The Treasury Department and the IRS on Thursday announced proposed regulations that would revoke federal tax-exempt status from private schools and universities that maintain programs benefiting students based on race, marking the administration’s latest and potentially most consequential effort to reshape higher education policy through financial pressure rather than legislation.
Under the proposal, any private educational institution — from elementary schools to graduate programs — that “adopts, maintains, or enforces” a policy considering race, color, or national or ethnic origin in admissions, scholarships, athletics, or any other school-run program would lose its 501(c)(3) status. Treasury and the IRS estimate the rule could touch as many as 18,000 institutions nationwide. The change would take effect for tax years beginning on or after May 31, 2027.
Treasury Secretary Scott Bessent framed the move as a matter of enforcing existing anti-discrimination principles, stating that “schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature.” IRS Chief Executive Officer Frank Bisignano echoed that framing, warning that institutions “should expect to lose that status” if they continue what officials describe as discriminatory practices.
But the rule is better understood as a continuation of the administration’s broader campaign against diversity, equity, and inclusion initiatives in education — one that has already included cutting off federal research funding to universities like Harvard and opening civil rights investigations into admissions practices at several elite schools. Framing race-conscious support programs as “discrimination” against white and Asian American students obscures what these programs have actually been designed to do: help remedy decades of documented, government-sanctioned exclusion of Black and other historically marginalized students from higher education.
The administration is leaning on the Supreme Court’s 2023 decision in Students for Fair Admissions v. Harvard, which ended race-conscious admissions, to justify the new rule. Notably, however, that ruling explicitly left room for universities to consider how race has shaped an individual applicant’s life experience.
The proposal does carve out some space: schools may still target aid using race-neutral criteria such as income, geography, first-generation status, or military family background, and religious schools may continue considering religious affiliation. Treasury has suggested that geography- or income-based programs could still, in effect, reach many minority students. But critics argue that substituting proxies for race is a poor stand-in for programs that were built to address race-specific harms.
The rule now enters a public comment period, and any final version is expected to face legal challenges before enforcement begins.
