The Trump administration proposed a new rule Thursday that would revoke the tax exempt status of any private school that the Internal Revenue Service deems to discriminate on the basis of “race, color, or national or ethnic origin” — a dramatic escalation of the president’s clash with the American educational system and his push to combat policies promoting diversity, equity and inclusion.
The proposal, issued by the Treasury Department, makes clear that it targets “discrimination” of any kind, including in admissions and the awarding of scholarships, no matter if the policy is intended to serve “remedial or diversity-related objectives” — and it makes clear that the change is expected to have sweeping effects.
“The Treasury Department and the IRS estimate that the proposed regulations may affect the 18,000 private elementary, secondary, and post-secondary schools in the United States that currently qualify for tax exempt status and the 750,000 students attending these schools who may qualify for scholarships allocated on the basis of racial, ethnic, or national identity,” the rule says.
It adds: “The Treasury Department and the IRS expect that all private primary and secondary schools will adjust their admissions criteria to conform to the proposed regulations, so that they may retain their tax-exempt status.”
The Treasury Department characterized the plan as restoring merit-based opportunity. “Under President Trump, this Administration is standing up for America’s students by ensuring racial discrimination has no place in American education,” Treasury Secretary Scott Bessent said in a statement. “Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature.”
The Trump administration has waged a long battle with colleges and universities as it tries to crack down on what it decries as “woke” policies that unfairly harm white and Asian American students. It has pulled federal grant funding and pushed for curriculum and staffing changes. President Trump has also explicitly threatened the tax status of leading universities, including Harvard, Columbia and Princeton. Last year, he publicly floated the idea of a broad crackdown on tax-exempt entities, describing the exemption as a privilege that has been abused.
The Treasury proposal comes after a 2023 Supreme Court ruling that struck down universities’ race-based affirmative action programs.
The American Association of University Professors reportedly blasted the new proposal as an attack on minorities.
“Weaponizing the IRS to attack colleges and universities that uphold and expand civil rights is outrageous,” Todd Wolfson, the group’s president, said in a statement. “This is blatantly racist political coercion intended to deny minority students reparative opportunities to further their education.”
Tax-exempt status reportedly saves many schools millions of dollars a year, and the administration’s proposal could have even greater impact on the universities’ fundraising efforts, given that their exemption allows donors to deduct the gifts they make.
The new rule is subject to public comment for 60 days and is likely to face a legal challenge. It would take effect after May 2027 if it is finalized.