Overview
- The Treasury Department and Internal Revenue Service published proposed regulations on Sept. 3 that say private schools could lose federal 501(c)(3) tax-exempt status for using race in admissions, scholarships, athletics, employment, or other school-run programs.
- The agencies estimate the change could affect as many as 18,000 private institutions, covering private K–12 schools, colleges and trade schools, and would apply to taxable years beginning after May 31, 2027 if the rule is finalized.
- Losing tax-exempt status would force affected schools to pay federal income tax, remove most donor tax deductions, and could reduce access to foundation and government grants, with direct effects on fundraising and budgets.
- The proposal is in rulemaking and open for public comment so its language could change, but higher-education groups such as NACUBO and civil-rights advocates say the agencies exceed their authority and legal challenges are widely expected.
- The rule builds on Bob Jones and the Supreme Court’s 2023 Students for Fair Admissions decision and has drawn contrasting coverage with outlets and commentators warning it will chill programs that help underrepresented students while others call it an enforcement of recent court limits on race-conscious campus policies.