Trump Administration Moves to Strip Tax-Exempt Status From Private Colleges With DEI Policies
The US Treasury Department has proposed a rule stripping tax-exempt status from private schools and colleges that give students targeted help based on race. The move is the latest escalation in the Trump administration's campaign against diversity, equity and inclusion policies in education.
The US Treasury Department on Thursday proposed a new regulation that would revoke tax-exempt status from private schools and colleges that provide targeted assistance to students based on race. If finalized, the rule would take effect after May 2027, at the close of the academic year.
The regulation targets any policies or programs that benefit students because of their race, explicitly stating that such advantages in admissions, scholarships and facilities would be incompatible with tax-exempt status. It represents the latest step in the Trump administration's effort to pressure schools and colleges into eliminating diversity, equity and inclusion (DEI) policies that became widespread before President Trump's return to office.
Higher education leaders pushed back against the proposal. Mike Gavin, President and CEO of the Alliance for Higher Education, said the changes amount to a blatant attempt to keep working-class Americans and people of color from accessing higher education.
Treasury Secretary Scott Bessent indicated the rule could also apply to policies no longer labeled as DEI but still relying on race-based preferences under different branding. The Treasury Department and Internal Revenue Service estimate as many as 18,000 private schools, colleges and other education institutions could be affected.
US private universities have enjoyed exemption from many taxes for more than a century, based on the premise that they provide a public good — a benefit saving institutions millions of dollars annually. Trump has treated this status as leverage in his campaign against universities he accuses of promoting "radical left ideology," having previously threatened Harvard University with the same measure.
There is only one notable historical precedent: Bob Jones University, a small Christian school in South Carolina, lost its tax-exempt status in the 1970s over a ban on interracial dating and marriage, a decision upheld by the Supreme Court. The school ended the ban and regained its exemption in 2017. Separately, the Justice Department has opened investigations into several medical schools accused of favoring Black and Hispanic applicants in admissions.
