Educational Organizations and Private Schools
If your organization wants to obtain recognition of exemption as an
educational organization, you must submit complete information as to
how your organization carries on or plans to carry on its educational
activities, such as by conducting a school, by panels, discussions,
lectures, forums, radio and television programs, or through various
cultural media such as museums, symphony orchestras, or art exhibits.
In each instance, you must explain by whom and where these activities
are or will be conducted and the amount of admission fees, if any. You
must submit a copy of the pertinent contracts, agreements,
publications, programs, etc.
If you are organized to conduct a school, you must submit full
information regarding your tuition charges, number of faculty members,
number of full-time and part-time students enrolled, courses of study
and degrees conferred, together with a copy of your school catalog.
See also Private Schools, discussed later.
Educational Organizations
The term educational relates to:
- The instruction or training of individuals for the purpose
of improving or developing their capabilities, or
- The instruction of the public on subjects useful to
individuals and beneficial to the community.
Advocacy of a position.
Advocacy of a particular position or viewpoint may be educational
if there is a sufficiently full and fair exposition of pertinent facts
to permit an individual or the public to form an independent opinion
or conclusion. The mere presentation of unsupported opinion is not
educational.
Method not educational.
The method used by an organization to develop and present its views
is a factor in determining if an organization qualifies as educational
within the meaning of section 501(c)(3). The following factors may
indicate that the method is not educational.
- The presentation of viewpoints unsupported by facts is a
significant part of the organization's communications.
- The facts that purport to support the viewpoint are
distorted.
- The organization's presentations make substantial use of
inflammatory and disparaging terms and express conclusions more on the
basis of emotion than of objective evaluations.
- The approach used is not aimed at developing an
understanding on the part of the audience because it does not consider
their background or training.
Exceptional circumstances, however, may exist where an
organization's advocacy may be educational even if one or more of the
factors listed above are present.
Qualifying organizations.
The following types of organizations may qualify as educational:
- An organization, such as a primary or secondary school, a
college, or a professional or trade school, that has a regularly
scheduled curriculum, a regular faculty, and a regularly enrolled
student body in attendance at a place where the educational activities
are regularly carried on,
- An organization whose activities consist of conducting
public discussion groups, forums, panels, lectures, or other similar
programs,
- An organization that presents a course of instruction by
correspondence or through the use of television or radio,
- A museum, zoo, planetarium, symphony orchestra, or other
similar organization, and
- A nonprofit children's day-care center.
College book stores, cafeterias, restaurants, etc.
These and other on-campus organizations should submit information
to show that they are controlled by and operate for the convenience of
the faculty and student body or by whom they are controlled and whom
they serve.
Alumni association.
An alumni association should establish that it is organized to
promote the welfare of the university with which it is affiliated, is
subject to the control of the university as to its policies and
destination of funds, and is operated as an integral part of the
university or is otherwise organized to promote the welfare of the
college or university. If your association does not have these
characteristics, it may still be exempt as a social club if it meets
the requirements described in chapter 4, under 501(c)(7) -
Social and Recreation Clubs.
Athletic organization.
This type of organization must submit evidence that it is engaged
in activities such as directing and controlling interscholastic
athletic competitions, conducting tournaments, and prescribing
eligibility rules for contestants. If it is not so engaged, your
organization may be exempt as a social club described in chapter 4.
Raising funds to be used for travel and other activities to interview
and persuade prospective students with outstanding athletic ability to
attend a particular university does not show an exempt purpose. If
your organization is not exempt as an educational organization, see
Amateur Athletic Organizations, later in this chapter.
Private Schools
Every private school filing an application for recognition of
tax-exempt status must supply the IRS (on Schedule B, Form 1023) with
the following information.
- The racial composition of the student body, and of the
faculty and administrative staff, as of the current academic year.
(This information also must be projected, so far as may be feasible,
for the next academic year.)
- The amount of scholarship and loan funds, if any, awarded to
students enrolled and the racial composition of students who have
received the awards.
- A list of the school's incorporators, founders, board
members, and donors of land or buildings, whether individuals or
organizations.
- A statement indicating whether any of the organizations
described in item (3) above have an objective of maintaining
segregated public or private school education at the time the
application is filed and, if so, whether any of the individuals
described in item (3) are officers or active members of those
organizations at the time the application is filed.
- The public school district and county in which the school is
located.
How to determine racial composition.
The racial composition of the student body, faculty, and
administrative staff may be an estimate based on the best information
readily available to the school, without requiring student applicants,
students, faculty, or administrative staff to submit to the school
information that the school otherwise does not require. Nevertheless,
a statement of the method by which the racial composition was
determined must be supplied. The identity of individual students or
members of the faculty and administrative staff should not be included
with this information.
A school that is a state or municipal instrumentality (see
Instrumentalities, near the beginning of this chapter),
whether or not it qualifies for exemption under section 501(c)(3), is
not considered to be a private school for purposes of the following
discussion.
Racially Nondiscriminatory Policy
To qualify as an organization exempt from federal income tax, a
private 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
that it does not discriminate against applicants and students on the
basis of race, color, or national or ethnic origin. Also, the school
must circulate information that clearly states the school's admission
policies. A racially nondiscriminatory policy toward students means
that the school admits the students of any race to all the rights,
privileges, programs, and activities generally accorded or made
available to students at that school and that the school does not
discriminate on the basis of race in administering its educational
policies, admission policies, scholarship and loan programs, and
athletic and other school-administered programs.
The IRS considers discrimination on the basis of race to include
discrimination on the basis of color or national or ethnic origin.
The existence of a racially discriminatory policy with respect to
the employment of faculty and administrative staff is
indicative of a racially discriminatory policy as to students.
Conversely, the absence of racial discrimination in the employment of
faculty and administrative staff is indicative of a racially
nondiscriminatory policy as to students.
A policy of a school that favors racial minority groups
with respect to admissions, facilities and programs, and
financial assistance is not discrimination on the basis of race when
the purpose and effect of this policy is to promote establishing and
maintaining the school's nondiscriminatory policy.
A school that selects students on the basis of membership in a
religious denomination or unit is not discriminating if
membership in the denomination or unit is open to all on a racially
nondiscriminatory basis.
Policy statement.
The school must include a statement of its racially
nondiscriminatory policy in all its brochures and catalogs dealing
with student admissions, programs, and scholarships. Also, the school
must include a reference to its racially nondiscriminatory policy in
other written advertising that it uses to inform prospective students
of its programs.
Publicity requirement.
The school must make its racially nondiscriminatory policy known to
all segments of the general community served by the school. Selective
communication of a racially nondiscriminatory policy that a school
provides solely to leaders of racial groups will not be considered an
effective means of communication to make the policy known to all
segments of the community. To satisfy this requirement, the school
must use one of the following two methods.
Method one.
The school may publish a notice of its racially nondiscriminatory
policy in a newspaper of general circulation that serves
all racial segments of the community. Such publication must be
repeated at least once annually during the period of the school's
solicitation for students or, in the absence of a solicitation
program, during the school's registration period. When more than one
community is served by a school, the school may publish the notice in
those newspapers that are reasonably likely to be read by all racial
segments in the communities that the school serves.
If this method is used, the notice must meet the following printing
requirements.
- It must appear in a section of the newspaper likely to be
read by prospective students and their families.
- It must occupy at least 3 column inches.
- It must have its title printed in at least 12 point bold
face type.
- It must have the remaining text printed in at least 8 point
type.
The following is an acceptable example of the notice:
|
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. |
|
Method two.
The school may use the broadcast media to publicize its
racially nondiscriminatory policy if this use makes the policy known
to all segments of the general community the school serves. If the
school uses this method, it must provide documentation showing that
the means by which this policy was communicated to all segments of the
general community was reasonably expected to be effective. In this
case, appropriate documentation would include copies of the tapes or
scripts used and records showing that there was an adequate number of
announcements. The documentation also would include proof that these
announcements were made during hours when they were likely to be
communicated to all segments of the general community, that they were
long enough to convey the message clearly, and that they were
broadcast on radio or television stations likely to be listened to by
substantial numbers of members of all racial segments of the general
community. Announcements must be made during the period of the
school's solicitation for students or, in the absence of a
solicitation program, during the school's registration period.
Exceptions.
The publicity requirements will not apply in the following
situations.
First,
if for the preceding 3 years the enrollment of a parochial or other
church-related school consists of students at least 75% of whom are
members of the sponsoring religious denomination or unit, the school
may make known its racially nondiscriminatory policy in whatever
newspapers or circulars the religious denomination or unit uses in the
communities from which the students are drawn. These newspapers and
circulars may be distributed by a particular religious denomination or
unit or by an association that represents a number of religious
organizations of the same denomination. If, however, the school
advertises in newspapers of general circulation in the community or
communities from which its students are drawn and the second exception
(discussed next) does not apply to the school, then it must comply
with either of the publicity requirements explained earlier.
Second,
if a school customarily draws a substantial percentage of its
students nationwide, worldwide, from a large geographic section or
sections of the United States, or from local communities, and if the
school follows a racially nondiscriminatory policy as to its students,
the school may satisfy the publicity requirement by complying with the
instructions explained, earlier, under Policy statement.
The school may demonstrate that it follows a racially
nondiscriminatory policy either by showing that it currently enrolls
students of racial minority groups in meaningful numbers or, except
for local community schools, when minority students are not enrolled
in meaningful numbers, that its promotional activities and recruiting
efforts in each geographic area were reasonably designed to inform
students of all racial segments in the general communities within the
area of the availability of the school. The question as to whether a
school demonstrates such a policy satisfactorily will be determined on
the basis of the facts and circumstances of each case.
The IRS recognizes that the failure by a school drawing its
students from local communities to enroll racial minority group
students may not necessarily indicate the absence of a racially
nondiscriminatory policy when there are relatively few or no such
students in these communities. Actual enrollment is, however, a
meaningful indication of a racially nondiscriminatory policy in a
community in which a public school or schools became subject to a
desegregation order of a federal court or are otherwise expressly
obligated to implement a desegregation plan under the terms of any
written contract or other commitment to which any federal agency was a
party.
The IRS encourages schools to satisfy the publicity requirement by
using either of the methods described earlier, even though a school
considers itself to be within one of the Exceptions. The
IRS believes that these publicity requirements are the most effective
methods to make known a school's racially nondiscriminatory policy. In
this regard, it is each school's responsibility to determine whether
either of the exceptions apply. Such responsibility will prepare the
school, if it is audited by the IRS, to demonstrate that the failure
to publish its racially nondiscriminatory policy in accordance with
either one of the publicity requirements was justified by one of the
exceptions. Also, a school must be prepared to demonstrate that it has
publicly disavowed or repudiated any statements purported to have been
made on its behalf (after November 6, 1975) that are contrary to its
publicity of a racially nondiscriminatory policy as to students, to
the extent that the school or its principal official was aware of
these statements.
Facilities and programs.
A school must be able to show that all of its programs and
facilities are operated in a racially nondiscriminatory manner.
Scholarship and loan programs.
As a general rule, all scholarship or other comparable benefits
obtainable at the school must be offered on a racially
nondiscriminatory basis. This must be known throughout the general
community being served by the school and should be referred to in its
publicity. Financial assistance programs, as well as scholarships and
loans made under financial assistance programs, that favor members of
one or more racial minority groups and that do not significantly
detract from or are designed to promote a school's racially
nondiscriminatory policy will not adversely affect the school's exempt
status.
Certification.
An individual authorized to take official action on behalf of a
school that claims to be racially nondiscriminatory as to students
must certify annually, under penalties of perjury, on
Schedule A (Form 990) or Form 5578, Annual
Certification of Racial Nondiscrimination for a Private School Exempt
From Federal Income Tax, whichever applies, that to the best of
his or her knowledge and belief the school has satisfied all
requirements that apply, as previously explained.
Failure to comply with the guidelines ordinarily will result in the
proposed revocation of the exempt status of a school.
Recordkeeping requirements. With certain exceptions,
given later, each exempt private school must maintain the following
records for a minimum period of 3 years, beginning with the year after
the year of compilation or acquisition.
- Records indicating the racial composition of the student
body, faculty, and administrative staff for each academic year.
- Records sufficient to document that scholarship and other
financial assistance is awarded on a racially nondiscriminatory
basis.
- Copies of all materials used by or on behalf of the school
to solicit contributions.
- Copies of all brochures, catalogs, and advertising dealing
with student admissions, programs, and scholarships. (Schools
advertising nationally or in a large geographic segment or segments of
the United States need only maintain a record sufficient to indicate
when and in what publications their advertisements were
placed.)
The racial composition of the student body, faculty, and
administrative staff may be determined in the same manner as that
described at the beginning of this section. However, a school may not
discontinue maintaining a system of records that reflects the racial
composition of its students, faculty, and administrative staff used on
November 6, 1975, unless it substitutes a different system that
compiles substantially the same information, without advance approval
of the IRS.
The IRS does not require that a school release any personally
identifiable records or personal information except in accordance with
the requirements of the Family Educational Rights and Privacy Act of
1974. Similarly, the IRS does not require a school to keep records
prohibited under state or federal law.
Exceptions.
The school does not have to independently maintain these records
for IRS use if both of the following are true.
- Substantially the same information has been included in a
report or reports filed with an agency or agencies of federal, state,
or local governments, and this information is current within 1
year.
- The school maintains copies of these reports from which this
information is readily obtainable.
If these reports do not include all of the information
required, as discussed earlier, records providing such remaining
information must be maintained by the school for IRS use.
Failure to maintain records.
Failure to maintain or to produce the required records and
information, upon proper request, will create a presumption that the
organization has failed to comply with these guidelines.
Previous | First | Next
Publication Index | 2002 Tax Help Archives | Tax Help Archives | Home