Tax-exempt organizations routinely engage in the hatred of Jews and Israel, as defined by the International Holocaust Remembrance Alliance’s working definition of antisemitism. Such organizations embrace BDS-informed hiring, procurement, investment, admissions, financial aid, alumni, grantmaking, partnering, pedagogy and administrative policies; they hold Jews collectively responsible for the actions of Israel; and they employ a double standard in assessing journalistic bias and reporting on Jews and Israel.
Although such practices are reprehensible, the antisemitism embraced by these organizations does not jeopardize their tax-exempt status. The reason is that, unlike racial discrimination, the IRS has not determined that antisemitism is contrary to public policy.
In Revenue Ruling 71-447, released 17 years after Brown v. Board of Education in response to a decision by the D.C. District Court, the IRS determined that educational organizations that racially discriminate are not charities as defined by tax and common law because racial discrimination in education is contrary to public policy.
The IRS then revoked the tax-exempt status of Bob Jones University, a Christian institution that discriminated in admissions and prohibited interracial dating. In Bob Jones University v. United States, the Supreme Court upheld the revocation, finding that a tax-exempt organization’s purpose (and activities) must not be “at odds with the common community conscience,” since tax-exempt status confers a public benefit.
The Supreme Court noted the long-standing alignment between all three branches of the federal government in determining that racial discrimination is contrary to fundamental public policy. In so doing, the Supreme Court looked to 1) judicial actions—an “unbroken line of cases” following the Brown v. Board decision; 2) legislative actions—e.g., the Civil Rights Act of 1964, the Voting Rights Act of 1965 and the Civil Rights Act of 1968; and 3) executive actions—multiple executive orders and deployment of the National Guard to enforce desegregation.
How might the IRS determine that, like racial discrimination, antisemitism is contrary to fundamental public policy?
First, by formalizing the adoption of the IHRA definition. This should not be difficult. There was no statutory definition of racial discrimination when the IRS determined it was contrary to public policy. The IHRA definition, by contrast, has been adopted by both the Biden and Trump administrations with respect to multiple departments, including Agriculture, Labor, Health and Human Services, Housing and Urban Development, Homeland Security, Interior, Transportation, Justice, State, Education and Treasury. Given that the IRS is a Treasury Department agency, it is both simple and natural for the IRS to formalize its adherence to the definition.
Second, by establishing that antisemitism is “at odds with the common community conscience.” Under Supreme Court rulings, antisemitism would be contrary to fundamental public policy only if prohibited by all three branches of the federal government. Fortunately, numerous federal statutes prohibit antisemitism as a subset of religious discrimination in housing, education, employment, public accommodation, land use, credit transactions, banking, defense-related agreements, government contracting, healthcare provision, transportation and communication services.
The Global Antisemitism Review Act of 2004, passed under President George W. Bush, recognized that antisemitism is an international problem that impacts American foreign policy. Under President Joe Biden, Congress elevated the Special Envoy to Monitor and Combat Antisemitism position to that of ambassador. The federal courts have addressed civil rights and hate crimes involving antisemitism for decades. Executive Orders issued by Obama, Biden, and President Donald Trump interpreted Title VI of the Civil Rights Act of 1964 as prohibiting antisemitism. The departments of Justice, State and Education under the Trump administration have utilized significant and unprecedented investigative, litigation and immigration policy tools to combat antisemitism.
Given this legislative, judicial and executive record, the IRS must conclude that, like racial discrimination, antisemitism is contrary to fundamental public policy.
As a federal agency, the IRS is subject to the Religious Freedom Restoration Act of 1993, a statute that expands the First Amendment’s Free Exercise Clause by providing that any “government action” (e.g., interpretation and application of tax law) substantially burdening a person’s exercise of religion must further a compelling government interest by the least restrictive means.
Thus, the granting of tax-exempt status to an antisemitic organization that substantially burdens Jews’ exercise of their religion (e.g., the wearing of religious symbols without fear of assault; the freedom to congregate and worship; the freedom to celebrate an essential element of Jewish faith, the Return to Zion) would only be possible if the government had a compelling interest in providing tax exemption to antisemitic organizations. One cannot imagine the IRS making such an argument.
The IRS must conclude that, like racial discrimination, antisemitism is contrary to fundamental public policy.
Since the issue at hand involves an interpretation of existing tax law, no legislation would be required for the IRS to determine that antisemitism, like racial discrimination, is contrary to fundamental public policy. The IRS could amend Revenue Ruling 71-447, issue a new revenue ruling or release guidance through its Office of Chief Counsel. As with racial discrimination, this determination would presumably only impact tax-exempt educational nonprofits, such as colleges and universities; most think tanks and private foundations; news outlets like NPR and PBS; nonprofit print and digital publishers; and nonprofit newspapers.
What would be the impact on nonprofits if the IRS determines that antisemitism is contrary to public policy?
Since 1945, the Supreme Court has held that nonprofits must engage exclusively in activities that further their tax-exempt purposes. A non-exempt purpose that accounts for more than approximately five percent of an organization’s time or expenses is substantial enough to jeopardize tax-exempt status. If the IRS determines that antisemitism is contrary to fundamental public policy, educational organizations will jeopardize their tax-exempt status if they expend more than approximately 5% of their time or expenses on antisemitic endeavors.
It should be noted that revoking tax-exempt status is a lengthy process because tax-exempt organizations have both administrative and judicial remedies. Nonetheless, a single IRS audit of a college, university or nonprofit news outlet engaged in antisemitism would send shock waves through the nonprofit community, since pre-revocation audits (termed “examinations”) of corporate records could include student, personnel, donor, program, partnering and investment data not otherwise accessible to regulators.
Since examinations are time-consuming and costly, the IRS could require that organizations certify (via annual Form 990 information return filings, which are signed under penalty of perjury) that they are not engaged in antisemitism. Imagine a college or university responding to that Form 990 question through an organization-wide analysis of curricula and pedagogy; admissions, student services and financial aid; governance policies and decisions; tenure decisions, peer collaborations and faculty hiring; partnering policies and agreements; publications and other messaging; and investments, procurement, grantmaking and fundraising.
The requirement to undertake such an annual review would fundamentally alter how these organizations operate.
For 55 years, the IRS has held that racial discrimination is contrary to public policy. It is high time, especially given the explosion of hate after Oct. 7, 2023, for the IRS to determine whether antisemitism is contrary to public policy. There is no mechanism for taxpayers to petition the IRS on this issue, however. Pressure must come from Congress, the nonprofit community and the federal courts. They should demand answers to two questions:
Does the IRS apply the IHRA working definition, with examples, of antisemitism to tax policy?
Is antisemitism a tax-exempt educational purpose pursuant to Treasury Regulation § 501(c)(3)-1(d)(3)(i) or is antisemitism, like racial discrimination, contrary to public policy?
