Trump administration targets college
New Treasury Department rules allow the IRS to revoke tax-exempt status from schools offering targeted support to minority students, affecting up to 18,000
The U.S. Treasury Department released new rules on Thursday that let the Internal Revenue Service to revoke the tax-exempt status of schools and colleges offering targeted support to Black or other minority students. This change could apply to as many as 18,000 schools and will take effect beginning next June.
This move represents a significant escalation in the administration's campaign against race-conscious policies in education. Institutions previously insulated from federal pressure due to their private funding now face direct scrutiny. The rule extends beyond admissions to target scholarships, academic programs, and other forms of student support.
The scope of the new IRS power
The administration's effort is two-pronged. It targets private secondary schools to potentially reduce the pipeline of students of color applying to competitive colleges. Simultaneously, it seeks to restrict how colleges themselves support minority students. The rule goes further than the Supreme Court's 2023 affirmative action decision by demanding race-blind approaches in areas like financial aid, campus housing, and hiring.
President Trump had previously threatened Harvard University's tax-exempt status in April 2025, stating it should be "Taxed as a Political Entity." He argued that tax exemption is contingent on acting in the public interest. However, legal experts note the standard for revoking such status is narrow and the barriers are high.
Legal precedent and practical hurdles
The 1983 Supreme Court case involving Bob Jones University established the precedent for removing tax-exempt status. The court ruled that an institution could only lose its status when its activities are "contrary to a fundamental public policy," specifically citing racial discrimination in education. Legal scholars Philip Hackney and Brian Mittendorf note this remains the only such case involving a college.
Hackney and Mittendorf explain that the revocation process is arduous. It begins with an IRS audit to determine if a nonprofit's operations have a "substantial nonexempt purpose," a process that could take years. The law also provides ample opportunities for appeal and review.
Potential consequences for institutions
Despite legal hurdles, the Treasury action has serious implications. It creates a new avenue for the administration to demand data and investigate schools nationwide. Institutions already financially strained may face greater compliance costs and burdens.
If an organization loses its tax-exempt status, it becomes subject to federal income tax. It also loses the ability to receive tax-deductible donations. This move follows previous administration efforts to withhold federal research funds from universities accused of racial discrimination.
The administration has also demanded vast amounts of data on admissions and student outcomes to identify racial disparities, though a court has issued an injunction halting that demand for now. As one article in GW's Online Public Health journal notes, equity requires allocating "the exact resources and opportunities needed to reach an equal outcome." The new rule challenges that principle directly.
