Topline
The Treasury Department and IRS released proposed regulations on Thursday that would deny tax-exempt status to private schools with policies or programs they deem racially discriminatory, marking the Trump administration’s latest effort to scrap initiatives designed to support minority students.
People walk through Harvard Yard on the Harvard University campus in Cambridge, Massachussetts, on April 15, 2025. (Photo by Joseph Prezioso / AFP) (Photo by JOSEPH PREZIOSO/AFP via Getty Images)
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Key Facts
The proposed rules would deny 501(c)(3) tax-exempt status to private schools that the administration believes discriminates based on race, color or national or ethnic origin in admissions, scholarships, athletics and all other school-administered programs.
The Treasury Department and IRS estimate the regulations could affect as many as 18,000 private institutions, including K-12 schools, colleges and universities, professional schools and trade schools.
Schools could still use race-neutral factors like family income, geography, first-generation status, individual hardship, military-family status and academic achievement to assist and expand educational opportunity for disadvantaged students, according to Thursday’s release.
A statement from Treasury Secretary Scott Bessent in Thursday’s release warns schools “rebranding” policies or programs as promoting inclusion, equity or diversity will not safeguard their tax-exempt status.
The proposed rules would apply to taxable years beginning May 31, 2027, which the release states will give schools time to review and change their policies and programs.
KEY BACKGROUND
The Treasury Department and IRS linked the proposed regulations to the Brown v. Board of Education, Bob Jones University v. United States and Students for Fair Admissions v. Harvard Supreme Court decisions, claiming they will restore merit-based opportunity and align guidance with constitutional and judicial principle. Brown v. Board of Education asserted that racial segregation in schools violates the Constitution, while Bob Jones University v. United States established that the IRS can deny tax-exempt status to institutions that violate public policy and Students for Fair Admissions v. Harvard ended race-conscious admissions at colleges and universities. Existing IRS guidance already requires private schools to maintain racially nondiscriminatory policies and annually certify compliance.
CRUCIAL QUOTE
“Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature,” Treasury Secretary Scott Bessent said in a statement Thursday.
WHAT TO WATCH FOR
The proposed regulations will have to go through a public comment period before they can be finalized, which could prompt changes.
FURTHER READING
Five Things The New Data About Race-Conscious College Admissions Tell Us (Forbes)
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