Private school advocates are applauding a federal appeals court ruling that “501(c)(3) status does not constitute receipt of federal financial assistance.”

Yesterday’s decision by the United States Court of Appeals for the Fourth Circuit overturned a lower court ruling which had stunned the nonprofit community by declaring that tax exempt status is a form of federal financial assistance. Under that anomalous understanding, private schools and other nonprofits would be subject to various federal regulations, including Title IX, simply because of their tax exempt status. Previously, private schools were only thought to be subject to federal regulations if they accepted federal funds.

In plain language, the three judge panel from the 4th Circuit unanimously agreed with the previous understanding:

“Tax exemption is not ‘Federal financial assistance.’ This is not a novel concept. Indeed, since Title IX’s inception over fifty years ago, it has never been applied to organizations based solely on their tax exempt status.”

The 4th Circuit decision applies to Maryland, Virginia, West Virginia, North Carolina, and South Carolina. CAPE and several of its member organizations had supported an amicus brief encouraging a reversal of the lower court decision.

Statement from Michael Schuttloffel, Executive Director of CAPE

CAPE is grateful for the 4th Circuit’s common sense decision restoring the over fifty year understanding that tax exempt status does not make a private school a recipient of federal financial assistance. We hope that courts across the country follow the 4th Circuit’s precedent if this issue is litigated elsewhere. In the meantime, we invite Congress to pass legislation clarifying what has always been the case in practice: tax exempt status is not the same as receiving federal funding.