Proposed IRS Rules Target All Race-Based Policies at Private Schools
The Treasury and IRS have proposed regulations that would deny Section 501(c)(3) tax-exempt status to any private educational institution with race-conscious policies, including for diversity or financial aid.
The U.S. Treasury and IRS have proposed regulations that would deny Section 501(c)(3) tax-exempt status to private schools with any policy that discriminates on the basis of race, color, or national origin. The proposal dramatically expands the scope of prohibited discrimination, defining it to include race-conscious admissions and scholarship programs, even those intended to promote diversity or remedy past discrimination. This moves beyond the holding in Bob Jones University v. United States and reflects the Supreme Court's recent decision in SFFA v. Harvard. The proposed rules would eliminate long-standing safe harbors in Revenue Procedure 75-50 that permitted certain affirmative action programs. The regulations would affect an estimated 18,000 private educational institutions, including primary schools, colleges, and universities, regardless of whether they receive federal funding. Affected institutions should immediately review admissions policies, financial aid programs, and endowed scholarships for compliance. Public comments on the proposed rule are due by November 3, 2026.