The US Treasury Department and the IRS recently proposed a rule threatening the 501(c)(3) tax-exempt status of private schools that offer targeted support to students based on their race.
AP News (Sep 3)
“The Trump administration is proposing a new rule that would strip private schools and colleges of their tax-exempt status if they provide targeted help to students based on their race, a significant escalation in the White House’s campaign to eradicate diversity programs directed at Black, Hispanic and other minority students.
“The Treasury Department proposed the change Thursday in a new regulation that, if made final, would kick in after May 2027. The rule is broadly aimed at ending any policies or programs that help students because of their race, and it specifically says such benefits in admissions, scholarships and facilities “would be incompatible” with the rule.
“It’s the latest attempt by the Trump administration to pressure schools and colleges to weed out diversity, equity and inclusion policies that had become common before President Donald Trump returned to the White House with a promise to end them. Trump officials have used Civil Rights-era laws to unwind the policies, saying they discriminate against white and Asian American students.”
From the Alliance for Higher Education
“The latest proposed rule from the Department of the Treasury and the Internal Revenue Service (IRS) would revoke tax-exempt 501(c)(3) status from any private schools offering targeted support to minority students.
“This new proposed rule threatens the tax-exempt status of institutions working to ensure fair opportunity for all students. It is not an isolated move. Collectively, the Department of Education's proposed accreditation rules, its recent National Call to Action, the OMB and EDGAR rules for grant-making, state-level restrictions on race, gender, and sexuality studies, and the IRS proposed rule limit students' access to higher education and undermine the freedom to teach, learn, and research. Each of these proposals uses diversity, equity, and inclusion as a dog whistle to divide rather than unite America. Our work must be to include, not exclude, all groups in higher education and our democracy. Zooming out even further, the IRS proposed rule is an assault on all nonprofits. This is not about higher education alone-–it is about who we claim to be and who matters.
“As many as 18,000 schools could be affected, from small colleges to large universities, K-12 to postsecondary. The schools with the fewest resources to survive an IRS audit will be hit hardest. We cannot let this administration divide the sector and pick off the most vulnerable institutions first.
- For more information on the proposed rule and for guidance on submitting public comment, see our IRS proposed rule public comment toolkit.
- Speak out and spread the word about the threat this proposed rule poses and join us in encouraging others across the field to act. The Alliance’s IRS Tax-Exempt Rule Toolkit provides talking points, actions you can take, and social media content.
“Public comments close Tuesday, Nov 3, 2026, at 11:59 PM ET. Federal agencies must review unique comments, so your submission is vital.”
The Alliance is presenting a webinar, “What the Proposed IRS Rule Change Means for Higher Education, Democracy, and Collective Action” October 29, 2026 at 2:00 PM Eastern.
