Treasury proposes ending tax-exempt status for schools with race-based admissions

The Trump administration proposed regulations to strip tax-exempt status from private and nonprofit schools that use race-based admissions, scholarships, or other programs, including DEI initiatives, with an estimated impact on up to 18,000 institutions. The rules would take effect for taxable years beginning May 31, 2027, and would bar any policy or practice that discriminates on race, color, or national or ethnic origin, while allowing race-neutral criteria such as income or academic achievement. Treasury Secretary Scott Bessent asserted the move upholds a public policy against racial discrimination, arguing that rebranding such preferences as diversity or equity does not change their discriminatory nature. Critics warn the policy could chill speech, threaten fundraising by limiting tax-deductible donations, and spur costly court battles, while religious institutions would retain some exemptions. The proposal frames the action as part of a broader effort to roll back DEI initiatives and reframe higher-education policy through tax policy, with institutions preparing to review admissions and aid programs to avoid penalties.