In a well-reasoned opinion, a unanimous panel of the United States Court of Appeals for the Fourth Circuit has reaffirmed that an independent school’s 501(c)(3) status as a tax-exempt organization does not make the school a recipient of federal financial assistance subject to Title IX or similar federal laws. See Buettner-Hartsoe; N.H. v. Baltimore Lutheran High School Assoc. et al, (4th Cir. March 27, 2024). The Court reversed the decision of the federal district court, which had ruled that the defendant, an independent school, needed to comply with Title IX because of its tax-exempt status. In reaching this ruling, the Court looked to the plain language of Title IX and concluded that “receiving” federal financial assistance requires the school to accept, directly or indirectly, federal financial aid or support such as through a grant, loan, or contract. It reasoned that the school must actually receive the aid and not simply benefit from federal funding. The Court then observed that tax exemptions confer a benefit in the amount of tax that may be owed but do not involve a transfer of money to the entity that is exempt. In reaching its conclusion, the Court noted that during the 50 years that Title IX has been in existence, the federal government has not claimed that these statutes apply to independent schools or other private entities solely because of tax exempt status. The Fourth Circuit ruling covers federal district court decisions from the states of Maryland, Virginia, West Virginia, North Carolina, and South Carolina. This decision is welcome relief not only for independent schools in the 4th Circuit, but for non-profit schools across the country. The solid reasoning of the Fourth Circuit should be persuasive to other courts that may be asked to address this issue.
Fourth Circuit Holds that an Independent School’s 501(c)(3) Status Does Not Constitute the Receipt of “Federal Financial Assistance” for Purposes of Title IX
