Attorneys general and Catholic bishops weigh in as comments close on the IRS private school race rule
Twenty attorneys general asked the IRS to withdraw its proposal, citing state laws that protect donors' restrictions on gifts. The Catholic bishops asked for protections for religious schools in the rule's own text. A hearing is set for Dec. 2.
Washington. The public comment period on the Treasury Department and Internal Revenue Service proposal to end the tax exemption of private schools that consider race closed on Nov. 3, with 20 attorneys general and the nation's Catholic bishops among the last to weigh in.
The proposal, published Sept. 4, 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. The Herald reported it in September, and on Nov. 2 reported that 47 higher education groups led by the American Council on Education had asked for its withdrawal.
The states' objections
The attorneys general's letter, dated Oct. 30 and announced by California Attorney General Rob Bonta on Nov. 2, was led by New York, Minnesota, California and Massachusetts and joined by 15 other states and the District of Columbia.
The attorneys general, who oversee charities, ask the IRS to withdraw the rule, saying it ignores state law on restricted gifts. Under a uniform law every signing state has adopted, a school generally cannot change the purpose of a restricted scholarship or endowment unless the gift allows it or the purpose has become unlawful, impossible or impracticable; the attorney general must be notified and may object, and most large gifts need a court's approval. The letter also argues that the rule infringes the First Amendment rights of donors and charities, reverses a 1975 IRS revenue procedure without adequate explanation, and exceeds the agency's authority.
What the bishops ask
The U.S. Conference of Catholic Bishops filed comments dated Nov. 2 with the Catholic University of America and the Association of Catholic Colleges and Universities. The groups say they reject invidious racial discrimination and support the rule's overarching aim, but its only assurance for religious schools is in the preamble, which lets a school select students by religious affiliation so long as the criterion rests solely on religion and not on shared ancestry. They ask that it be moved into the rule and the word "solely" dropped, warning that religious programs serving particular communities, such as Catholic missions to Black and Native American communities, could otherwise be caught.
They also ask the agencies to address the Religious Freedom Restoration Act, to bar IRS staff from second-guessing a school's religious doctrine, and to give schools notice and time to correct a problem before any adverse action.
A public hearing is scheduled for Dec. 2 by teleconference. Speakers had to send outlines by Nov. 3, and the IRS notice says the hearing will be cancelled if none arrived. The agencies expect to finalize the rule before it would first apply, to tax years beginning after May 31, 2027.
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