The Trump administration took steps on Thursday to revoke the tax-exempt status of private schools that engage in racial discrimination through race-based admissions, scholarships, or other programs.

The Department of the Treasury and the Internal Revenue Service issued proposed regulations that would disqualify private educational institutions from Section 501(c)(3) tax-exempt status if they adopt, maintain, or enforce policies that discriminate based on race, color, or national or ethnic origin. The rule would cover admissions, educational policies, scholarships, loans, athletics, and all other school-administered or school-supported programs.

Treasury Secretary Scott Bessent said the move delivers on President Trump's executive orders to end discrimination and restore merit-based opportunity. “Under President Trump, this Administration is standing up for America’s students by ensuring racial discrimination has no place in American education,” Bessent said. “Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature. Today’s Treasury and IRS proposed regulations establish a clear standard, and the institutions that continue to use discriminatory practices will no longer receive the benefits of federal tax-exempt status.”

The proposed regulations would apply to tax-exempt private primary and secondary schools, colleges, universities, professional schools, and trade schools. Treasury and the IRS estimate that the proposal may affect as many as 18,000 private educational institutions. The rules would also eliminate outdated IRS guidance that had permitted schools to favor certain racial preferences in admissions, facilities, programs, scholarships, and financial assistance.

The changes align with Supreme Court precedents including Brown v. Board of Education, Bob Jones University v. United States, and Students for Fair Admissions v. Harvard, which rejected race-conscious admissions at colleges. The proposal would apply to taxable years beginning after May 31, 2027.

The announcement follows earlier administration actions pressuring schools and nonprofits to drop race-based scholarships and programs. Critics of race preferences have argued such policies violate civil rights laws and undermine equal treatment under the law.