Trump administration to end tax-exempt status over school discrimination

The rule would eliminate IRS guidance that allowed schools to favor certain racial preferences in admissions, facilities, programs, scholarships and financial assistance. The guidance would apply to primary and secondary schools, colleges, universities, professional schools and trade schools. 

"Today's proposed regulations put institutions on notice and schools that participate in racial discrimination should expect to lose that status," said Frank Bisignano, IRS Chief Executive Officer. 

Trump administration officials said guidance supporting school's racial discrimination practices are not aligned with the U.S. Supreme Court's precedent. The administration cited Brown v. Board of Education, Bob Jones University v. United States and Students for Fair Admissions v. Harvard.

In 2023, the U.S. Supreme Court ruled Harvard and the University of North Carolina at Chapel Hill violated the Equal Protection Clause of the Fourteenth Amendment in their admissions practices. 

Trump administration officials clarified that the rule would not have an effect on private schools seeking to maintain a religious mission, curriculum, religious observance or programs.

"Religious schools may continue to select students based on genuine religious affiliation or membership to remain consistent with federal law," the Treasury Department wrote. 

The proposed rule would also continue to allow schools to use family income, geographic location, first-generation status, individual hardship, military family status or academic achievement when making admission or financial assistance decisions. 

"Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature," Treasury Secretary Scott Bessent said.

"Today's Treasury and IRS proposed regulations establish a clear standard, and the institutions that continue to use discriminatory practices will no longer receive the benefits of federal tax exempt status," Bessent continued. 

The rule would apply to taxable years beginning May 31, 2027.