VISA update: 501(c)(3) tax exemption may add nondiscrimination requirement to schools

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Both courts ruled that independent schools that have tax-exempt status under 26 U.S.C. § 501(c)(3) are subject to the same Title IX requirements imposed on public schools. If other federal courts follow suit, tax-exempt independent schools may be required to put in place policies and processes for dealing with allegations of sex-based discrimination and harassment that comply with Title IX.

Editor’s note: This is from the Aug. 19, 2022, update by the Vermont Independent Schools Association.

Two recent federal district court case rulings may have opened the way for expanded sex-based Title IX nondiscrimination requirements on tax-exempt independent schools.

In a departure from prior legal standards, the U.S. District Court for Maryland held last month that an independent school’s status as a 501(c)(3) tax-exempt organization is considered federal financial assistance, requiring the school to comply with Title IX. Then a few days later, the U.S. District Court for the Central District of California similarly held that 501(c)(3) status constitutes federal financial assistance.

Both courts ruled that independent schools that have tax-exempt status under 26 U.S.C. § 501(c)(3) are subject to the same Title IX requirements imposed on public schools. If other federal courts follow suit, tax-exempt independent schools may be required to put in place policies and processes for dealing with allegations of sex-based discrimination and harassment that comply with Title IX.

Title IX prohibits discrimination on the basis of sex by education programs or activities receiving federal financial assistance, though religious educational institutions are exempted if compliance conflicts with their religious tenets.

These opinions will be appealed because they are a substantial departure from prior interpretations. The National Association of Independent Schools is working with several regional independent school associations to coauthor an appeal brief. Other associations are signing on to a letter in support of this brief and the Association of Independent Maryland Schools is authoring an additional amicus brief to advocate from a local perspective. Together these actions will present a unified front representing independent schools across the country.

Meanwhile, the Biden Administration has announced proposed changes to the current Title IX regulations. If enacted these changes will require most institutions subject to Title IX to revisit their policies and procedures related to sex-based discrimination and harassment.

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