Highlights from BakerHostetler’s Webinar on Race-Based Grantmaking and Charitable Activities

Published on: by Gene Takagi Category:DIVERSITY EQUITY INCLUSION, EVENTS
"Civil Rights" on a strip of paper sitting on top of a copy of the U.S. Constitution

Last month, BakerHostetler presented a very helpful webinar titled Race-Based Grantmaking and Charitable Activities: Protected First Amendment Speech or Prohibited Racial Exclusion? Materials are available on the firm’s website at the preceding link.

Highlights

The term charitable is used in section 501(c)(3) in its generally accepted legal sense and includes the promotion of social welfare by organizations designed to eliminate prejudice and discrimination, to lessen neighborhood tensions, and to defend human and civil rights secured by law. We previously wrote about some of these aspects of charitable here and here.

Race and racial issues have long been explicitly recognized in connection with charitable activities. The materials listed several examples of revenue rulings regarding housing and employment.

There is some dissonance in treatment of organizations seeking to assist minorities versus those seeking to assist white persons. “Compare GCM 39117 and GCM 38841, both approving charitable programs supporting exclusively minorities, and GCM 39792, disapproving as violative of public policy trust which supported only “worthy and deserving white persons”.”

Private foundation grants to individuals must be awarded on an objective and non-discriminatory basis, but an example in Treas. Reg. §53.4945-4(b)(5), describes with approval a private foundation scholarship program “for members of a certain ethnic minority” and this position has been re-affirmed by the IRS earlier this year in IRS Approval Letter 202407006 (referencing a “historically underrepresented group”).

In Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, the Supreme Court held that affirmative action in college admissions violates the 14th Amendment to the US Constitution and Title VI of the Civil Rights Act of 1964. We previously wrote about this decision here.

All eyes are now on the American Alliance for Equal Rights (AAER) v. Fearless Fund litigation in the United States District Court Northern District of Georgia. An interesting summary of this litigation can be found on this Council on Foundations page.

Section 1981 of the Civil Rights Act of 1866 provides: “All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.” We previously wrote about Section 1981 and its potential impacts on nonprofits here.

The First Amendment rights to free speech, association, and religion have been used in the past as arguments to discriminate based on race. “These arguments generally failed, however, because courts found the government’s interest in protecting victims of racial discrimination to be more compelling than the schools’ freedom to discriminate. … Recently, freedom of association has been elevated from reasonable basis to exacting scrutiny. Americans for Prosperity Foundation v. Bonta.” We previously wrote about this decision here.

Practical guidance from the presenters:

  • Know your rights as an employer. Nonprofits and foundations should remember that the SCOTUS Affirmative Action decision did not change the law for employers; and it is still legal to make race conscious decisions.
  • Get legal counsel to assess your current and potential legal risk. The best protection nonprofits have right now is to work with an attorney to check and evaluate DEI related program policy in light of employment laws, and that this is especially important for nonprofits who have government contracts.
    • In particular, as advised by Alex Campbell and Alex Reid on the Raced-Based Grantmaking and Charitable Activities webinar on April 10, understand the difference between grants and contracts in the context of grant-making and charitable activities and have your policies and practices reviewed by legal counsel.
  • Communicate with your stakeholders about why your current policies are legal. Organizations can then develop messages to stakeholders clarifying why their DEI programming/policies are legal.