Trump Treasury Targets Tax Breaks for Race-Based School Policies

Private schools could soon have a costly choice: DEI or risk losing federal tax exemption.

The Treasury Department and Internal Revenue Service proposed new regulations Thursday clarifying that private schools engaging in racial discrimination would not qualify for tax-exempt status under Section 501(c)(3).

The proposal could affect as many as 18,000 private educational institutions, according to the administration.

The rule would reach beyond admissions to scholarships, loans, athletics, and other school-run programs.

It would also eliminate older Internal Revenue Service guidance permitting certain financial-aid programs favoring racial groups — provisions the administration argues no longer align with a uniform nondiscrimination standard and recent Supreme Court precedent.

The proposed rule would still allow schools to expand opportunities using race-neutral factors such as income, geography, first-generation status, individual hardship, and academic achievement.

But the Trump administration’s message is straightforward: Federal tax breaks shouldn’t subsidize racial discrimination — even when it comes packaged as DEI.

Treasury, IRS Move to End Tax-Exempt Status for Discriminatory Practices in Private Schoolshttps://t.co/RqJphpdXrj

— Rapid Response 47 (@RapidResponse47) September 3, 2026