WASHINGTON (dpa-AFX) - The Department of the Treasury and the Internal Revenue Service (IRS) have issued proposed regulations to end federal tax-exempt status for private schools that engage in racial discrimination.
'Under President Trump, this Administration is standing up for America's students by ensuring racial discrimination has no place in American education,' said Treasury Secretary Scott Bessent. 'Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature. Today's Treasury and IRS proposed regulations establish a clear standard, and the institutions that continue to use discriminatory practices will no longer receive the benefits of federal tax-exempt status.'
'Private educational institutions that promote discriminatory practices will no longer be afforded the benefits of federal tax-exempt status,' said IRS Chief Executive Officer Frank J. Bisignano. 'Today's proposed regulations put institutions on notice and schools that continue to engage in racial discrimination should expect to lose that status.'
Federal law provides tax-exempt status to organizations that operate exclusively for charitable and educational purposes. For decades, the Supreme Court has recognized that eligibility for tax-exempt status is conditioned on compliance with fundamental public policy, including the prohibition against racial discrimination.
Under the proposed rule, a private school would not qualify for Federal tax-exempt status if it adopts, maintains, or enforces a policy or practice that discriminates on the basis of race, color, or national or ethnic origin. The rule would apply across admissions, educational policies, scholarships and loans, athletics, and every other school-administered or school-supported program.
The proposed regulations would apply to tax-exempt private primary and secondary schools, colleges, universities, professional schools, and trade schools. Treasury and the IRS estimate that the proposal may affect as many as 18,000 private educational institutions.
The proposal would also eliminate outdated provisions of IRS guidance that permitted schools to favor certain racial preferences in admissions, facilities, programs, scholarships, and financial assistance.
The Treasury made it clear that the proposal would not prevent a private school from maintaining a religious mission, curriculum, or program of religious observance.
The final regulations would apply to taxable years beginning on or after May 31, 2027, providing affected institutions with sufficient time to review and update their policies to bring admissions, scholarship, and other policies into compliance, it said in a press release.
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