GSA Draft Certification May Indicate What Will Constitute Contrary to Fundamental Public Policy Racial Discrimination for Tax Exemption Purposes
Last month the U.S. General Services Administration (GSA) released a draft revision of the information that must be submitted by applicants for and recipients of federal financial assistance. The draft includes new language addressing what constitutes illegal discrimination based on race or color, which such applicants and recipients must certify they do not engage in. This new language may indicate how Treasury and the IRS will approach what constitutes what constitutes racial discrimination that is contrary to fundamental to public policy for purposes of tax exemption under Internal Revenue Code section 501(c)(3) in new guidance promised by the 2025-2026 Priority Guidance Plan.
Here is the new language provided by the GSA:
Will comply with the U.S. Constitution, all Federal laws, and relevant executive orders prohibiting unlawful discrimination on the basis of race or color in the administration of federally funded programs (See Titles VI and VII of the Civil Rights Act of 1964, the Equal Protection Clause of the Fourteenth Amendment, and 2 C.F.R. § 200.303 Internal controls). Federal antidiscrimination laws apply to programs or initiatives that involve discriminatory practices, including those labeled as Diversity, Equity, and Inclusion (DEI) or “diversity, equity, inclusion, and accessibility” (DEIA) programs. Entities that receive federal funds, like all other entities subject to federal antidiscrimination laws, must ensure that their programs and activities comply with federal law and do not discriminate on the basis of race or color. Examples of practices that may violate applicable Federal anti-discrimination laws include:
(i) Granting preferential treatment based on race or color, such as race-based scholarships or programs, preferential hiring or promotion practices, or access to facilities or resources based on race or ethnicity, including through the use of “cultural competence” requirements, “overcoming obstacles” narratives, or “diversity statements;”
(ii) Segregation based on race or color, such as race-based training sessions, segregation in facilities or resources, or implicit segregation through program eligibility;
(iii) Other unlawful use of race or color as criteria, such as race-based “diverse slate” policies in hiring, race-based selection for contracts, or race-based program participation or resource allocation;
(iv) Training programs that stereotype, exclude, or single out individuals based on protected characteristics or create a hostile environment; or
(v) Retaliation by taking adverse actions against employees, participants, or beneficiaries because they engage in protected activities related to opposing DEI practices they reasonably believe violate federal antidiscrimination laws. Protected activities include raising concerns or filing complaints about, or objecting to or refusing to participate in, discriminatory programs, trainings, or policies;