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Taxes and Civil Rights; “Constitutionalizing” the Internal Revenue Code (with Kaufman), 82 Yale Law Journal 51 (1972)


In McGlotten v. Connally, a three-judge federal court held that the
Secretary of the Treasury could not grant federal income tax exemptions
to fraternal orders that exclude nonwhites from membership or
allow gifts supporting the charitable functions of such organizations
to be deducted by the donors as charitable contributions in computing
taxable income. In the court's view, these tax benefits constitute federal
"subsidies" that, if granted to a fraternal order with a racially
restrictive membership policy, would violate the Due Process Clause
of the Fifth Amendment as well as the statutory prohibition on discrimination
in "any program or activity receiving Federal financial
assistance" imposed by Section 601 of the Civil Rights Act of 1964.
The court also held that "a clearly indicated Congressional policy"
against racial discrimination by "the beneficiaries of federal largesse"
required that the Internal Revenue Code be construed to disallow a
deduction for contributions to fraternal orders excluding nonwhites
from membership. Although the plaintiff also attacked the income
tax exemption of segregated nonprofit social clubs, the court held
their exemption to be more limited than the tax benefits enjoyed by
fraternal orders, and therefore not burdened with the same prohibition
on racial discrimination.

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