Overview
- The Treasury Department and IRS published proposed regulations in early September that would revoke federal 501(c)(3) status for private schools that use race, color, or national-origin criteria in admissions, scholarships, loans, athletics, or other school-run programs.
- The proposal would delete parts of Revenue Procedure 75-50 so race-conscious measures that aim to further nondiscrimination would no longer be treated as permissible.
- The agencies set a public-comment deadline of November 3, 2026 and said the rule would apply to taxable years of private schools beginning after May 31, 2027.
- Treasury estimates about 18,000 private schools and roughly 750,000 students could be affected, creating risks to donor tax deductions, foundation grants, tax-exempt bonds, and state or local tax exemptions that rely on federal status.
- Higher-education groups and legal experts have questioned Treasury's authority and warned of likely litigation that will test whether the tax code can be used to police race-conscious educational programs.