The Trump administration plans to propose a rule affecting private schools and colleges, possibly removing their tax-exempt status if racial preferences are offered. This aims to dismantle programs helping Black, Hispanic, and other minority students.
The Treasury Department announced this regulatory change, set to take effect after May 2027 if finalized. The proposed rule seeks to eliminate policies that aid students based on race, considering such benefits in admissions and scholarships incompatible with these changes.
This move is an extension of efforts by the Trump administration to eliminate diversity, equity, and inclusion (DEI) policies in education. Past efforts have invoked Civil Rights-era laws to reverse policies believed to discriminate against white and Asian American students.
Impact on Educational Institutions
Reactions from higher education leaders show significant concern. Mike Gavin, president of the Alliance for Higher Education, criticized the draft rules, viewing them as a blatant attack on educational access for working-class Americans and people of color.
The proposal could affect approximately 18,000 private educational institutions. For over a century, private universities in the U.S. have enjoyed tax exemptions due to their public contributions, saving them millions annually. President Trump previously threatened this tax benefit for Harvard University, claiming it as a tactic in his criticism of what he terms “wokeness” in higher education.
Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature.
At the heart of this issue is whether institutions rebrand DEI initiatives while perpetuating race-based discrimination. Treasury Secretary Scott Bessent emphasized that rebranding does not alter the discriminatory essence.
Precedents and Legal Considerations
Historically, revoking tax-exempt status from colleges is rare. Bob Jones University in South Carolina lost this benefit in the 1970s due to interracial dating policies and later regained it in 2017 after policy changes.
Legal frameworks prohibit the IRS from targeting organizations on ideological grounds. Tax-exempt entities must meet IRS standards on lobbying, political activities, reporting, and more.
Potential Outcomes and Reactions
This proposal could influence donations, often intended for scholarships. The Council of Independent Colleges’ president, Marjorie Hass, and National Association of Independent Colleges and Universities’ vice president, Tim Powers, highlight concerns about new compliance challenges, noting schools’ commitment to civil rights laws.
While the IRS Chief Executive Frank J. Bisignano stated that discriminatory practices could result in tax status loss, both political parties traditionally uphold a high threshold for altering nonprofit status.
Preston Cooper from the American Enterprise Institute explained how this regulatory change could shape future political actions. Escalating enforcement could provoke a significant response from Democrats, while a mere warning might steer a different course of political dialogue.
Associated Press Education Writers Annie Ma and Heather Hollingsworth contributed to this report.