4th Circuit Overturns Lower Court Decisions Finding Independent School’s 501(c)(3) Status Subjects Them to Title IX Requirements
The U.S. Court of Appeals for the Fourth Circuit has held that an independent school’s 501(c)(3) tax-exempt status alone does not make that school a recipient of federal financial assistance. Therefore, the school was not subject to additional federal laws that apply to schools that receive federal financial assistance, including Title IX of the Education Amendments of 1972.
The U.S. Court of Appeals for the Fourth Circuit has held that an independent school’s 501(c)(3) tax-exempt status alone does not make that school a recipient of federal financial assistance. Therefore, the school was not subject to additional federal laws that apply to schools that receive federal financial assistance, including Title IX of the Education Amendments of 1972. The case is Buettner-Hartsoe v. Baltimore Lutheran High School Association, No. 23-1453 (4th Cir. 2024). The California Center for Nonprofit Law is here to advise you on all legal requirements that impact your public charity, including how to maintain your 501(c)(3) status. Call our office when you have questions about these important issues to keep your charity compliant and able to receive donations.
Background of the Case
In 2022, two federal district courts ruled that independent schools with 501(c)(3) tax-exempt status qualified as schools receiving federal financial assistance. As a result of receiving federal financial assistance, they are subject to various federal laws, including Title IX. These court decisions were a significant departure from prior legal precedent. In one case, the school appealed to the U.S. Court of Appeals for the Fourth Circuit.
The Fourth Circuit Ruling
On appeal, the Fourth Circuit discussed the common definitions of “receive” and “assistance,” concluding that the phrase “receipt of federal financial assistance” means that an entity has received funds transferred to it by the federal government. In contrast, the Court found that while a tax exemption is a benefit in that it is the withholding of a tax burden, it is not the affirmative grant or even an indirect receipt of funds from the federal government to the tax-exempt entity. Therefore, tax-exempt status is not “federal financial assistance.”
The Court also noted that its conclusion was not novel. Since Congress enacted Title IX over 50 years ago, tax-exempt status has never been the sole basis for its application to a school or any other entity.
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