The Council for American Private Education (CAPE) strongly supports the Safeguarding Charity Act, introduced today by Senator Marco Rubio and Representative Greg Steube.
The legislation clarifies that tax-exempt status does not qualify as federal financial assistance.
Tax exempt status has not previously been understood to be a form of federal financial assistance, as it is very different from receiving a government check. Unfortunately, two unexpected court decisions in Maryland and California ruled otherwise in the summer of 2022.
Nonprofits serve America’s communities in a variety of indispensable ways, which tax-exempt status is supposed to encourage. These court decisions represent a sudden and unexpected change to longstanding policy on tax-exempt status, a change not contemplated by Congress, and would subject private schools and other nonprofits to a potentially crippling array of federal regulations, especially for those many organizations with small staffs.
Fortunately, a recent court decision in Arizona disagreed with the Maryland and California court rulings by sustaining the long held understanding of tax-exempt status.
While many in the nonprofit community expect the Maryland decision to be overturned on appeal, legislation clarifying the matter is most welcome.
Statement from Michael Schuttloffel, Executive Director of CAPE
“This legislation provides vital protection for private schools and other nonprofits put at risk by two outlier court decisions. Ensuring that tax-exempt status is recognized as being distinct from federal financial assistance is critical for preserving the ability of private K-12 schools to continue to serve families and communities. We appreciate Senator Marco Rubio and Representative Greg Steube for defending this commonsense principle.”