Historically, most independent schools have not been subject to Title IX of the Education Amendments Act of 1972 because they do not accept federal funds. As a result, many independent schools carefully evaluate whether to accept certain funds so they can control whether they are subject to Title IX.
In the past two years, some independent schools have cautiously accepted federal financial assistance under the Paycheck Protection Program (PPP), with an understanding that, based on guidance from the Department of Education, doing so would require compliance with Title IX only until the PPP loan was fully forgiven or repaid. However, in decisions that may have dramatic effects on independent schools throughout the United States, two federal courts recently expanded Title IX coverage, ruling that independent schools may be subject to Title IX based on their tax-exemption status alone.
Institutions Subject to Title IX
Title IX applies to any recipient of federal financial assistance. 20 U.S.C. § 1681(a). Therefore, a Title IX claim against an educational institution requires a claimant to first establish that the educational institution receives federal funds. Whether an institution accepts “federal financial assistance” is defined by the regulations governing Title IX. For example, an independent school may be subject to Title IX if it receives a federal grant or loan of funds made available for the acquisition or construction of a building or facility, or for scholarships to students.
For decades, the U.S. Department of Education and courts have not interpreted an educational institution’s 501(c)(3) tax-exempt status as “receiving federal assistance” under Title IX. However, in separate cases decided in late July 2022, two federal courts found independent schools were subject to Title IX based on their 501(c)(3) status. These rulings may have implications beyond education, as any tax-exempt organization may be subject to Title IX by virtue of the tax status.
Recent Case Developments
In Buettner-Hartsoe v. Baltimore Lutheran High School Association d/b/a Concordia Preparatory School, decided on July 21, the U.S. District Court in Maryland permitted a case to continue against an independent school, despite the school’s arguments that it was not subject to Title IX. Former students of the institution alleged that they were subject to sexual assault and verbal sexual harassment, and that the school failed to adequately address their complaints. Concordia Preparatory School argued that the claims could not proceed because the school did not accept federal funds and therefore was not subject to Title IX.
The U.S. District Court in Maryland rejected this defense and agreed with the plaintiffs that the school’s tax-exempt status under 26 U.S.C. § 501(c)(3) represented federal financial assistance sufficient to subject the school to Title IX. The court first noted that a school need not receive federal funds directly to qualify as a recipient of federal financial assistance for Title IX purposes. It then reasoned that, in Regan v. Taxation with Representation, 461 U.S. 540 (1983), the U.S. Supreme Court “recognized § 501(c)(3) status as a form of Congressional subsidy and the equivalent of a cash grant.” Therefore, the court concluded, tax-exempt status constitutes “federal financial assistance” under Title IX.
On July 25, in E.H. v. Valley Christian Academy, the U.S. District Court for the Central District of California reached the same result. In that case, a female student played football for a public school that competed against an independent school, Valley Christian Academy. The female student claimed Valley Christian Academy had violated her rights under Title IX because Valley Christian Academy prohibited her from participating in football competition against the independent school. The plaintiff argued that Valley Christian Academy was subject to Title IX because it was a 501(c)(3) institution, and because it has accepted a PPP loan.
Like in the Concordia Preparatory School case, the independent school defendant tried to dismiss the case, claiming that it was not subject to Title IX. The district court similarly rejected this argument, holding that Valley Christian Academy’s 501(c)(3) status alone constituted “federal financial assistance,” even though its PPP loan was already forgiven. Noting that prior case law offered conflicting guidance on this issue, the California court relied primarily on the “plain purpose of the statute” to find that tax-exempt status qualified Valley Christian Academy as a recipient of federal financial assistance under Title IX.
Given the enormous potential impact of these decisions, expect further litigation, both in these two cases and in others. On Aug. 4, Concordia Preparatory School filed a motion to reconsider the district court’s ruling, or in the alternative, for certification of an interlocutory appeal to the 4th U.S. Circuit Court of Appeals. Expect plaintiffs’ lawyers in other jurisdictions also to use these cases to test their luck pursuing Title IX claims against independent schools, which could lead to a circuit split in the relatively near future.
Takeaways for Independent Schools
These recent decisions may have important consequences for independent schools and tax-exempt organizations across the United States. Below are the major takeaways for independent schools as they consider how these cases will affect their institutions:
- Although these decisions technically bind only the parties involved in these suits, they signal a potential shift in how federal courts will interpret Title IX cases and regulations and expand coverage to institutions based on tax-exemption status. Independent schools, especially those in California and Maryland, should monitor updates on these cases to determine whether this becomes settled law.
- These cases may be appealed and overturned — as noted above, Concordia Preparatory School is already preparing for an appeal. Given that these decisions run contrary to how courts and the U.S. Department of Education have interpreted Title IX for decades, it is reasonably likely that at least some appellate judges will disagree with these rulings. Independent schools should consult their attorneys to determine whether to act and adopt a Title IX policy.
- Independent schools should evaluate the extent to which Title IX compliance would require changes to their existing anti-discrimination policies. Independent schools should contact their attorneys to determine the extent to which they should make changes to their policies.
- Independent schools — particularly those in Maryland and California — also should consider how these decisions could implicate compliance with other laws that depend on receipt of federal financial assistance, such as Section 504 of the Rehabilitation Act, the Family Educational Rights and Privacy Act, and Title VI of the Civil Rights Act.
- Other entities that enjoy tax-exempt status should note that these rulings may effectively cause all nonprofits (such as churches or private hospitals) with education programs and activities to become subject to Title IX.
The education industry team at McGuireWoods will continue to monitor updates on these cases as well as other developments that affect independent schools. Please contact any of the authors of this article for assistance.