Why the Trump administration’s bid to end diversity efforts at nonprofit schools is likely to get tied up in court

The Treasury Department and IRS proposed a rule on September 3, 2026 that would strip tax-exempt status from any nonprofit private school with a program using race as an eligibility criterion, potentially taking effect after May 31, 2027.

The IRS estimates the rule would affect 18,000 private schools and 750,000 students; Treasury Secretary Scott Bessent has framed diversity-goal programs as a form of discrimination, though the rule itself does not define 'discriminate.'

Legal scholars argue the rule stretches the 1983 Bob Jones and 2023 Students for Fair Admissions Supreme Court rulings well past their actual holdings, since Bob Jones required proof the practice shocked the community conscience and Harvard applied only to schools accepting federal funds.

The nonprofit sector, worth roughly $92 billion in 2025 donations to private schools, faces tuition hikes and legal battles if the rule proceeds, with the author predicting years of litigation.

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