Private schools thought they could hide their race-based policies behind new names. That was the plan. The IRS just said no. A new rule proposed on Thursday would strip tax-exempt status from any school using racial preferences. This hits every level of education. According to ABC News, the Treasury Department says these rules kick in after May 2027 if they become final.
The numbers are huge. The Treasury Department estimates the rule could affect 18,000 private institutions. This includes elementary schools, colleges, and trade schools. Per The Federalist, the government sees through the rebranding efforts. Schools changed names but kept the same policies. Harvard tried this after a Supreme Court ruling in 2023. They renamed their DEI office to the “Office of Community and Campus Life.” The IRS says that trick does not work.
— Treasury Secretary Scott Bessent (@SecScottBessent) September 3, 2026
Treasury Secretary Scott Bessent made the stance clear. He noted that rebranding race-based preferences within schools as equitable, inclusive, or diversity-enhancing fails to alter their discriminatory nature. The rule targets admissions, scholarships, and facilities. According to ABC News, officials say these benefits are now “incompatible” with tax-exempt status. The government views racial discrimination as a major issue. Trump officials are using Civil Rights-era laws to drive this change. They argue these policies hurt white and Asian American students.
The proposal is specific. It says schools cannot use race to help students get in or get money. Per The Federalist, the rule applies to “every other school-administered or school-supported program.” This ends a century-old benefit. For over a century, numerous taxes have exempted America’s private universities. The exemption saves them millions of dollars every year. Now, that money is at risk.
Bessent warned institutions directly. According to his statement, the proposed regulations from today’s Treasury and IRS set a clear standard, meaning institutions persisting in discriminatory practices will lose federal tax-exempt status benefits. Scores of universities have already shut down or rebranded their DEI offices. Under White House pressure, many terminated scholarships intended for minority students. But the IRS wants to be sure the changes are real.
The Treasury Department and IRS estimate up to 18,000 schools could lose their status. This is a massive shift for private education. The rule aims to stop schools from claiming they are diverse while practicing discrimination. The Washington Times reported that the proposal targets these specific practices. The government is drawing a hard line in the sand. Schools that ignore this will pay the price. The era of tax-free racial preference is ending.
