuit claiming millions of dollars in unpaid taxes. 26 Id. at 574.
After paying a portion of the federal unemployment taxes for a certain taxable year, the University filed a refund action in Federal District Court, and the Government counterclaimed for unpaid taxes for that and other taxable years.
The Court found that the IRS was correct in its decision to revoke the tax-exempt status of Bob Jones University and the Goldsboro Christian School. These institutions did not meet the requirement by providing "beneficial and stabilizing influences in community life" to be supported by taxpayers with a special tax status.
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The Fourth Circuit held that because Bob Jones University could not be considered charitable, contributions to it were not deductible under IRC provisions, and the IRS acted legally and appropriately in revoking the tax exemption.
