The Department of the Treasury and the Internal Revenue Service (IRS) have issued proposed regulations to revoke federal tax-exempt status from private schools that engage in racial discrimination, fulfilling President Trump's Executive Orders aimed at ending discrimination and restoring merit-based opportunity.
Treasury Secretary Scott Bessent emphasized the administration's stance, saying, "Under President Trump, this Administration is standing up for America’s students by ensuring racial discrimination has no place in American education." He added that schools rebranding race-based preferences as equitable or inclusive would not alter their discriminatory nature, and institutions continuing such practices would lose federal tax-exempt benefits.
IRS Chief Executive Officer Frank J. Bisignano reinforced this, stating, "Private educational institutions that promote discriminatory practices will no longer be afforded the benefits of federal tax-exempt status." The proposed rule would apply to private primary, secondary, college, university, professional, and trade schools, potentially affecting up to 18,000 institutions. It covers discrimination based on race, color, or national or ethnic origin across admissions, educational policies, scholarships, athletics, and all school-administered programs.
These regulations update existing guidance to align with longstanding public policy and Supreme Court precedents, including Brown v. Board of Education and Students for Fair Admissions v. Harvard. They also eliminate outdated provisions that previously allowed certain racial preferences. While religious schools may continue to select students based on genuine religious affiliation, and institutions can use race-neutral criteria like family income or geographic location to assist disadvantaged students, decisions based on race, color, or national or ethnic origin will be prohibited. The final regulations are slated to apply to taxable years beginning on or after May 31, 2027.