501(c)(3) Status Does Not Trigger Title IX Application


In the long-awaited case of Buettner-Hartsoe v. Baltimore Lutheran High School Association, No. 23-1453 (4th Cir. 2024), the United States Court of Appeals for the Fourth Circuit held that the 501(c)(3) tax-exempt status of an entity does not—in and of itself—constitute “accepting Federal aid, help, or financial support” to trigger Title IX obligations.

In relevant part, Section 901(a) of Title IX states: “No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefit of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance…” In other words, for Title IX to apply to an education program or activity, the program or activity must have been actually “receiving” Federal financial assistance at the time of the alleged discrimination.

Interpreting the phrase “receiving Federal financial assistance,” from Section 901(a), under its ordinary meaning, and leaning on precedent in Grove City College v. Bell, 465 U.S. 555, 563 – 70 (1984), the Court determined the phrase to mean “accepting Federal aid, help, or support,” even through indirect means.

The Court also distinguished between “receiving” and “benefiting from” Federal funding. “Title IX is not triggered when an entity merely benefits from Federal funding.” Nat’l Collegiate Athletic Ass’n v. Smith, 525 U.S. 459, 468 (1999). Entities with tax-exempt status merely receive a tax benefit by not having to pay income tax. The Court reasoned tax-exempt entities receiving a monetary benefit in the form of tax relief is not the same as funds changing hands.

The parties arguing that Title IX applied argued that charitable contribution deductions are akin to “indirect grants” which trigger Title IX application under Grove City because donors receive a deduction for donating to tax-exempt entities and those entities receive more money than if the donors received no deduction. Because donors donating to tax-exempt entities do not receive any Federal funds by claiming a charitable deduction and, instead, are merely allowed to donate the full pre-tax amount of their donation, the Court held that charitable contribution deductions are not considered Federal financial assistance.

This opinion is in the best interests of educational organizations that benefit from their tax-exempt status. The attorneys at Airdo Werwas, LLC, are available to consult with you on any matter concerning your non-profit or tax-exempt organization. If you have any questions or concerns about how this ruling might impact your organization, please feel free to contact Justin Callaci at jcallaci@airdowerwas.com.

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