IRS: Stop Forcing DEI or Lose Funding!

New IRS Rule To Strip Private Schools At All Levels Of Tax-Exempt Status For Using DEI

by Brendan Theis, The Federalist, September 5, 2026

A new IRS proposed rule would strip private schools at all levels—elementary, secondary, and post-secondary, including colleges, universities, and trade and professional schools—of tax-exempt status for using racial-preference policies such as DEI. Treasury estimates the rule could affect about 18,000 private institutions. Treasury Secretary Scott Bessent said the target is schools that claimed to scrap DEI but only rebranded: “Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature.” Institutions that keep discriminatory practices “will no longer receive the benefits of federal tax-exempt status.”

The Federalist ties the crackdown to post–Students for Fair Admissions evasion: Harvard rebranded its DEI office to “Office of Community and Campus Life” after the Supreme Court barred race-based admissions, while then-President Claudine Gay signaled race could still be communicated on applications. Tax-exempt status, IRS said, requires compliance with “fundamental public policy, including the prohibition against racial discrimination.” Disqualifying noncompliance would cover not only admissions and hiring but educational policies, scholarships and loans, athletics, and “every other school-administered or school-supported program,” including school-supported affinity groups that discriminate by ideology.

Medical-school “racial concordance” schemes that race-match patients and doctors—creating artificial admissions pressure—would also face jeopardy. Race-neutral criteria such as family income, geography, first-generation status, individual hardship, military-family status, or academic achievement remain allowed. The piece notes those proxies have been used after SFFA to recreate race effects, and that DOJ recently found Yale Medical School discriminated based on race.

Education/DEI cold open with a purse-strings hook parents understand: tax exemption is not a right to keep racial preferences under new names. Do not invent effective dates beyond “proposed rule,” and do not invent a school-by-school hit list Treasury has not published.
 

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