University Accountability Act Links Tax-Exempt Status to Civil Rights Compliance, Introduces Fines

This bill, the University Accountability Act, takes aim at tax-exempt universities and colleges by tying their finances and status directly to civil rights compliance. It amends the Internal Revenue Code to introduce financial penalties for institutions found by a federal court to have violated Title VI of the Civil Rights Act of 1964. The penalty isn't pocket change – it's set at the greater of $100,000 or 5% of the institution's administrative compensation for the year the violation occurred (as outlined in the new Section 6720D). The core idea is to create a significant financial reason for these institutions to strictly adhere to civil rights laws.

Dollars and Due Diligence: The New Cost of Non-Compliance

The main punch of this legislation comes from the financial penalties. If a university loses a Title VI case in federal court, it could face a hefty fine. Think about it: for a large university with high administrative salaries, 5% could be a substantial sum, potentially impacting budgets for programs or student services. This financial stick (detailed in Section 6720D) is clearly designed to make institutions think twice about policies or actions that could lead to discrimination claims. It also mandates that any such court determinations must be reported on the university's annual tax returns (Section 6033), adding a layer of public transparency.

Repeat Offenders Under Review

It's not just about one-off penalties. The bill adds a provision (Section 501(s)) requiring the Secretary of the Treasury to review an institution's tax-exempt status if it racks up "more than two" civil rights violation determinations. While the bill doesn't explicitly define the timeframe for accumulating these violations, the implication is clear: repeated non-compliance could jeopardize the tax-exempt status universities heavily rely on. This raises the stakes considerably beyond just fines. Furthermore, the standard time limits for the IRS to assess taxes or for institutions to claim refunds related to these penalties are waived, meaning these issues could hang over an institution's head indefinitely.

Real-World Ripple Effects

So, what does this mean on the ground? For students and staff, the hope is that the financial risks will push universities to be more proactive about preventing discrimination and ensuring fair treatment. For university administrators, it means increased legal and financial risks, potentially leading to more cautious policies, rigorous internal reviews, and definitely more paperwork reporting any violations (Section 6033). There's also a potential burden, especially for smaller institutions where a $100,000 fine or the cost of fighting a claim could be crippling. While aiming for accountability, the effectiveness hinges on how consistently Title VI violations are determined by courts and how the IRS applies the review process for tax-exempt status.