The U.S. Supreme Court case Bob Jones University v. United States in 1982 revolved around the issue of whether or not a private, religious university could maintain its tax-exempt status while practicing racial discrimination. The Internal Revenue Service (IRS) had revoked the tax-exempt status of Bob Jones University because it prohibited interracial dating and marriage among students, which was viewed as racially discriminatory by IRS standards. The university argued that this policy was based on their sincere religious beliefs and thus should be protected under the First Amendment's guarantee to freedom of religion. However, the Supreme Court ruled against Bob Jones University in an 8-1 decision stating that combating racial discrimination is such a compelling public interest that it overrides any potential infringement upon religious freedom rights.

In the dissenting opinion for Bob Jones University v. United States, Justice William H. Rehnquist argued that the majority had overstepped its bounds by interpreting a statute in a way not intended by Congress. He contended that while racial discrimination is indeed contrary to public policy and morally reprehensible, it was not within the Court's purview to determine whether an institution's tax-exempt status should be revoked on these grounds without clear legislative direction from Congress. According to him, such decisions were better left to lawmakers rather than judges as they involve complex social and political issues beyond judicial competence or authority. Furthermore, he pointed out that there was no evidence of Congressional intent supporting IRS’s position when granting tax exemptions under Section 501(c)(3) of Internal Revenue Code; hence IRS lacked statutory authority for denying tax exemption based on racially discriminatory policies.