Colleges Seek Answers Amid Trump Push to Cancel Tax Exemptions Over Diversity Programs

The Trump administration is threatening to cancel universities’ tax exemptions over diversity programs, and the higher education world is worried.

The new rules, which aim to stamp out policies supporting minorities on college campuses, are unusually stringent. At the same time, they’re also vague, leaving many to wonder what commonplace activities and practices might land a school in the government’s crosshairs.

And the penalty for flunking the test — the loss of nonprofit status — is extreme: It would upend schools’ finances. Colleges could suddenly find themselves facing stiff tax bills, not to mention higher borrowing costs and other expenses.

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Schools don’t have much time to prepare — the IRS regulations proposed Sept. 3 are slated to go into effect next June. Legal challenges are likely, with many saying the administration doesn’t have the authority to make the changes without Congress’ blessing.

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The rules would cancel universities’ tax exemptions if they have any “policy or practice” that discriminates based on race or ethnicity “for any purpose,” including attempts to make up for past discrimination.

They not only apply to admissions criteria but also educational policy, scholarships, loans, athletic programs and any “other school-administered or supported program.” Only private schools, including trade, elementary and secondary schools, are subject to the rules. State schools are exempt.

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The National Scholarship Providers Association told The Washington Post earlier this year that about 11% of all higher education scholarships still have race, ethnicity or other demographic factors in their eligibility requirements since the Supreme Court decision.

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Some changes would be difficult to make, like revising race-based scholarships funded by donations made on the precondition that they are reserved for students from certain groups. In many cases, as the regulations acknowledge, the donors may now be dead. Schools “may need to work with the donors, or the donors’ heirs, to find an alternative set of criteria for the scholarship recipients,” the IRS says.

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