Constitutional Law - Charitable Tax Exemptions - Granting of Tax Benefits to Discriminatory Fraternal Orders is a Violation of the Equal Protection Aspect of the Fifth Amendment

Volume 18 | Issue 1 Article 9 1972 Constitutional Law - Charitable Tax Exemptions Granting of Tax Benefits to Discriminatory Fraternal Orders is a Violation of the Equal Protection Aspect of the Fifth Amendment Marc Howard Jaffe Follow this and additional works at: http://digitalcommons.law.villanova.edu/vlr Part of the Civil Rights and Discrimination Commons, Constitutional Law Commons, Education Law Commons, and the Tax Law Commons Recommended Citation Marc H. Jaffe, Constitutional Law - Charitable Tax Exemptions - Granting of Tax Benefits to Discriminatory Fraternal Orders is a Violation of the Equal Protection Aspect of the Fifth Amendment, 18 Vill. L. Rev. 93 (1972). Available at: http://digitalcommons.law.villanova.edu/vlr/vol18/iss1/9 This Note is brought to you for free and open access by Villanova University Charles Widger School of Law Digital Repository. It has been accepted for inclusion in Villanova Law Review by an authorized editor of Villanova University Charles Widger School of Law Digital Repository. For more information, please contact . Jaffe: Constitutional Law - Charitable Tax Exemptions - Granting of Tax NOVEMBER 1972] RECENT DEVELOPMENTS damages so that they might serve as private attorneys general.10 4 However, since the concept of a suit by a state as parens patriae to redress antitrust violations is no longer viable, the courts should now concern themselves with the question of workable alternatives which would be in the best interests of those consumers faced with compensable - albeit small injuries due to violations of the antitrust laws.' 0 James M. Papada, III CONSTITUTIONAL LAW - CHARITABLE TAX EXEMPTIONS - GRANTING OF TAX BENEFITS TO DISCRIMINATORY FRATERNAL ORDERS Is A VIOLATION OF THE EQUAL PROTECTION ASPECT OF THE FIFTH AMENDMENT. McGlotten v. Connally (D.D.C. 1972) Plaintiff, a black American allegedly denied membership in a fraternal order' solely because of his race, brought a class action in federal district court seeking to enjoin 2 the Secretary of the Treasury from granting tax benefits to fraternal and nonprofit organizations which discriminate in their membership on the basis of race.3 Plaintiff contended that the 104. See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 130-31 (1969). 105. It would seem that only two approaches remain. First, a class action might be brought pursuant to FED. R. Civ. P. 23. However, in the instant case the class action count was dismissed as "unmanageable" by the district court. See note 8 supra. Second, an individual consumer might sue in his own right, but this approach also is fraught with difficulties - cost of initiation of the suit, attorney fees, and discovery costs. When weighed against the comparatively small amount of damage which one consumer or even a group of consumers usually sustains in such an action, the cost of the suit becomes prohibitive for him. See Comment, supra note 30, at 570-71. 1. The fraternal order in question was the Benevolent and Protective Order of Elks. McGlotten v. Connally, 338 F. Supp. 448, 450 (D.D.C. 1972). 2. Plaintiff sought the following relief: (1) to enjoin the Internal Revenue Service from any further approval of applications by segregated nonprofit clubs and fraternal orders for tax exempt status under INT. REV. CODE of 1954, §§ 501 (c) (7) & (8) ; (2) to require the revocation of tax exemptions previously issued such groups; and (3) to require the promulgation of regulations prohibiting the granting of tax exempt status to any segregated nonprofit club or fraternal order. Additionally, plaintiff requested similar relief with respect to INT. REV. CODE of 1954, §§ 2055, 2106(a) & 2522 which provide for deductibility of contributions for estate and gift tax purposes. Id. 3. Section 144 of the Constitution and statutes of the Grand Lodge of the Benevolent and Protective Order of Elks provides in pertinent part that No person shall be accepted as a member of this Order unless he be a white male citizen of the United States of America ... The By-Laws and Rules of Order of Portland, Oregon, Lodge #142 conform to the National Constitution in Article II: Membership § 1 : Applications for membership shall be received only from white male citizens of the United States of America .... Id. at 450 n.1. Published by Villanova University Charles Widger School of Law Digital Repository, 1972 1 Villanova Law Review, Vol. 18, Iss. 1 [1972], Art. 9 VILLANOVA LAW REVIEW [VOL. 18 Internal Revenue Code of 1954 (the "Code") did not, in fact, authorize such tax benefits; that if it did, the sections of the Code involved were unconstitutional; and that these benefits were a form of federal financial assistance in violation of Title VI of the Civil Rights Act of 19644 (the "Act"). Defendant moved to dismiss the complaint both on jurisdictional grounds 5 and for failure to state a claim upon which relief could be granted 6 The United States District Court for the District of Columbia dismissed the complaint as it applied to nonprofit clubs but found that the plaintiff stated a claim upon which relief could be granted with respect to fraternal orders. The court held that the granting of exemptions from the income tax and the granting of deductions to the income tax for contributions to fraternal orders which discriminate in their membership on the basis of race was impermissible "state action,"7 unconstitutional under the equal protection aspect of the due process clause of the fifth amendment; contrary to the congressional policy against racial discrimination; and, violative of Title VI of the Act.8 McGlotten v. Connally, 338 F. Supp. 448 (D.D.C. 1972). The two basic issues involved were whether the granting of these tax benefits constituted "state action" so as to be within the scope of the due process clause of the fifth amendment and whether they constituted federal financial assistance within the meaning of Title VI of the Act. The court split the first question into three distinct issues: (1) whether the granting of a deduction for contributions to discriminatory fraternal orders was sufficient federal involvement to constitute unconstitutional "state action;" (2) whether the granting of tax exemptions to nonprofit clubs (other than fraternal orders) which discriminate was sufficient federal involvement to constitute unconstitutional "state action ;" and (3) whether the granting of tax exemptions to fraternal orders which discriminate is sufficient federal involvement to constitute unconstitutional "state action." 4. 42 U.S.C. § 2000d (1970). See note 67 infra. 5.The court felt that both Zemel v. Rusk, 381 U.S. 1 (1965), and Flast v. Cohen, 392 U.S. 83 (1968), required the convening of a three-judge court where there was a substantial constitutional claim, even though the attack was on the constitutionality of a statute as applied and was coupled with a claim that the action in question was not authorized by the statute. Fi (...truncated)