Court rules that religious schools’ tax-exempt status does not make them subject to Title IX 

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CNA Staff, Apr 3, 2024 / 11:15 am (CNA).

A federal appeals court has ruled that an institution’s tax-exempt status does not qualify as “federal assistance” under federal law, reversing a lower court ruling ordering a religious school to comply with federal Title IX regulations.

A former student of Concordia Prep, a Lutheran school serving grades 6–12 in Towson, Maryland, had brought suit against the institution in 2020, claiming that she had suffered bullying and sexual harassment at the school during her time there and that the school had violated Title IX federal sex-discrimination laws in its handling of those claims.

The school had argued in response that it was not subject to Title IX regulations since it does not accept federal financial assistance. Institutions are required to follow that federal rule if they receive funding from the federal government.

A lower court had ruled against the school, arguing that the school’s tax-exempt status, in and of itself, constituted a form of federal funding. But a three-judge panel at the U.S. Court of Appeals for the 4th Circuit reversed that decision, saying in a ruling last week that a 501(c)(3) tax-exempt status “does not constitute receipt of federal financial assistance.”

“[T]he phrase ‘receiving federal financial assistance’ means taking or accepting federal financial aid, help, or support,” the judges said. “Thus, the plain text of Title IX contemplates the transfer of funds from the federal government to an entity.”

The judges called the plaintiffs’ argument in the case “a novel concept.”

“Indeed, since Title IX’s inception over 50 years ago, it has never been applied to organizations based solely on their tax-exempt status,” they wrote, arguing that “tax exemption … is the withholding of a tax burden rather than the affirmative grant of funds.”

Greg Baylor, a senior counsel with the legal advocacy group Alliance Defending Freedom (ADF), which filed an amicus brief in the case, told CNA that the ruling was “consistent with the text of Title IX statute and regulation and precedence.”

“For decades virtually everyone has understood that federal financial assistance consists of grants, contracts, property, and things of that nature,” Baylor said. 

“No one has seriously argued that an organization’s possession of mere tax-exempt status counts as federal financial assistance.”

“We’re grateful that the 4th Circuit overruled the lower court decision,” Baylor said. “Under the reasoning of the lower court, hundreds of thousands of nonprofits would be subject to this burdensome law. We’re grateful for the decision.”

Title IX was passed as a component of the federal Education Amendments of 1972 and signed into law by President Richard Nixon. It has been a major factor in U.S. education law and policy for decades. 

The Supreme Court has weighed in on Title IX matters in several cases, including in the landmark 1984 decision Grove City College v. Bell, in which the justices held that the rule could be applied to colleges and universities that admitted students with federal aid scholarships even if the schools themselves did not directly accept federal financial aid.

In contrast, the Supreme Court held in 1999 that the NCAA’s receipt of dues from institutions that accepted federal financial aid was not, in and of itself, enough to establish Title IX claims.

Baylor told CNA that it was “extraordinarily unlikely that the Supreme Court will review this decision.”

“There isn’t another federal circuit that’s reached the opposite conclusion, and that’s usually the context when the Supreme Court takes the opinion,” he said.