The Trump administration wants to strip all nonprofit colleges, universities and private K-12 schools of their tax-exempt status if any of their programs designed to help students uses race as a criterion for eligibility.

This change is included in a rule the Treasury Department and Internal Revenue Service proposed on Sept. 3, 2026. The rule could take effect after May 31, 2027, following a two-month-long comment period – as long as it’s not blocked or delayed by the legal challenges likely to arise.

As a nonprofit law scholar who helps nonprofit leaders understand the legal issues they face, I believe this latest salvo in the Trump administration’s attempt to end racial preferences stretches U.S. law so far that it will likely be tied up in court for years.

What is the Trump administration aiming to do?

The proposed rule states that private schools aren’t eligible for tax-exempt status if they have any school-administered or -supported program that “discriminates on the basis of race, color, or national or ethnic origin … for any purpose.”

The regulations do not define the word “discriminate” in this context, but Treasury Secretary Scott Bessent has made clear that the Trump administration considers programs that have diversity goals to be a form of discrimination.

Private K-12 schools, colleges, universities and professional and trade schools would be subject to this rule, including all academic and athletic programs as well as all scholarships and admissions policies having anything to do with efforts to increase diversity.

The proposed rule would not apply to religious schools that make admitting people who adhere to the school’s religion a priority. Nor would it apply to public universities, but I believe the language is broad enough to apply to the foundations that provide scholarships to students at public universities.

At this point, many key details about the rule remain........

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