Proposed Rule Details
The Trump administration announced Thursday a rule that would strip private colleges and schools of tax‑exempt status. The rule targets institutions that enforce racial discrimination through diversity, equity and inclusion policies.
The Treasury Department and the IRS said the rule would bar any private school from obtaining 501(c)(3) status if it adopts, maintains or enforces a policy that discriminates on the basis of race, color, national or ethnic origin. The regulation, set to take effect in May 2027, covers admissions, financial aid, scholarships, loans, athletics and other programs administered by the institutions.
Potential Impact
The estimate suggests up to 18,000 private educational institutions could be affected nationwide. Treasury Secretary Scott Bessent said the administration is protecting students by ending racial discrimination in education. He emphasized that the rule aligns with the president’s agenda to restore merit‑based learning.
Administration Position
“Schools rebranding race‑based preferences as equitable, inclusive or diversity‑enhancing does not change their discriminatory nature,” Bessent added. The rule would create a clear standard, warning that any institution that continues discriminatory practices will lose federal tax‑exempt benefits. The Treasury warns that non‑compliance will result in immediate revocation of tax‑exempt status.
Political Context
Trump officials argue DEI policies discriminate against white and Asian American students and have already moved to end such programs. On his first day of his second term, President Trump signed an order terminating DEI initiatives introduced under the Biden administration.
Legal Precedent
Last year the administration threatened to revoke Harvard University’s tax‑exempt status amid a dispute over its DEI policies. Harvard officials responded that the action lacked legal basis and would force cuts to financial aid and crucial medical research.
IRS Rules
To retain 501(c)(3) status, organizations must obey IRS rules on lobbying, political activity, reporting and cannot allow net earnings to inure to private individuals. IRS Chief Executive Officer Frank J. Bisignano said schools that promote discriminatory practices will no longer be exempt from taxes. He warned that continued discrimination would trigger immediate loss of tax‑exempt status.
Religious Schools
The proposal preserves the ability of religious schools to maintain a religious mission, curriculum or observance. They may also select students based on faith, provided they follow federal law. The exemption remains available as long as the schools comply with all federal regulations.
Reporting
The Associated Press contributed to this report. The story underscores the administration’s commitment to eliminating racial discrimination in education.
