The Department of the Treasury and the Internal Revenue Service (IRS) have issued proposed regulations aimed at revoking federal tax-exempt status for private schools found to engage in racial discrimination. This move aligns with President Trump's Executive Orders focused on ending discrimination and restoring merit-based opportunity.
Treasury Secretary Scott Bessent said, "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, inclusive, or diversity-enhancing does not change their discriminatory nature." IRS Chief Executive Officer Frank J. Bisignano emphasized that "Private educational institutions that promote discriminatory practices will no longer be afforded the benefits of federal tax-exempt status."
The proposed rule clarifies longstanding principles, reflecting Supreme Court decisions like Brown v. Board of Education, Bob Jones University v. United States, and Students for Fair Admissions v. Harvard. It would apply to all private primary, secondary, college, university, professional, and trade schools, affecting an estimated 18,000 institutions across admissions, scholarships, athletics, and other programs.
Outdated IRS guidance permitting racial preferences in admissions and financial aid would be eliminated. The proposal does not impact religious schools' ability to maintain their mission or select students based on genuine religious affiliation. Schools can still assist disadvantaged students using race-neutral criteria such as income or first-generation status. The final regulations would apply to taxable years beginning on or after May 31, 2027.