College associations ask the IRS to withdraw its proposed rule tying tax exemption to race in school programs
The American Council on Education and 46 other organizations filed comments on Oct. 29. They argue the rule goes beyond the agency's authority, leaves schools unsure what conduct is barred and offers no process before an exemption is revoked.
Charitable support for higher education, fiscal year 2025
Washington. The American Council on Education and 46 other higher education organizations have asked the Internal Revenue Service to abandon its proposed rule on racial discrimination by tax-exempt private schools, or at least to narrow it, in comments filed on Oct. 29.
The Treasury Department and the IRS proposed the rule on Sept. 3. It would end the federal tax exemption of a private school, college or university that considers race, color or national or ethnic origin in any program it runs or supports, and the agencies estimate it may reach 18,000 schools. The Herald reported the proposal when it was published. Comments are due Nov. 3.
The case against the rule
The 16 page letter, signed by the council's president, Ted Mitchell, argues that the IRS has no general power to revoke an exemption on grounds of public policy. That power comes from the Supreme Court's 1983 decision in Bob Jones University v. United States, which allowed revocation only where there can be no doubt that an activity is contrary to a fundamental public policy, the letter says. In the associations' view, the proposal goes further, reaching any policy or practice in any program regardless of the intent behind it or whether it is lawful, which could cover isolated incidents and speech protected by the First Amendment.
The letter also says the rule gives schools no fair notice of what is prohibited, does not explain how an investigation would begin or what evidence would count, and does not promise schools notice or a chance to respond.
What the associations ask for
If the IRS finalizes anything like the proposal, the associations ask that it set standards for investigations, give institutions notice and an opportunity to answer, and include a provision suspending any revocation until legal challenges are resolved.
They describe what a college stands to lose with its exemption: charitable gifts, financial aid, research support and access to tax-exempt bond financing. Citing outside estimates, the letter says higher education received $78.8 billion in charitable support in fiscal year 2025, $49.5 billion of it going to private, nonprofit institutions. It warns that academic medical centers and teaching hospitals would be hit particularly hard.
Signers include the Association of American Universities, the National Association of Independent Colleges and Universities, the Council of Independent Colleges, the Association of American Medical Colleges and the Council for Christian Colleges and Universities.
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