Treasury Proposes Revoking Tax-Exempt Status for Colleges Using Race-Based Policies

September 4, 2026 at 12:00 PM2 min

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The U.S. Treasury Department proposed a rule Thursday to revoke tax-exempt status for private nonprofit colleges that use race-based admissions, scholarships, or other programs. The rule could affect up to 18,000 private schools and 750,000 students. Treasury Secretary Scott Bessent said institutions continuing discriminatory practices will no longer receive federal tax-exempt benefits.

Key Facts

The proposed rule could revoke 501(c)(3) tax-exempt status for up to 18,000 private schools, including K-12 and postsecondary institutions.
The Treasury Department estimates 750,000 students at those schools may qualify for race-based scholarships.
If finalized, the rule would take effect after May 31, 2027.
Colleges losing 501(c)(3) status would face federal income tax and lose tax-deductible donations.
Treasury Secretary Scott Bessent said the rule establishes a clear standard against racial discrimination in education.

Proposed Rule Details

The draft rule targets private nonprofit colleges that adopt or enforce admissions policies, scholarships, or other programs intended to support Black, Hispanic, or other minority students. The Treasury Department released the proposed rule Thursday, citing discrimination on the basis of race, color, or national or ethnic origin in educational, admissions, scholarship, athletic, or other policies. The rule would apply to as many as 18,000 private schools, including K-12 and postsecondary institutions. The Treasury Department estimates that as many as 750,000 students attending those schools may qualify for scholarships allocated on the basis of racial, ethnic, or national identity.

Administration's Broader Campaign

The proposal is the latest effort in the administration's ongoing push to eliminate diversity, equity, and inclusion at American universities. Federal agencies have already defunded grant programs supporting minority-serving institutions and declared several colleges discriminatory in admissions. In April 2025, President Trump pushed to revoke Harvard University's tax-exempt status after the university rejected administration demands on governance, admissions, and hiring. Treasury Secretary Scott Bessent said schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature.