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IRS Expands Private Schools Options to Publicize Racially Nondiscriminatory Policy

June 26, 2019

On May 7, 2019 the IRS released an advance version of Rev. Proc. 2019-22, which modifies Rev. Proc. 75-50 by providing an additional method that a private school may use to publicize the school’s racially nondiscriminatory policy – on a website.

The IRS has long required that for a private school to qualify as tax-exempt, it must have and follow a racially nondiscriminatory policy regarding its students. Rev. Proc. 75-50 provides guidelines and recordkeeping requirements for determining whether a private school has adopted a racially nondiscriminatory policy and operates in a bona fide manner in accordance with that policy.

Specifically, the revenue procedure states that the school must include the statement in its charter, bylaws, or other governing instrument, or in a resolution of its governing body, and must further include a statement of its policy in all of its brochures and catalogs dealing with student admissions, programs, and scholarships.

Furthermore, private schools must make their racially nondiscriminatory policy known to all segments of the community served by the school. Rev. Proc. 75-50 provides two options for meeting this requirement:

  1. Publishing a notice of the racially nondiscriminatory policy in a newspaper of general circulation serving all racial segments of the community at least once annually, or
  2. A school may use broadcast media and secure documentation demonstrating that there were a sufficient number of announcements made during hours where it would be brought to the attention of the general community and, further, that the broadcast radio or television station is likely to be listened to by substantial numbers of members of all racial segments of the general community.

Rev. Proc. 2019-22

The new revenue procedure adds a third method to those two provided by the 1975 revenue procedure; the school may display a notice of its racially nondiscriminatory policy on its primary publicly accessible Internet homepage at all times during its tax year in a manner reasonably expected to be noticed by visitors to the homepage.

The revenue procedure 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 page.

Among the 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
  • Whether the notice is visible without a visitor having to do anything other than simple scrolling on the homepage

The IRS guidance states that 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.

Lastly, 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 the new publication method.

Rev. Proc. 2019-22 is effective May 28, 2019.

Mazars Insight

This is a welcome expansion of the options for exempt private schools to publicize their racial nondiscriminatory policy, which previously could only be done through a 3rd party.

As Form 990, Schedule E, specifically asks “Has the organization publicized its racially nondiscriminatory policy through newspaper or broadcast media,” this change will make it easier for organizations to be able to answer yes and show that they follow IRS “best practices.”