Treasury and IRS Propose Ending Tax Exemptions for DEI Schools

The U.S. Treasury Department and the Internal Revenue Service proposed regulations on Thursday to revoke the federal tax-exempt status of private schools and colleges that use race to influence admissions, student aid, or other educational programs. The rule targets diversity, equity, and inclusion policies that the Trump administration characterizes as discriminatory against white and Asian American students.

Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano stated the regulations establish a clear standard to root out racial discrimination. The proposal could affect up to 18,000 institutions for taxable years beginning on or after May 31, 2027. If finalized, the move would eliminate tax deductions for donors and potentially jeopardize scholarships based on racial or national identity.

While the administration frames the action as a restoration of merit, higher education leaders argue the policy attacks access for working-class Americans and people of color. This regulatory push coincides with separate investigations by the United States Department of Justice into medical schools for allegedly favoring Black and Hispanic students in admissions.