The U.S. Treasury Department and Internal Revenue Service proposed new regulations Thursday that would deny federal tax-exempt status to private schools that discriminate based on race, color, or national or ethnic origin.
Treasury said the proposal, announced Thursday, advances the Trump administration’s effort to enforce nondiscrimination requirements and expand merit-based educational opportunities.
Proposed rule covers private schools
Under the proposed regulations, a private educational institution would not qualify for tax-exempt status under Section 501(c)(3) if it adopts, maintains, or enforces policies or practices that discriminate based on race, color, or national or ethnic origin.
The rule would apply to admissions, scholarships and loans, educational programs, athletics and other school-administered or school-supported activities.
Treasury and the IRS estimate the proposal could affect as many as 18,000 private educational institutions, including elementary and secondary schools, colleges, universities, professional schools and trade schools.
As previously reported by The Dallas Express, the administration has also warned federally funded schools against race-based preferences.
Officials cite Supreme Court decisions
Treasury and IRS officials said the proposed regulations update federal guidance to reflect what they described as a longstanding principle that tax-exempt organizations must comply with fundamental public policy prohibiting racial discrimination.
The agencies cited Supreme Court decisions including Brown v. Board of Education, Bob Jones University v. United States, and Students for Fair Admissions v. Harvard.
Treasury Secretary Scott Bessent said schools would not avoid the proposed standard by describing race-based preferences as diversity, inclusion, or other similar programs.
“Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature,” Bessent said.
IRS Chief Executive Officer Frank J. Bisignano said schools that continue discriminatory practices should expect to lose their tax-exempt status.
Religious schools could maintain religious missions
The proposal would not prevent private religious schools from maintaining religious missions, religious curricula or programs of religious observance.
Religious schools could continue selecting students based on genuine religious affiliation or membership when permitted under existing federal law.
The proposed regulations would also allow schools to assist disadvantaged students through race-neutral criteria.
Those criteria could include family income, geographic location, first-generation status, individual hardship, military family status and academic achievement.
Schools could not, however, make decisions or provide benefits based on race, color, or national or ethnic origin.
Proposed changes would remove older guidance
The Treasury and IRS proposal would eliminate portions of existing agency guidance that permitted certain racial preferences in areas including admissions, facilities, programs, scholarships and financial assistance.
The agencies said those provisions are inconsistent with a uniform nondiscrimination standard and Supreme Court precedent.
The proposed regulations would not take effect immediately. If finalized, they would apply to taxable years beginning after May 31, 2027.
The proposed applicability date would give affected institutions time to review their policies and make changes related to admissions, scholarships and other programs.
The proposal remains subject to public comment. The regulations are available for public inspection and are scheduled for publication Friday in the Federal Register.
Provided by Dallas Express
