Does Title IX Apply to Tax-Exempt Private Schools? Two Courts Say Yes

By Leila Gary, Jackie Gharapour Wernz, & Leah Northener

It’s well established that Title IX applies only to entities that receive federal financial assistance, which traditionally has been interpreted to apply to a school’s actual receipt of federal money, such as special education funds. Two recent decisions from federal courts in  Maryland and California have turned this traditional understanding on its head, holding that a school’s tax-exempt status under the federal tax code is the functional equivalent of receiving funds. What do these decisions mean for tax-exempt private and independent schools?    

The Maryland case, Buettner-Hartsoe v. Baltimore Lutheran High School Association, involved a private, independent, religiously-affiliated school that was sued for damages under Title IX. The school argued that it was not subject to Title IX because the events at issue occurred before it accepted a federal PPP loan and had not otherwise accepted federal funds. The former students argued that the school was subject to Title IX because it received a federal tax exemption as a 501(c)(3) non-profit organization. The judge agreed, finding that an organization’s tax exemption under 501(c)(3) of the Internal Revenue Code is akin to a “Congressional subsidy and the equivalent of a cash grant” from the federal government. 

Similarly, in E.H. v. Valley Christian Academy, et al., a California federal court also concluded that an independent, religiously-affiliated school’s “tax-exempt status confers a federal financial benefit that obligates compliance with Title IX.”  Valley Christian was sued by a female football player that attended a different school after Valley Christian objected to her participation in football games. Having determined that the school’s tax-exempt status conferred Title IX compliance obligations, the court went on to deny the school’s defenses to Title IX liability, finding that E.H., as a non-student who sought to play sports on Valley Christian’s premises, had standing to bring a claim under Title IX and the religious organization and contact sports exceptions to Title IX did not apply under the circumstances presented in the case. 

What are the implications of these rulings? 

  • The rulings are trial court decisions from Maryland and California and bind only schools in those courts’ jurisdictions. The rulings will likely be reviewed by federal appellate courts, which could decide to reverse them. 
  • The trial courts’ reasoning appears contrary to Supreme Court authority which historically has examined whether Congress gave “clear notice” to recipients that accepting the federal benefit would subject them to Title IX. A reasonable argument can be made that private and independent schools did not receive clear notice that receiving a tax exemption would subject them to Title IX liability. 
  • Which federal agencies would be responsible for enforcing Title IX in tax-exempt independent schools? The U.S. Department of Education has implemented detailed rules that apply to educational institutions that receive federal funds from it. But educational institutions that receive funds from other federal agencies—such as NASA and the National Science Foundation—must comply with the separate rules of those agencies. Will the IRS establish Title IX regulations to ensure that tax-exempt institutions comply with Title IX?  
  • Prevention is always the best medicine.  The existence of two court decisions recognizing Title IX applicability for tax-exempt education programs and activities certainly is no small matter. Indeed, we expect there will now be lawsuits pressing this legal theory in other jurisdictions. But even without Title IX obligations, independent schools have many good reasons for establishing robust anti-discrimination programs and grievance processes, including protecting students and resolving disputes. Such practices also may guard against liability in a future Title IX lawsuit should a court in your jurisdiction adopt the reasoning from the Maryland or California courts. Finding a middle ground may be a prudent option for private and independent schools trying to balance the potential risks associated with this ruling. For more information on how to strike such a balance, contact the authors of this post or any Thompson & Horton attorney.