U.S. Treasury proposes revoking tax-exempt status for private schools using race in policies

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have proposed new regulations that would strip federal tax-exempt status from private educational institutions that use race as a factor in admissions, student aid, or other school-administered programs. The rules, which would take effect for taxable years beginning on or after May 31, 2027, aim to eliminate racial discrimination in American education, according to Treasury Secretary Scott Bessent.

The proposal could impact approximately 18,000 private schools, including colleges, universities, elementary, and trade schools. The regulations would cover admissions, scholarships, loans, and athletics, though religious-based student selection criteria would remain exempt. Experts suggest the loss of tax-exempt status would eliminate charitable tax deductions for donations, potentially reducing philanthropic giving and affecting scholarships for an estimated 750,000 students.

Critics, including EdTrust CEO Denise Forte, have characterized the move as federal overreach, arguing that addressing racial inequity is necessary to remove barriers to opportunity. The proposal follows the legal landscape established by the Supreme Court's decision in Students for Fair Admissions v. Harvard/UNC, which declared race-conscious admissions policies unlawful.