Trump Administration Proposes Ending Tax Exemptions for Race-Conscious Schools

Key facts

• The Trump administration proposed new regulations to end federal tax-exempt status for private schools that discriminate based on race.
• The rules would affect admissions, scholarships, loans, and all other school programs considering race.
• The Treasury Department estimates up to 18,000 institutions and 750,000 students could be impacted.
• Civil rights groups contend the move undermines efforts to address historical inequities.
• Schools can continue to use race-neutral criteria for disadvantaged students and maintain religious affiliations.

The Trump administration has proposed new regulations that would revoke the tax-exempt status of private schools that consider race in their admissions, scholarships, or other programs. The U.S. Treasury Department and Internal Revenue Service (IRS) issued the proposed rules, framing them as a move to end racial discrimination in education and restore merit-based opportunity.

Treasury Secretary Scott Bessent stated that schools rebranding race-based preferences as equitable or diversity-enhancing does not alter their discriminatory nature. The proposal aims to align with recent Supreme Court decisions that have limited the consideration of race in college admissions. It would apply to all aspects of school operations, including admissions, educational policies, scholarships, loans, and athletics.

Civil rights advocates and organizations like the American Association of University Professors (AAUP) have criticized the proposal. AAUP President Todd Wolfson called it an "affirmative attempt to turn civil-rights law against the very people it was enacted to protect." They argue that such diversity practices are crucial for addressing historical inequities faced by marginalized ethnic minorities.

The Treasury Department estimates that the proposed regulations could impact as many as 18,000 private educational institutions and affect approximately 750,000 students who might otherwise qualify for race-based scholarships. The rules would not prohibit schools from maintaining religious missions or selecting students based on religious affiliation. Additionally, schools would still be permitted to assist disadvantaged students through race-neutral criteria such as income, geography, or first-generation status. The final regulations are slated to take effect for taxable years beginning on or after May 31, 2027, allowing institutions time to adjust their policies.