The U.S. Department of the Treasury and the Internal Revenue Service have issued a new proposal that would end federal tax-exempt status for private schools and colleges that engage in race-based admissions, policies, or programs.
Federal law provides tax-exempt status to organizations that operate exclusively for charitable and educational purposes; private schools, colleges, and universities have historically fallen under this designation. However, the Trump administration’s latest proposal would remove this designation for any private primary or secondary school, college, university, professional school, or trade school that “enforces a policy or practice that discriminates on the basis of race, color, or national or ethnic origin … across admissions, educational policies, scholarships and loans, athletics, and every other school-administered or school-supported program.”
“Under President Trump, this administration is standing up for America’s students by ensuring racial discrimination has no place in American education,” said Treasury Secretary Scott Bessent. “Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature. Today’s Treasury and IRS proposed regulations establish a clear standard, and the institutions that continue to use discriminatory practices will no longer receive the benefits of federal tax-exempt status.”
“Private educational institutions that promote discriminatory practices will no longer be afforded the benefits of federal tax-exempt status,” said IRS Chief Executive Officer Frank J. Bisignano. “Today’s proposed regulations put institutions on notice and schools that continue to engage in racial discrimination should expect to lose that status.”
The proposal is the latest in a string of attempts by the Trump administration to end diversity, equity, and inclusion in higher education. Earlier this year, the U.S. Department of Housing and Urban Development declared that race-based “affinity housing” — such as residence halls with dedicated space for Black student groups — violates federal anti-discrimination law. Additionally, several U.S. medical schools are under federal investigation for allegedly admitting Black and Hispanic student applicants with lower academic qualifications than their White and Asian peers.
Notably, the recent Treasury and IRS proposal “would not prevent a private school from maintaining a religious mission, curriculum, or program of religious observance,” nor would it prevent schools from supporting disadvantaged students through “race-neutral criteria such as family income, geographic location, first-generation status, individual hardship, military family status, or academic achievement.”
“The Trump administration’s latest proposal threatens to use the power of the federal government to punish schools and colleges for doing what we should expect them to do: recognize barriers to opportunity and work to remove them,” argues Denise Forte, president and CEO of EdTrust. “Addressing racial inequity is not discrimination. Students of color continue to face real and persistent barriers to accessing educational opportunities. Threatening the tax-exempt status of institutions for recognizing those barriers does nothing to make education fairer. It risks making it harder for schools and colleges to reach, support, and create opportunities for students who have too often been locked out.”
If approved, the new regulations would apply to taxable years beginning on or after May 31, 2027. The Treasury Department and IRS estimate this proposal could affect as many as 18,000 private educational institutions across the country.
