The Trump administration has introduced a proposal aiming to remove tax-exempt status from private schools and colleges that offer targeted aid based on race. This move escalates efforts to eliminate diversity programs for minority students.
The regulation proposed by the Treasury Department, set to take effect after May 2027 if finalized, aims to end policies supporting students based on race. It would impact admissions, scholarships, and facilities, labeling such benefits as incompatible with the rule. Critics view it as part of efforts to dismantle diversity, equity, and inclusion (DEI) programs common before President Donald Trump’s return to the White House.
The administration’s latest rules changes are its most blatant attack to keep working-class Americans and people of color from accessing higher education and a better life.— Mike Gavin, Alliance for Higher Education president and CEO
Under White House pressure, numerous universities have already closed or rebranded DEI offices. The Treasury Secretary, Scott Bessent, stated that even rebranded policies could be targeted. The proposal could affect up to 18,000 private institutions. Private universities, exempt from many taxes for over a century, could face financial challenges if the rule passes. Trump views tax-exempt status as leverage against colleges perceived as “wokeness hotbeds.”
Historically, it’s rare for the federal government to challenge tax-exempt status, but Bob Jones University’s case in the 1970s over an interracial dating ban serves as a precedent. The Supreme Court upheld the IRS’s decision to revoke its exemption.
The Trump administration describes the new proposal as a step toward restoring merit in education. Marjorie Hass of the Council of Independent Colleges noted potential donation impacts earmarked for scholarships. Tim Powers of the National Association of Independent Colleges and Universities mentioned new compliance and legal uncertainties for schools.
Our institutions are committed to complying with applicable civil rights laws and maintaining safe and supportive campuses free from discrimination.— Tim Powers, Vice President, National Association of Independent Colleges and Universities
Revoking tax-exempt status requires a high bar. The Justice Department has opened investigations into several medical schools over alleged favoritism toward Black and Hispanic students. The Trump administration argues this violates Title IV of the Civil Rights Act of 1964.
IRS Chief Executive Officer Frank J. Bisignano stated that schools engaging in racial discrimination should expect to lose their tax-exempt status.
Historically, altering nonprofit status is seen as highly controversial. Some conservative colleges previously worried about losing it due to conduct codes. The outcome of the Trump administration’s proposal could influence future political responses, particularly from Democrats.
Associated Press Education Writers Annie Ma and Heather Hollingsworth contributed to this report.
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