The Trump administration has introduced a regulatory proposal that would strip private schools and universities of their tax-exempt status if they utilize race-based programs to assist students. This move represents a significant escalation in the White House’s ongoing campaign to dismantle diversity, equity, and inclusion (DEI) initiatives that target Black, Hispanic, and other minority students.
Proposed by the US Treasury Department on Thursday, the regulation would, if finalized, take effect following the conclusion of the academic year in May 2027. The rule is designed to end policies that offer benefits to students based on their race, explicitly stating that such practices in admissions, scholarships, and facility usage would be considered incompatible with the new requirements.
Trump officials contend that these existing practices discriminate against white and Asian American students, citing Civil Rights-era laws as the basis for their efforts to unwind them. Treasury Secretary Scott Bessent, in a post on X announcing the legislation, suggested that the administration would also target institutions that attempt to rebrand their policies. “Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature,” Bessent stated.
Higher education leaders have criticized the proposal, with one representative remarking, “By claiming that efforts to increase fair opportunity for all students are discriminatory, the administration is trying to gaslight the American people into believing that up is down and black is white.”
The Treasury Department and the Internal Revenue Service (IRS) estimate that as many as 18,000 private educational institutions could be affected by the change. For over a century, private universities have enjoyed tax-exempt status as providers of a public good, a benefit that saves these institutions millions of dollars annually. President Trump has frequently identified this status as a key lever in his pressure campaign against colleges he characterizes as centers of “wokeness” and “radical left ideology.”
The administration previously threatened to revoke Harvard University’s tax-exempt status during a prior dispute. In response, Harvard officials argued that no legal basis existed for such a move and warned that it would force reductions in financial aid and essential medical research. While federal authorities rarely target the tax-exempt status of colleges, there is one notable precedent involving Bob Jones University in the 1970s, which lost its status over a ban on interracial dating before regaining it in 2017 after the policy was reversed. Laws forbid the IRS from targeting organizations for ideological reasons, and federal officials are not allowed to direct IRS investigations. To maintain nonprofit status, organizations must follow IRS rules on lobbying, political campaign activity, and annual reporting requirements.
Separately, the Justice Department has launched investigations into several medical schools, alleging that their admissions processes favor Black and Hispanic students in violation of Title IV of the Civil Rights Act of 1964. The administration frames these combined actions as a necessary step toward restoring merit to the nation’s education system.
