Story perspectives

Treasury and IRS Propose Revoking Tax-Exempt Status Over Race

9/4/2026

Left

Treasury Targets Race-Based Aid

U.S. Treasury and IRS proposed rules on September 3 2026 to revoke tax-exempt status of schools and colleges that consider race in admissions or scholarships.
Civil-rights groups argue the rule harms minority students, stripping financial aid and diversity programs without improving fairness in education.
The Treasury estimates up to 750,000 students could lose race-based scholarships.
Legal scholars say the regulation may exceed IRS authority, could be deemed arbitrary, capricious.

Right

Treasury Revokes Exemption

The U.S. Treasury and Internal Revenue Service proposed regulations on September 3 2026 to revoke tax-exempt status of schools that use race in admissions or scholarships.
The proposal is framed as stopping discrimination against white students and eliminating race-based preferences.
President Donald Trump has targeted Harvard University with funding cuts, investigations, and tax-exempt status threats.
Treasury Secretary Scott Bessent said rebranding race-based preferences as “equitable” does not change discriminatory nature.

Center

Treasury Revokes

On Thursday, September 3 2026, U.S. Treasury and IRS proposed regulations to revoke tax-exempt status of schools using race in admissions or scholarships.
The rule excludes schools that select by religion and references the IRS’s 1970s revocation of Bob Jones University’s tax-exempt status.
Up to 18,000 schools would be covered, with the rule becoming effective May 31 2027.
It covers admissions, scholarships, athletics and school-administered programs, ending donor tax deductions.

History

Historical Context

After President Lyndon B. Johnson signed the Civil Rights Act of 1964—passed by the Senate 73-27 and the House 290-130—to ban race-based discrimination in schools and public programs, the IRS began enforcing nondiscriminatory tax-exempt rules. Building on that precedent, the Treasury and IRS proposal announced on September 3 2026 would revoke tax-exempt status from any school that uses race in admissions, affecting 18,000 schools and 750,000 students.

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Treasury Targets Race-Based Aid

U.S. Treasury and IRS proposed rules on September 3 2026 to revoke tax-exempt status of schools and colleges that consider race in admissions or scholarships.
Civil-rights groups argue the rule harms minority students, stripping financial aid and diversity programs without improving fairness in education.
The Treasury estimates up to 750,000 students could lose race-based scholarships.
Legal scholars say the regulation may exceed IRS authority, could be deemed arbitrary, capricious.

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