WASHINGTON - The Treasury Department and the Internal Revenue Service have proposed regulations that would make federal tax exemption unavailable to private schools that adopt, maintain, or enforce policies or practices that discriminate on the basis of race, color, or national or ethnic origin.
The proposed rule, published in the Federal Register on September 4, 2026, would add a new section to the income tax regulations under 26 CFR part 1. It is issued under the Treasury Secretary's general rulemaking authority in section 7805(a) of the Internal Revenue Code. Treasury says the rule reflects what it describes as a longstanding public-policy principle against racial discrimination in education, citing Brown v. Board of Education, Bob Jones University v. United States, and Students for Fair Admissions v. Harvard.
Under the proposed text, a private school would not qualify as an organization exempt from federal income tax under section 501(c)(3) if it discriminates in the administration of educational policy, admissions policy, scholarship and loan programs, athletics, or any other school-administered or school-supported program. The proposal defines covered schools broadly to include private primary and secondary schools, colleges, professional schools, trade schools, and universities.
Treasury and the IRS say the proposal would replace older guidance that had allowed some racial preferences in admissions, facilities, programs, scholarships, and financial assistance. The agency says those older provisions are inconsistent with a uniform nondiscrimination standard and with current case law.
The proposal also says a private school would still be allowed to maintain a religious mission, curriculum, or observance program, and that religious schools may continue to select students based on genuine religious affiliation or membership. The rule also says schools may use race-neutral criteria such as family income, geographic location, first-generation status, individual hardship, m… [truncated for model]