Courts Rule Private Schools' Nonprofit Status Triggers Title IX Compliance

Jul 27, 2022, 8:33 PM

July 28, 2022

(from Venable LLP) In a departure from prior legal standards, on July 21, 2022 the U.S. District Court for the District of Maryland held 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 of the Education Amendments Act of 1972. On July 25, 2022, the U.S. District Court for the Central District of California similarly held that 501(c)(3) status constitutes federal financial assistance.

These trial court decisions, if upheld on appeal, would significantly impact independent schools' policies regarding their response to sex-based misconduct, as the vast majority of independent schools are tax-exempt organizations under Section 501(c)(3). Given that these opinions represent a departure from prior interpretations, we can expect that they will be appealed. Additionally, given conflicting opinions, this interpretation is not settled law. Therefore, we recommend that independent schools await further guidance and consult with their legal counsel.

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(from McLane Middleton) In the Maryland case, the judge drew on U.S. Supreme Court decisions, which collectively found that institutions qualify as recipients of federal assistance under Title IX even if they did not apply for the aid or the aid was indirectly provided.  The cases held that 501(c)(3) status is a form of Congressional subsidy and the equivalent of a cash grant. ... This week's ruling potentially affects every nonprofit independent school throughout the country, regardless of whether such schools ever accepted a PPP loan.  ... The standard of care of how schools respond to complaints of sexual harassment or other forms of gender discrimination may be evolving. Therefore, independent schools should consider the ways in which they can incorporate the fundamental aims of Title IX.  

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(from Courthouse News Service) A female football player who played on a high school team can proceed with her discrimination lawsuit against a Christian school and its affiliated church for refusing to play against her school if she was on the team. U.S. District Judge Maame Ewusi-Mensah Frimpong this week rejected arguments by Valley Christian Academy and First Baptist Church in Santa Maria, California, that they can’t be sued under Title IX of of the Education Amendments of 1972, the federal law that prohibits sexual discrimination at schools that receive U.S. funding. Since the church and the school received federal pandemic-relief loans and as religious institutions are exempt from federal taxes, they are subject to Title IX requirements, according to the judge. The judge also wasn’t persuaded by arguments that non-students can’t sue a school for sexual discrimination or that the student, only identified as E.H., can’t sue based on the school’s religious beliefs.

July 27, 2022

(from Fisher Phillips) In a decision that should put the nation’s private and independent school community on notice, a federal judge in Baltimore recently ruled that a school’s nonprofit status in and of itself constituted the receipt of federal financial assistance – which means that it is subject to Title IX requirements, among other things. For now, the July 21 decision only impacts schools in Maryland, and is almost certain to be appealed (and could even be blocked from going into effect during the appeal process). But this could be the beginning of a trend that could catch on elsewhere, meaning that all private tax-exempt schools should review this ruling and be on guard to adapt your policies and practices if necessary.

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years is the target ceiling for a school plant's financial "age."

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