Sponsors (3)
Last progress April 7, 2025 (9 months ago)
Introduced on April 7, 2025 by Nicole Malliotakis
Referred to the House Committee on Ways and Means.
Creates a new tax penalty and reporting obligations for tax-exempt educational institutions found to have violated Title VI of the Civil Rights Act. Institutions must disclose civil-rights judgments on annual information returns, pay a penalty (the greater of $100,000 or 5% of yearly administrative compensation) when a violation is determined, and face IRS review of ongoing tax-exempt status after repeated violations; the rules apply to determinations made after enactment.
Add a new section 6720D to the Internal Revenue Code imposing a penalty on specified tax-exempt educational institutions for each determination that the institution violated Title VI of the Civil Rights Act of 1964.
A specified tax-exempt educational institution is liable for the penalty on the date of the judgment referred to in the section (the civil judgment finding a Title VI violation).
If any determination of civil rights violation is vacated, overturned, or otherwise reversed, the Secretary must refund any penalty paid for that determination, except that this does not prevent applying the section to determinations later reinstated or redetermined.
Defines 'determination of civil rights violation' as a civil judgment of a Federal court of competent jurisdiction that the institution violated any provision of Title VI of the Civil Rights Act of 1964.
Authorizes the Secretary to treat two or more judgments based on the same facts and circumstances as a single 'determination of civil rights violation' for purposes of this section and related IRC provisions.
Who is affected and how:
Tax-exempt educational institutions (colleges, universities, private schools, and other nonprofit educational entities) are the primary targets. When found to have violated Title VI, these institutions will face a new financial penalty (minimum $100,000 or 5% of annual administrative pay), mandatory reporting of civil-rights judgments on their annual information returns, and heightened risk of losing tax-exempt status after repeated violations.
Students, faculty, and staff at affected institutions may experience downstream effects: enforcement and corrective actions could alter institutional policies, funding, or services; litigation and reputational harm could also affect enrollment and employment.
Donors and grantors could be affected if an institution’s tax-exempt status is revoked or if public reporting of judgments changes donor behavior.
The IRS will have increased administrative and enforcement responsibilities to process new reports, assess penalties, and conduct repeated-violation reviews; this may require more resources or procedural updates.
Communities and civil-rights claimants could gain greater transparency and stronger remedies through public reporting and the prospect of meaningful monetary and tax consequences for violations.
Overall implications: The change raises the cost of proven Title VI violations and increases transparency, which may deter discriminatory practices but also raise legal and compliance costs for educational nonprofits. Some institutions may challenge the law’s scope or application, particularly where questions of religious freedom or differing interpretations of Title VI arise.