The Treasury Department and Internal Revenue Service have proposed regulations that would deny federal tax-exempt status to private schools that discriminate based on race, color, or national or ethnic origin.
The proposal would establish a uniform nondiscrimination standard covering admissions, educational policies, scholarships and loans, athletics, facilities and other school-administered or supported programs. It would apply to tax-exempt private elementary and secondary schools, colleges, universities, professional schools and trade schools.
Treasury and the IRS estimate that as many as 18,000 educational institutions could be affected, although the agencies said many schools have already changed their admissions policies following the Supreme Court’s 2023 decision in Students for Fair Admissions v. Harvard.
“Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature,” Treasury Secretary Scott Bessent said in the agency announcement.
Existing IRS policy already requires tax-exempt private schools to maintain racially nondiscriminatory policies. However, guidance dating to 1975 allows certain preferences benefiting racial minority groups when intended to establish or preserve a school’s nondiscriminatory policy.
Become a Paid Subscriber for Exclusive Content Access and Support Independent News
The proposed rule would eliminate those exceptions, including provisions permitting preferences in admissions, facilities, programs, scholarships and financial assistance. Treasury and the IRS said the exceptions are inconsistent with a uniform nondiscrimination standard and subsequent Supreme Court rulings.
In its 2023 decision, the Supreme Court ruled that the race-conscious admissions systems used by Harvard University and the University of North Carolina violated federal constitutional or statutory protections. The decision held that universities could consider an applicant’s discussion of how race affected that person’s life, but could not use essays or other application materials to recreate a system of race-based preferences. The Harvard ruling concerned a private university receiving federal financial assistance, while the North Carolina case involved a public university. The majority opinion was decided 6-2 in the Harvard case and 6-3 in the North Carolina case.
The proposal also cites the Supreme Court’s 1983 ruling in Bob Jones University v. United States. In that case, the court upheld the IRS’s authority to revoke the tax-exempt status of private religious schools whose racial policies violated established public policy.
Religious schools could continue maintaining religious missions, curricula and observances under the new regulations. They could also select students based on genuine religious affiliation or membership, provided membership in the religious group is available without racial discrimination.
Schools would remain permitted to assist disadvantaged students through race-neutral considerations, including family income, geographic location, first-generation status, individual hardship, military-family status and academic achievement. They could not award admission, scholarships or other benefits because of a student’s race, color, or national or ethnic origin.
“Private educational institutions that promote discriminatory practices will no longer be afforded the benefits of federal tax-exempt status,” IRS Chief Executive Officer Frank J. Bisignano said.
The regulations have not yet been finalized. According to the Federal Register notice, public comments and requests for a hearing are due by Nov. 3, 2026.
If adopted, the regulations would apply during taxable years beginning after May 31, 2027.
About the Author
Discover more from Right Now Oregon
Subscribe to get the latest posts sent to your email.
