Filing the certificate of racial nondiscrimination (IRS Form 5578) is one of the most commonly ignored federal reporting requirements of private schools and preschools, including ones operated, supervised, or controlled by churches and other religious organizations.
But it is due every year.
What is a private school?
A private school is defined as an educational organization that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly conducted. The term includes primary, secondary, preparatory, or high schools, as well as colleges and universities, whether operated as a separate legal entity or an activity of a church.
Key point. The term school also includes preschools, and this is what makes the reporting requirement relevant for many churches. As many as 25 percent of all churches operate a preschool program.
Private schools must meet certain requirements
The IRS requires that a private school have:
- a statement in its charter, bylaws, or other governing instrument, or in a resolution of its governing body, that is has a racially nondiscriminatory policy toward students.
- a statement of its racially nondiscriminatory policy toward students in all its brochures and catalogs dealing with student admissions, programs, and scholarships.
The IRS also requires that a school make its racially nondiscriminatory policy known to all segments of the general community served by the school either online, in the local newspaper, or via broadcast media (see below).
What is an acceptable public notice?
The IRS has offered this template:
Notice Of Nondiscriminatory Policy As To Students
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.
Exceptions to the public notice requirement
The publicity requirement is not required if one or more exceptions apply. These include the following:
- During the preceding three years, the enrollment consists of students at least 75 percent of whom are members of the sponsoring church or religious denomination, and the school publicizes its nondiscriminatory policy in religious periodicals distributed in the community.
- The school draws its students from local communities and follows a racially nondiscriminatory policy toward students and demonstrates that it follows a racially nondiscriminatory policy by showing that it currently enrolls students of racial minority groups in meaningful numbers.
- The school can demonstrate that all scholarships or other comparable benefits are offered on a racially nondiscriminatory basis.
Online notice options
Private schools can post their racially nondiscriminatory policy online, per IRS Revenue Procedure 2019022 (2019).
To do that, a school must display a notice of its racially nondiscriminatory policy on its primary publicly accessible Internet homepage at all times during its taxable year (excluding temporary outages due to website maintenance or technical problems) in a manner reasonably expected to be noticed by visitors to the homepage.
Per the IRS, a publicly accessible Internet homepage is one that does not require a visitor to input information, such as an email address or a username and password, to access the homepage.
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, and whether the notice is visible without a visitor having to do anything other than simple scrolling on the homepage.
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. 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.
Other notice options
A school may publish its racially nondiscriminatory policy at least once a year in a newspaper of general circulation, or via broadcast media.
Filing the certificate of racial nondiscrimination
The certificate of racial nondiscrimination is due by the fifteenth day of the fifth month following the end of the organization’s fiscal year.
However, for organizations that operate on a calendar-year basis, the Form 5578 deadline is May 15, 2024. Schools must also maintain supporting records documenting compliance with the policy in order to retain their tax-exempt status.
Form 5578 is easy to complete. A church official simply identifies the church and the school and certifies that the school has “satisfied the applicable requirements of sections 4.01 through 4.05 of Revenue Procedure 75-50.”
Key point. Independent religious schools that are not affiliated with a church or denomination and that file Form 990 do not file Form 5578. Instead, they make their annual certification of racial nondiscrimination directly on Form 990 (Schedule E).
