501(c)(3) Status May Trigger Title IX Obligations for Private Schools

In a case of first impression, the United States District Court for the District of Maryland concluded that independent schools receiving a 501(c)(3) tax exemption is the substantial equivalent of receiving a cash grant from the government in the amount of tax otherwise owed, which subjects them to the requirements of Title IX.

In Buettner-Hartsoe et al. v. Baltimore Lutheran High School Association, the federal judge held that the 501(c)(3) tax-exempt status of a private school, Concordia Preparatory School (CPS), qualifies the institution as a recipient of federal financial assistance for the purposes of Title IX of the Education Amendments Act of 1972 (“Title IX”) coverage. Until this ruling, Title IX was generally construed to exclude tax-exempt private schools if they did not receive affirmative federal funding. More recently, accepting federal COVID-19 relief funding, such as PPP loans, conferred Title IX obligations on private schools.

Title IX – perhaps best known for creating equal access for female athletes in schools – prohibits discrimination and harassment on the basis of sex (including sexual orientation and gender identity) of students and employees in educational settings receiving federal funding. Covered educational institutions are required to undertake several, specific obligations, including adopting written policies and training, and designating a Title IX coordinator.

In denying CPS’ motion to dismiss the lawsuit, the federal judge held that entities that receive federal assistance, either directly or indirectly are recipients of federal financial assistance within the meaning of Title IX. Adding that the “Supreme Court has held that tax exempt institutions must demonstrably serve and be in harmony with the public interest,” the judge reasoned that “CPS cannot avail itself of federal tax exemption but not adhere to the mandates of Title IX.”

Shortly after this decision, the federal court for the Central District of California issued a similar ruling in E.H. v. Valley Christian Acad., declaring tax exemption as a form of federal financial assistance for the purposes of Title IX. Although we anticipate that both rulings will be appealed, private schools with 501(c)(3) tax exempt status should follow these developments carefully.