Did you know that most nonprofits can legally discriminate? According to the Supreme Court, the tax laws that recognize tax-exemption allow 501(c)(3) and other exempt organizations (other than schools) to selectively provide their services to only certain groups of individuals. For example, in Boy Scouts of America v Dale, that court ruled that the First Amendment right of freedom of association meant that Boy Scouts of America could exclude gays and lesbians from its program. Only last month, Boy Scouts reversed its ban on gay and lesbian scouts, though not on adult scout leaders.
Even in California, where the Unruh Civil Rights Act generally prohibits business establishments, including some nonprofits, from discriminating based on certain protected categories, the state Supreme Court has upheld the right of Boy Scouts’ right to discriminate based on sexual orientation, finding that the organization is not a business establishment but a “charitable, expressive, and social organization.”
Legislation recently introduced by State Senator Ricardo Lara would invalidate the state court’s ruling by denying exemption from state taxes to any “public charity youth organization” that discriminates on the bases of gender identify, race, sexual orientation, nationality, religion or religious affiliation. Similar legislation has been proposed in other states.
Incidentally, this brings us to the current IRS scandal involving 501(c)(4) organizations. Some have argued that nonprofits are entitled to full First Amendment protections. However, there is a glaring fallacy in this argument, which equally applies to discrimination by nonprofits. That fallacy is based on the fact that there is NO RIGHT to tax-exempt status. It is a privilege granted by Congress and state legislators. That privilege can and does come with restrictions, though currently one of those restrictions is not a ban on discrimination.