The Department of the Treasury proposed regulations that would strip federal tax-exempt status from private schools that engage in racial discrimination through diversity, equity, and inclusion policies.
The proposal comes as the Trump administration has worked to eliminate DEI initiatives across the federal government and in institutions receiving federal support.
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Treasury Secretary Scott Bessent praised the proposal, saying the administration is standing up for American students and opposing discriminatory practices.
“Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature,” Bessent said.
The Treasury Department said schools that use race-based DEI policies violate federal public policy against racial discrimination.
“These proposed regulations would provide that all forms of racial discrimination in education, regardless of the intent behind or the legality of such discrimination (for example, where such discrimination is defended as serving remedial or diversity-related objectives) are against a fundamental public policy of the United States,” the proposal said.
The proposed regulations would update Treasury and IRS guidance to reflect what the agencies described as that long-standing principle, citing Supreme Court decisions Brown v. Board of Education, Bob Jones University v. United States, and Students for Fair Admissions v. Harvard College.
The changes would also eliminate outdated IRS provisions that Treasury says allowed private schools to consider race in admissions, facilities, programs, scholarships, and financial assistance.
The proposal, however, clarified that the rule would not restrict freedoms for schools with religious missions. Under the proposed rule, private schools could maintain religious missions, curricula, or programs of religious observance, while also selecting students based on genuine religious affiliation or membership.
Schools would also remain free to expand educational opportunities for disadvantaged students using race-neutral criteria. Those criteria could include family income, geographic location, first-generation status, individual hardship, military family status, or academic achievement when making admissions or financial aid decisions.
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The proposal is part of the Trump administration’s broader campaign against DEI practices and initiatives. In March 2026, Trump signed an executive order directing federal contractors and subcontractors to refrain from what the administration characterized as “racially discriminatory DEI activities.”
The Justice Department has also targeted several prominent universities, including Harvard, the University of California, Los Angeles, and Yale University, over allegations involving race-based admissions and other policies.
