Treasury Proposal Threatens Tax Status of Colleges
A Treasury Department proposal could strip tax-exempt status from private colleges that consider race in admissions or aid, a move the author argues would
The U.S. Treasury Department has proposed a rule to revoke tax-exempt status from private colleges and universities that factor race into admissions, scholarships, financial aid, or athletics. The move, announced this month, could affect as many as 18,000 private schools and colleges nationwide.
If finalized, the rule would place institutions already operating on thin financial margins in peril. Losing tax-exempt status would be catastrophic, argues Yolanda Watson Spiva, president of Complete College America, in an opinion piece for The Hechinger Report. Charitable giving would likely fall if contributions were no longer deductible. Schools' investment income could become taxable, budgets would shrink, and programs would inevitably close.
Institutions at Risk
The change could create profound uncertainty for historically Black colleges and universities (HBCUs), tribal colleges, Hispanic-serving institutions, predominantly Black institutions, and even faith-based colleges. This is particularly true for those with scholarships, recruitment initiatives, or student-support programs intended to address historic disparities. The students who would suffer most, Spiva writes, are those who can least afford the consequences: first-generation students, working parents returning to school, and Black, Indigenous, and Latino students.
Spiva, a Spelman College graduate, argues these institutions are not interchangeable but share a mission of expanding access. HBCUs have a distinct history defined by their founding missions, while many other minority-serving institutions are designated based on whom they enroll. "Spelman and institutions like it exist because Black students were excluded, by law, institutional policy and rampant discrimination, from most of American higher education," she states.
A History of Opening Doors
The author points to a broader history of minority-serving institutions expanding opportunity. During the early 1900s, many leading American colleges limited the admission of Jewish students. In the 1930s, Jewish scholars fleeing the Nazi regime arrived in the U.S. To find antisemitism and unemployment. When much of American higher education would not make room for them, HBCUs did. Researchers have identified 51 refugee scholars who taught at 19 HBCUs.
"Institutions created for Black students whom other colleges had excluded recognized the humanity and talent of other scholars who had been pushed to the margins," Spiva writes. Their commitment to a historically underserved community did not make them exclusionary, she contends. It gave them a deeper understanding of why opening closed doors matters.
Confusing Opportunity with Discrimination
Spiva argues we should not confuse efforts to expand opportunity with unlawful discrimination. A college that provides additional advising to first-generation students or creates a STEM-support program for Native American students is trying to close an existing gap, not confer an arbitrary preference. It is an attempt to make the college experience feel roughly the same for every student, regardless of zip code, family income, or race.
Scholarship programs aimed at underserved populations exist because certain groups have faced real barriers to enrolling in and completing college. Pretending that history doesn’t matter and that those barriers don’t exist won’t make the barriers disappear, Spiva notes. It just makes them harder to address.
If the proposal moves forward, colleges will be forced to choose between risking their financial survival and abandoning programs that are closing disparities in student outcomes. The author concludes that the colleges most affected remain evidence of what makes American higher education good: its capacity to widen opportunity and recognize human potential.
