Earlier this year, the IRS released Rev. Proc. 2019-22, effective as of May 28, 2019, which provides a private school may use its Internet website to publicize the school’s racially nondiscriminatory policy as to students and meet the requirements of exemption under Section 501(c)(3).
In 1970, the IRS announced that racially discriminatory private schools did not qualify for exemption under IRC 501(c)(3). Only schools having a racially nondiscriminatory policy would be considered for tax exemption.
Rev. Proc. 75-50 sets forth guidelines and recordkeeping requirements for determining whether a private school, which is applying to be or currently recognized as exempt from federal income tax under 501(c)(3), has adopted a racially nondiscriminatory policy regarding students and operates in a bona fide manner in accordance with that policy.
Section 4.01 of Rev. Proc. 75-50 provides: “A school must include a statement in its charter, bylaws, or other governing instrument, or in a resolution of its governing body, that it has a racially nondiscriminatory policy as to students and therefore does not discriminate against applicants and students on the basis of race, color, and national or ethnic origin.”
Section 4.02 of Rev. Proc. 75-50 provides: “Every school must include a statement of its racially nondiscriminatory policy as to students in all its brochures and catalogues dealing with student admissions, programs, and scholarships. … Further, every school must include a reference to its racially nondiscriminatory policy in other written advertising that it uses as a means of informing prospective students of its programs.”
Section 4.03 of Rev. Proc. 75-50 provides: “The school must make its racially nondiscriminatory policy known to all segments of the general community served by the school.” Subsection 1(a) of Section 4.03 permits a school to satisfy this publicity requirement by publishing, at least once annually, a notice of its racially nondiscriminatory policy in a newspaper of general circulation that serves all racial segments of the community. Subsection 1(b) of Section 4.03 permits a school to use the broadcast media to publicize its racially nondiscriminatory policy, provided that the means by which the policy is communicated is reasonably expected to be effective.
Rev. Proc. 2019-22
Rev. Proc. 2019-22 modifies Rev. Proc. 75-50 by adding Subsection 1(c) to Section 4.03, which provides for a third way of making a racially nondiscriminatory policy known to all segments of the general community served by the school. In addition to publishing the policy in a suitable newspaper or publicizing the policy using broadcast media, Subsection 1(c) provides:
The school may display a notice of its racially nondiscriminatory policy on its primary publicly accessible Internet homepage at all times during its taxable year (excluding temporary outages due to website maintenance or technical problems) in a manner reasonably expected to be noticed by visitors to the homepage. The following notice, which is identical to the notice that may be used to satisfy the publicity requirement using a newspaper of general circulation that serves all racial segments of the community, is acceptable:
NOTICE OF NONDISCRIMINATORY POLICY AS TO STUDENTS
The M school admits students of any race, color, national and ethnic origin to all the rights, privileges, programs, and activities generally accorded or made available to students at the school. It does not discriminate on the basis of race, color, national and ethnic origin in administration of its educational policies, admissions policies, scholarship and loan programs, and athletic and other school-administered programs.
A publicly accessible homepage is one that does not require a visitor to input information, such as an email address or a username and password, to access the homepage. It certainly should not be password protected or behind another screen.
Factors to be considered in determining whether a notice is reasonably expected to be noticed by visitors to the homepage include:
- the size, color, and graphic treatment of the notice in relation to other parts of the homepage,
- whether the notice is unavoidable,
- whether other parts of the homepage distract attention from the notice, and
- whether the notice is visible without a visitor having to do anything other than simple scrolling on the homepage.
A link on the homepage to another page where the notice appears, or a notice that appears in a carousel or only by selecting a dropdown or by hover (mouseover) is not acceptable.
If a school does not have its own website, but it has webpages contained in a website, the school must display a notice of its racially nondiscriminatory policy on its primary landing page within the website in a manner that satisfies all other requirements of this subsection 1(c) to use this publication method.
Form 1023, Schedule B
Form 1023 is the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Schedule B to Form 1023 is for Schools, Colleges, and Universities and Section II of Schedule B raises questions regarding the applicant’s Establishment of Racially Nondiscriminatory Policy. Form 1023 and the Instructions to Form 1023 were last revised on December 2017 and consequently have not incorporated the publicity requirement for the applicant’s racially nondiscriminatory policy.
Question 3 in Part II of Schedule B asks:
Have you published a notice of your nondiscriminatory policy in a newspaper of general circulation that serves all racial segments of the community? See the instructions for specific requirements. If “No,” explain.
If the answer for a particular applicant is “No” and the applicant used its Internet website to meet the publicity requirement, it should state so in the required explanation of how it meets the publicity requirement of Rev. Proc. 75-50. In case a particular agent isn’t aware of Rev. Proc. 2019-22, the applicant may find it beneficial to include this citation in its explanation.
IRS Publication 557 (Tax-Exempt Status for Your Organization) was last updated in January 2019 and consequently also does not include the Internet website option for meeting the publicity requirement.
Additional Resources Relating to Private School Racially Nondiscriminatory Policies
Private School Nondiscrimination Policies: Website Publication Now Meets IRS Requirements (Adler & Colvin, June 28, 2019)
FAQs: IRS Requirements for Private School Racial Nondiscrimination Policies (Wagenmaker & Oberly, August 3, 2016)