Private colleges could lose their federal tax-exempt status if they engage in diversity, equity and inclusion work, under a proposed rule issued by the U.S. Department of Treasury on Thursday.

The IRS tax code does not grant tax-exempt status to private colleges that discriminate based on race. The Treasury’s proposal would align the agency’s definition of racial discrimination with a January 2025 executive order from President Donald Trump that declared DEI policies and programs to be violations of federal civil rights law.

The Treasury will accept public comments on the proposal until early November, after which the agency will create a final rule. A final rule would go into effect in June, the proposal said.

The Treasury proposal, set to be published in the Federal Register on Sept. 4, is the Trump administration’s latest attack on diversity work, and the higher education system more broadly.

If enacted, the proposal would revoke a decades-old IRS rule that allows a college to favor racial minority groups in admissions, programming and financial assistance decisions if that supports the college’s racial nondiscriminatory policy for students.

The use of race-conscious college admissions has been banned since the U.S. Supreme Court ruled the practice unconstitutional in 2023.

The proposed Treasury rule seeks to establish that “all forms of racial discrimination in education, regardless of the intent behind or the legality of such discrimination,” run contrary to U.S. public policy.

It cited Trump’s executive orders directing federal officials to root out DEI in colleges and K-12 schools, which it likened to President Dwight Eisenhower’s 1957 executive order authorizing the use of the National Guard to enforce the public school desegregation in Little Rock, Arkansas.

U.S. Treasury Secretary Scott Bessent said in a statement Thursday that the rule would set “a clear standard” for what is expected of tax-exempt colleges.

“Today’s proposed regulations put institutions on notice and schools that continue to engage in racial discrimination should expect to lose that status,” added Frank Bisignano, head of the IRS.

Read the full article about private colleges possibly losing tax-exempt status by Laura Spitalniak at Higher Ed Dive.