The IRS deadline for filing the document commonly known as “The Nondiscrimination Form” is fast approaching. It is always due five months after the organization’s fiscal year end. So for organizations that have a calendar fiscal year your form is due May 15!
The official name of the document is the “Annual Certification of Racial Nondiscrimination for a Private School Exempt From Federal Income Tax” (Form 5578). So if you are a tax-exempt organization (church or other religious organization) that operates, controls or supervises a private school, you are required to file this document every year. Form 5578 requires your organization to adhere to several requirements assuring compliance. Let me explain more fully.
Purpose. This certification aims to ensure that all enrollees of private schools are allowed as students with full rights, privileges, programs and activities that everyone else has access to. The school certifies to the federal government that it does not discriminate on the basis of race in the administration of its policies, scholarships and financial aid, athletics and other school-administered programs. The IRS has determined that “schools” includes preschools. Additionally, “the basis of race” is to include discrimination on the basis of color or national or ethnic origin.
Certification Requirements. An individual authorized to act on behalf of the organization attests that Sections 4.01 through 4.05 are in place. These sections describe the use of the nondiscrimination statement by the school.
Section 4.01—To file Form 5578 the school must include a nondiscriminatory statement in at least one of the following: (1) the school’s charter, (2) the bylaws (or other governing instrument) of the organization, or (3) in a resolution adopted by the governing body.
Section 4.02—The school must include a statement of nondiscrimination in all publications pertaining to student enrollment, student activities, educational programs and scholarship or financial aid programs. This statement must also be referenced in all written advertising aimed at prospective students. The following minimal discrimination statement is allowed:
“The [name] school admits students of any race, color, and national or ethic origin.”
Section 4.03—The school is required to place a public notice of its nondiscrimination policy. There are two ways to make this happen and the organization can choose either. The school may place the notice in newspapers (in all racial communities it serves and in newspapers that are likely to be reasonably read) during one of the following periods: recruitment, solicitation or enrollment. This notice must be published at least once a year. This is the notice recommended by the IRS:
“The [name] 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.”
Or, the school may purchase broadcast media advertising. If this method is used, the school must provide the content of the commercials, the broadcast schedule and the targeted market as proof that it tried to reach all racial groups in the community from which it attracts students.
This section does not apply if—
- At least 75% of the students come from the sponsoring denomination or church. In such a case, the policy may be made known in the publications aimed at those communities.
- A substantial percentage of students are nationwide or cover a larger geographical territory.
- Enrollment in the school reflects a nondiscriminatory practice. The school will be required to present facts and circumstances that prove it has actively reached out into all communities in the area it serves and that enrollment is racially diverse.
Section 4.04—The school must be able to show that the nondiscriminatory policy guides all the programs and facilities.
Section 4.05—All financial aid and scholarship programs must adhere to the nondiscrimination policy.
Form 5578 is very easy to fill out. And you probably have all the requirements of Sections 4.01-4.05 in place. But, it is always a good idea to check annually that these things are in place. You can download the IRS Form, complete with detail instructions, by clicking here.
The certified public accounting firm of Cox and Associates CPAs has been serving churches and nonprofit organizations since 1996. Our goal is to achieve excellence in the provision of tax, accounting, auditing, financial education, consultation, and other related businesses services to our clients. Call us with your questions at (281) 399-8153.