Court Holds Tax-Exempt Status Subjects Private School to Title IX

Title IX prohibits sex-based discrimination in education programs or activities that receive federal financial assistance. Public schools are clearly subject to Title IX requirements, but applicability to private schools is less clear.  If a private school receives federal financial assistance, it is subject to Title IX, thought there are certain exemptions for educational institutions controlled by religious organizations.  Federal financial assistance can include grants and loans, but can also include programs such as the National School Lunch Program and Head Start. A federal court in Maryland recently considered whether tax-exempt status constitutes federal financial assistance.

Former students and parents on behalf of minor former students sued a private high school, alleging the school had failed to adequately address their complaints of sexual assault and sexual harassment by male students.  The school moved to dismiss the Title IX complaints, alleging it was not subject to Title IX because it was not a direct recipient of federal financial assistance at the time in question.

The court stated the school’s argument was “without merit” because its “tax-exempt status . . . constitutes federal financial assistance for the purposes of Title IX.”

The high school is a religiously affiliated private school.  The plaintiffs attended the school at various times ranging from 2014 to 2020.  According to the trial court’s opinion, the school received grants from the State of Maryland during that time.  The school did not apply for federal funding, however, until it applied for a Paycheck Protection Program (“PPP”) loan in March or April 2020.  It received the loan in April and it was forgiven in November 2020.

The plaintiffs argued the school’s tax-exempt status was sufficient federal financial assistance to make the school subject to Title IX.  The court considered the relevant Title IX language and definitions.  The court acknowledged that neither the U.S. Supreme Court or the Fourth Circuit had considered whether tax exemption constitutes federal financial assistance for Title IX purposes, but determined that decisions from both courts supported the conclusion that it does.

The court pointed out that the Supreme Court has referred to tax exemption as “a form of subsidy. . .” and has held that tax exempt institutions must serve the public interest.  The court also considered a case from the District Court for the District of Columbia that held that schools are not entitled to federal tax exemptions if they discriminate on the basis of race.  The court stated it believed the same principle should apply to sex-based discrimination, especially because Title IX was modeled upon Title VI.

The court denied the defendant’s motion because the school received federal financial assistance through its tax exempt status while the plaintiffs or their daughters were enrolled in the school.  Additionally, the court denied the motion as to one plaintiff because she was enrolled at least through Spring 2020 and the school had accepted the PPP loan in April 2020.

This decision is just one case that is not binding on other jurisdictions.  However, it may raise concerns in private schools that previously thought they were not subject to Title IX requirements.  Private schools could therefore change their discrimination and harassment policies or become more aggressive in handling complaints.  If you have been accused of sexual harassment at school, the experienced Title IX defense attorneys at Blair & Kim, PLLC, can help you through the investigation and any resulting disciplinary proceedings.  Set up an appointment by calling (206) 622-6562.


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