U.C. Davis Law Review, Vol. 33, No. 2 (Winter 2000), pp. 389-447


The Treasury Department is empowered to enforce “established public policy” with respect to tax-exempt charities. Under this public policy power, the Treasury has revoked the tax-exempt charitable status of organizations that discriminated against blacks, organizations whose members engaged in civil disobedience against war, and organizations involved in illegal activity. The Treasury interprets its public policy power as applying to any activity that violates clear public policy. Thus, presumably, the Treasury could use this power to deny tax-exempt charitable status to an organization that engages in conduct that violates assisted suicide laws, anti-abortion laws, or other sufficiently “established” public policies.

The point at which a public policy is sufficiently established for purposes of applying the Treasury's public policy power is unclear. For example, could the Treasury revoke an organization's tax exempt charitable status on the ground that the organization engages in race-based affirmative action? Presently, neither Congress nor the United States Supreme Court has decided conclusively whether race-based affirmative action violates public policy. Even the present Democratic administration has expressed some misgivings about race-based affirmative action.

But what if the Treasury were to read recent anti-affirmative action decisions and legislation, and determine that race-based affirmative action violates “established public policy”? Assuming the Treasury interprets recent trends against affirmative action as showing that organizations engaging in race-based affirmative action violate a clear policy on race, the Treasury could place a serious burden on affirmative action programs of private entities by revoking the entities' tax-exempt charitable status. Using race-based affirmative action as the example, this Article highlights some of the problems and dangers with the Treasury's public policy power.