What parameters determine whether a non-profit can maintain its tax-exempt status while dispensing benefits based on protected characteristics?
I'm trying to understand the pattern of organizations that dispense benefits to a certain protected characteristic based on its underrepresentation (e.g. Scholarships for X), but exclude demographics even less well represented.
Because tax-exempt status is not the same as legality, I've created a separate question for legality. This is about tax-exempt status.
Possibly relevant rulings:
- Masterpiece Cakeshop v. Colorado Civil Rights Commission
- Schuette v. Coalition to Defend Affirmative Action
- Before 2018, the Boy Scouts maintained legal discrimination and its nonprofit status while barring female and non-binary applicants. The Boy Scouts voluntarily opened its membership, but did not have a legal obligation nor did it risk its tax exempt status.
- A number of organizations (DFBSST, UNCF, Ron Brown Scholar Program) award scholarships only to certain ethnicities underrepresented in higher education. Would they be able to deny a scholarship to e.g. a Native American student, or any other student with even less representation in higher education than their target demographic?
- In certain programs, like athletic scholarships, certain ethnicities normally perceived as "privileged" are in fact largely underrepresented. Would it be legal for a non-profit to award scholarships only to these underrepresented groups?
It was my understanding that positive discrimination was called "affirmative action" in the United States, and that it generally did not allow hard quotas (or racial exclusion, which is a quota with an allowance of zero for certain groups).
I'm ignoring the complication of religious organizations, and also the fact that the ability to discriminate may be restricted by a more conservative Supreme Court. I understand that maintaining non-profit status and legality are two separate matters.
If this is too complex a question or tries to answer too many things at the same time (scholarships, food, nonprofit status vs. legality), I'm happy to break it into multiple questions so it is helpful for future searchers.
If a specific example is helpful, consider the Ron Brown Scholar Program: "Applicants for this scholarship must be low-income Black or African American high school seniors."