09/03/2026
Every private school in America with a scholarship for Black or Latino students was just given a deadline by Trump's IRS: drop it by 2027 or lose your tax-exempt status.
The proposed rules, issued Thursday by the Treasury Department and the IRS, say a private school no longer qualifies as a charity under section 501(c)(3) if it adopts, maintains, or enforces a policy that treats students differently by race, color, or national or ethnic origin. They reach admissions, scholarships, loans, athletics, facilities and every other school-run program, from private kindergartens up through medical, law and trade schools.
The rules would also delete the existing IRS guidance that has let schools favor minority students in admissions, scholarships and financial assistance.
Treasury Secretary Scott Bessent said schools "rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature." IRS chief executive Frank Bisignano said institutions that keep those programs "should expect to lose that status."
Tax-exempt schools pay no property tax on their campuses, borrow money through tax-free bonds, and their donors deduct every gift. Taking that away would cost the sector billions, out of the same budgets that pay for financial aid, research and staff.
Religious schools got a carve-out. They may keep selecting students based on religious affiliation. Schools can also still weigh family income, geography, first-generation status, military families and academic achievement. Race is the one thing that becomes disqualifying.
The administration is grounding all of this in Brown v. Board of Education and Bob Jones University v. United States, the 1983 decision that let the IRS revoke a school's exemption over its racially discriminatory policies. That precedent is now aimed at the scholarships built to open those same doors.
