The Trump administration moved Thursday to strip tax-exempt status from private schools and colleges that use race-based admissions, scholarships, or programs, marking the most aggressive federal action yet against diversity initiatives in American education.
Treasury Department Unveils Sweeping Regulation
The Treasury Department and Internal Revenue Service proposed new rules ending tax-exempt status for educational institutions using race in admissions, scholarships, loans, athletics, and all other school programs. Treasury Secretary Scott Bessent declared that schools rebranding race-based preferences as equitable or diversity-enhancing does not change their discriminatory nature. The proposal builds on the Supreme Court’s 2023 Students for Fair Admissions ruling, which prohibited most race-conscious admissions at colleges and universities.
The regulation would impact approximately 18,000 schools across all education levels and potentially affect 750,000 students currently qualifying for race-based scholarships. Any program considering race, color, or national origin for any purpose would lose tax-exempt status, including efforts addressing past racial discrimination. Religious schools could continue selecting students based on religious affiliation, and institutions could still help disadvantaged students using race-neutral criteria like income, geography, or first-generation status.
Legal Battle Looms Over Policy Change
The American Association of University Professors announced it is considering legal action against the proposal, joining a pattern of lawsuits against Trump administration education policies. AAUP President Todd Wolfson characterized the move as turning civil rights law against the people it was enacted to protect. He noted that for half a century, federal policy recognized measures dismantling entrenched racial exclusion differ from policies preserving it. The proposal now enters a public comment period before potential implementation.
Broader Education Overhaul Continues
This proposal represents the latest component of the administration’s campaign eliminating diversity, equity, and inclusion policies in education since President Trump returned to office in January 2025. Education Secretary Linda McMahon and President Trump previously outlined efforts redirecting billions from DEI programs to classrooms while granting states waivers bypassing federal bureaucracy. The administration has also targeted educational institutions for alleged antisemitism, with Harvard University facing particular scrutiny including federal funding cuts, investigations, and threats to its tax-exempt status. Officials argue these changes restore parental rights and dismantle federal micromanagement of schools.