Title IX, Tax-Exemption, and Transgender Students: Using Federal Guidelines to Determine the Tax-Exempt Status of Single-Sex Institutions

Abstract

The current test for determining tax-exemption status, that an organization must be in compliance with “fundamental public policy,” is outdated and unclear for a variety of organizations, including single-sex institutions. Without specific guidelines for determining what constitutes “fundamental public policy,” and with the IRS refusing to state whether gender discrimination is in violation of “fundamental public policy,” single-sex institutions are left unsure of whether they will be able to continue their status as tax-exempt organizations in the future. This uncertainty becomes especially frightening with the recent policy push for the rights of students that fall outside of the gender binary. Should the IRS maintain their current test of simply being in violation of fundamental public policy as grounds to revoke any organization’s tax-exempt status, single-sex schools are increasingly at risk of losing their status as public policy quickly progresses. Before losing their status as tax-exempt organizations, single-sex schools should be able to readily determine whether they are in violation of the abstract notion of “fundamental public policy.” This Article argues for a change in the current tax-exemption test, specifically asserting that the requirements for single-sex schools already incorporated in Title IX should be balanced as factors in determining whether a single-sex institution adheres to the notion of “fundamental public policy.” Most scholars have focused either on proposing a variety of potential solutions to the test for tax-exemption or have explored the experience of transgender individuals at single-sex institutions. Though these articles provide important context, the articles fail to address these intertwining concerns in tandem. In examining the tax-exemption status of single-sex institutions, it is crucial to analyze the current Title IX requirements for these schools as well as how these policy shifts could affect single-sex institutions in more appropriately accommodating their diverse population climates. This Article demonstrates the problems with previously suggested solutions to the tax-exemption test and proposes instead an update to the “fundamental public policy” requirement by viewing the issue through the lens of current requirements for single-sex education.