Treasury proposes stripping tax-exempt status from private colleges with DEI policies

In a controversial move, the Trump administration is proposing a new regulation that could strip tax-exempt status from private colleges and universities if they implement diversity, equity, and inclusion (DEI) policies that favor students based on race. The Treasury Department announced the proposed rule, which would take effect in May 2027, on Thursday.

The regulation would target institutions that provide race-based benefits or advantages in admissions, scholarships, or facilities. If enacted, the rule could affect up to 18,000 private educational institutions.

The proposal is part of the administration's broader effort to eliminate DEI programs, which have become increasingly common in higher education since Donald Trump took office. Critics, including higher education leaders, argue that the rule would disproportionately impact minority students and working-class Americans who rely on college education for a better life.

Mike Gavin, president of the Alliance for Higher Education, stated that the administration's actions are an attempt to silence progress and maintain systemic inequities.

The Treasury Department and the IRS estimate that the regulation could impact thousands of universities that have already started to shut down or rebrand their DEI offices and eliminate scholarships and minority-focused clubs in response to the pressure from the White House. The proposal has sparked concerns among higher education institutions about the potential legal and financial implications of maintaining their tax-exempt status.

The Justice Department is also investigating several medical schools for alleging discriminatory admissions practices that allegedly violate Title IV of the Civil Rights Act of 1964.