Two Important Questions

In recent days, I’ve been asked two timely questions:

  1. Is it OK for a college to contribute funds to organizations leading protests for racial justice?
  2. Is it OK for a school to establish a scholarship fund just for members of a certain racial group?

These are questions of law, not policy.

The first question is answered by examining the exact wording of the college’s tax-exempt purposes. This wording is set forth somewhere—maybe in the college’s bylaws, maybe in some document submitted to a government entity (e.g., the IRS application for tax-exempt status or the application to the state for recognition as a nonprofit corporation) or in a mission statement crafted a long time back by some lawyer connected to the college (e.g., the college’s 1970 general counsel).

I prefer to examine the bylaws or a document submitted to a government entity. These are highly unlikely to reflect bias or just one individual’s preferences. A mission statement is less reliable in this regard.

In any event, a charity can spend its funds only in furtherance of its stated tax-exempt purposes. If the call is close, it needs to be made in a written opinion of a competent attorney.

The “formal” answer to the second question is no. Scholarship funds need on paper to skirt race, religion, gender, national origin and single parenthood. Title IX comes into play here as well as some U.S. Supreme Court cases dealing with constitutional issues.

One way to finesse Title IX and constitutional problems is, for example, to set up a scholarship fund to provide for individuals who have a demonstrated interest in African American history (clearly within the realm of an educational purpose).

But caution: Setting up such a fund is not a DIY project. The skills of an expert lawyer are required. In particular, the selection of scholarship recipients needs to follow a basically race-neutral procedure.
 

By Jon Tidd
 

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