The Trump administration has introduced a proposal that would remove the tax-exempt status of private schools if they use race in any aspect of their operations, including admissions, scholarships, athletics, or other programs. The rule, developed by the IRS and the Treasury Department, would make any private institution ineligible for tax-exempt status if it considers race in these areas. The administration argues that this aligns with a 2023 Supreme Court decision that ended the use of affirmative action in college admissions. Under the proposal, even if a school rebrands race-based preferences as efforts to promote equity, inclusion, or diversity, it would still be considered discriminatory. Treasury Secretary Scott Bessent emphasized that the new regulations would provide a clear standard, and any institution continuing to use what the government views as discriminatory practices would lose the benefits of federal tax-exempt status. Before the rule can take effect, it must undergo a public comment period, and it could be implemented as early as June 2027. Private schools can qualify for tax-exempt status under 501(c)(3) if they operate as non-profit organizations, reinvesting their revenue into education rather than distributing it to individuals or shareholders. This status is valuable because it allows schools to avoid paying federal income tax and enables donors to claim their contributions as charitable deductions. The Trump administration has warned that schools not complying with the president’s policies could face the loss of their tax-exempt status. The proposed rule does not offer detailed instructions on how the IRS and Treasury will determine if a private school uses race in its programs. However, the administration insists that schools can still offer financial aid or admission benefits to disadvantaged students, as long as these decisions are made without considering race. The administration referenced the 1983 Supreme Court case Bob Jones University v. U.S., which ruled that institutions opposing "fundamental public policy" could lose their tax-exempt status. In a related development, CNN reported last year that the IRS was considering revoking Harvard University’s tax-exempt status due to disagreements over policy issues. This highlights the potential implications of the new rule for prominent educational institutions.