Treasury Proposes Ending Tax Exemption For Private Schools With Race-Based Aid
On Thursday, September 3, 2026, the Treasury Department proposed a rule that would strip tax-exempt status from private schools, colleges and other educational institutions that give benefits based on race.[1]
The rule would deny or revoke 501(c)(3) status if schools provide benefits to students specifically based on race in admissions, scholarships or facilities.[1] Treasury and the IRS estimate the rule could affect as many as 18,000 private schools, colleges and education institutions if it is finalized.[1] If adopted after the formal rulemaking process, the regulation is slated to take effect after May 2027.[1] Treasury Secretary Scott Bessent said rebranding race-based preferences as diversity or equity measures does not make them acceptable under the proposal.[1]
The Trump administration has pushed to remove tax exemptions for private colleges with diversity, equity and inclusion policies, framing them as race-based preferences.[1]
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📌 Key Facts
- On Thursday, September 3, 2026, the Treasury Department issued a proposed rule targeting tax exemption for private educational institutions.
- The rule would deny or revoke 501(c)(3) status if schools provide benefits to students specifically based on race in areas such as admissions, scholarships, or facilities.
- Treasury and IRS estimate up to 18,000 private schools, colleges and education institutions could be affected if the rule is finalized.
- The regulation is slated to take effect after May 2027 if adopted following the rulemaking process.
- Treasury Secretary Scott Bessent said rebranding race-based preferences as diversity or equity measures does not make them acceptable under the proposal.
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