At long last, tax-exempt schools, colleges, and universities can stop paying newspapers to annually publish their nondiscrimination policies, and instead satisfy the IRS publicity requirement by posting the policy on their websites. Revenue Procedure 2019-22 has modified the publication requirements originally set forth in Revenue Procedure 75-501 to allow schools to publicize their nondiscrimination policy on their websites alone. Importantly, this new method could make it easier for private foundations to make "equivalency determinations" with respect to foreign school grantees.
In order for schools, including colleges, universities, secondary schools, foreign schools, preschools and schools operated by churches, to qualify and maintain exemption from tax under Section 501(c)(3) of the Internal Revenue Code, they must comply with the guidelines and recordkeeping requirements set forth in Revenue Procedure 75-50. The requirements include adopting and publicizing a racial nondiscrimination policy as to students and operating in a manner consistent with the policy.
Revenue Procedure 75-50 defines a "racially nondiscriminatory policy" to mean nondiscrimination with regard to: (i) administration of student admission and educational policies; (ii) awarding of scholarships and financial aid; and (iii) the administration of athletic and other school-administered programs. "Discrimination" for purposes of this non-discriminatory policy includes any discrimination against applicants and students on the basis of race, color, and national or ethnic origin.2
Revenue Procedure 75-50 requires schools to include a statement of their nondiscrimination policy in all distributed catalogs and brochures that relate to student admissions, programs, scholarships, as well as in other written advertising recruiting students. Schools must also publicize their nondiscrimination policy to all segments of the general community that are served by the school.
Until Revenue Procedure 2019-22 came along, schools had to satisfy the publicity requirement in one of two ways (each of which still work). A school may publish, at least once annually during the period of the school's solicitation for students, a notice of its nondiscrimination policy in a newspaper of general circulation that serves all racial segments of the community. Alternatively, a school may use broadcast media to publicize its nondiscrimination policy if this use makes the policy known to all segments of the general community the school serves.3
Revenue Procedure 2019-22 - The Internet Has Arrived!
Revenue Procedure 2019-22 provides a third method for publicizing its racial nondiscrimination policy. A school can now display a notice of its policy on its primary, publicly accessible homepage. This notice must be displayed at all times during the taxable year, excluding temporary outages due to website maintenance or technical problems. It must also be presented in a manner that is reasonably expected to be noticed by visitors accessing the school's homepage.
Revenue Procedure 2019-22 defines a "publicly accessible homepage" as one that does not require a visitor to input information (such as an email address or a username and password) to access the homepage.
The IRS will consider a variety of factors for purposes of determining whether a notice is reasonably expected be noticed by visitors to the school's homepage. Some of these factors include the following:
- 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 school's 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) will not meet the requirements set forth in Revenue Procedure 2019-22.
Furthermore, if a school does not have its own website, but has webpages contained in a website, the school must display a notice of its nondiscrimination policy on its primary landing page within the website in a manner that satisfies all other requirements of this new method, as discussed above.
Implications - Foreign and Domestic
Revenue Procedure 2019-22 became effective May 28, 2019, and makes it easier for schools to comply with the publicity requirement with respect to their nondiscrimination policy. While it may amount to more unwelcome news for newspaper publishers, this is welcome news for tax-exempt schools. Schools now choosing to forego print advertising should review the guidelines set forth in Revenue Procedure 2019-22 to ensure that their discrimination policy is displayed on their website in a manner compliant with the new requirements.
This new method may also make it easier for private foundations to make good faith determinations (also known as "equivalency determinations") with respect to foreign school grantees. For purposes of such equivalency determinations, Revenue Procedure 2017-534 requires a foreign school grantee to adopt a policy in its governing instrument, or in a resolution of its governing body, that it does not discriminate against students and provide evidence that such policy is actually practiced and enforced. Evidence of racial nondiscrimination regarding students can be shown by complying with the guidelines set forth in Revenue Procedure 75-50. Now, private foundations may be able to look to a foreign school grantee's website, with its nondiscrimination policy appropriately posted, as evidence that the grantee does not discriminate on the basis of race, color, or national or ethnic origin.
1 1975-2 CB 587.
2 Two exceptions to this general rule are as follows: (i) policies that favor racial minority groups with respect to admissions, facilities and programs, and financial assistance (e.g., affirmative action-type programs) are not considered discriminatory; and (ii) religious schools that select students based on membership to a certain religious denomination are not discriminatory if admission is open to all individuals.
3 A school is not subject to these publication requirements if it follows a nondiscrimination policy as to students and meets one of the following: (i) customary draws its students nationally or internationally and regularly enrolls minority students in meaningful numbers and keeps records of its student body that evidences this policy, or (ii) customarily draws its students from local communities and regularly enrolls minority students in meaningful numbers and keeps records of its student body that evidences this policy.
4 2017-40 IRB 263.
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