The U.S. Department of the Treasury and Internal Revenue Service have proposed regulations that would deny federal tax-exempt status to private schools that engage in racial discrimination in admissions, scholarships, athletics, or any school-administered program.
Under the proposal, a private school would not qualify for tax-exempt status under Internal Revenue Code section 501(c)(3) if it adopts, maintains, or enforces a policy or practice that discriminates based on race, color, or national or ethnic origin. The proposed regulations would apply to private primary and secondary schools, colleges, universities, professional schools, and trade schools.
Treasury and IRS estimate the proposal may affect as many as 18,000 private educational institutions. The agencies said the proposal updates guidance to reflect longstanding law and Supreme Court precedent, including Brown v. Board of Education, Bob Jones University v. United States, and Students for Fair Admissions v. Harvard.
The proposal would allow schools to maintain religious missions and select students based on genuine religious affiliation. Schools may also consider race-neutral criteria such as family income, geographic location, first-generation status, individual hardship, military family status, or academic achievement when awarding admission or financial assistance.
The final regulations would apply to taxable years beginning on or after May 31, 2027, giving affected institutions time to update their policies.