Key facts
- The Treasury Department and IRS have proposed new regulations to revoke tax-exempt status for private schools with race-based programs.
- The rules target policies related to admissions, scholarships, loans, and athletics.
- Officials state the aim is to end racial discrimination in education and ensure merit-based opportunity.
- The proposal draws on recent Supreme Court rulings limiting race considerations in admissions.
- Religious schools would be exempt from these specific race-based restrictions if selecting based on religious affiliation.
- Race-neutral criteria such as income or first-generation status can still be used for admissions and financial aid.
The Trump administration, through the Treasury Department and the Internal Revenue Service (IRS), has proposed new regulations that would strip private schools of their federal tax-exempt status if they maintain policies discriminating on the basis of race, color, or national or ethnic origin. This move is framed by officials as a delivery on President Trump's executive orders to end discrimination and restore merit-based opportunity in education.
Treasury Secretary Scott Bessent stated that schools rebranding race-based preferences as equitable or diversity-enhancing does not alter their discriminatory nature, and institutions continuing such practices will lose tax benefits. IRS Chief Executive Officer Frank J. Bisignano echoed this sentiment, warning that schools engaging in racial discrimination should expect to lose their tax-exempt status.
The proposed regulations update guidance to reflect the principle that tax-exempt status is conditioned on compliance with public policy, including the prohibition against racial discrimination, as established in landmark Supreme Court cases like Brown v. Board of Education and Students for Fair Admissions v. Harvard. Under the proposed rule, a private school would not qualify for tax-exempt status if it adopts, maintains, or enforces a policy or practice that discriminates on the basis of race, color, or national or ethnic origin. This would apply across admissions, educational policies, scholarships, loans, athletics, and all other school-administered or supported programs.
The proposal is estimated to affect up to 18,000 private educational institutions, including primary and secondary schools, colleges, universities, and trade schools, potentially impacting around 750,000 students who may qualify for race-based scholarships. The regulations would eliminate outdated IRS guidance that permitted certain racial preferences in admissions and financial aid, deeming these provisions inconsistent with a uniform nondiscrimination standard.
However, the proposal would not prevent private schools from maintaining religious missions or selecting students based on genuine religious affiliation. It also allows schools to assist disadvantaged students using race-neutral criteria such as family income, geographic location, first-generation status, or academic achievement. The final regulations are slated to take effect for taxable years beginning on or after May 31, 2027, providing institutions time to adjust their policies.
Civil rights advocates and the American Association of University Professors (AAUP) have criticized the proposal, with the AAUP stating it represents an "affirmative attempt to turn civil-rights law against the very people it was enacted to protect." They argue that measures intended to dismantle racial exclusion are not equivalent to policies designed to preserve it.