Trump administration aims to strip tax exemption from schools that support marginalized students

What This is

• The Trump administration is pushing to strip some schools of tax-exempt status.
• Treasury and the IRS proposed a rule targeting private K-12 schools and colleges that consider race in admissions, scholarships, athletics, or other benefits.
• Officials say the rule would treat race-based preferences as incompatible with tax-exempt status under federal anti-discrimination rules, citing the Supreme Court’s 2023 Students for Fair Admissions decision.
• The proposal also points to the Supreme Court’s 1983 Bob Jones University case as a basis for denying tax-exempt status to schools the government views as violating public policy on racial discrimination.
• The proposal would still allow race-neutral ways to help disadvantaged students and would exclude religious institutions, according to reports.
• The administration estimates the change could affect as many as 18,000 institutions, and one report says the rule would take effect after May 2027.

Why This Matters

• It would use the tax code to pressure schools to change admissions, scholarships, and student support.
• Losing tax-exempt status could raise operating costs and make fundraising harder because donors may lose a tax break.
• It sharpens the debate over when helping specific racial groups is illegal discrimination versus a lawful response to unequal opportunity.
• Court fights could set new rules for how far the federal government can go in regulating private education through tax benefits.