IRS Proposed New Tax Rules for Private Schools

The proposed regulations would remove tax-exempt status from schools that engage in racial discrimination.

Updated on Sept. 28, 2026 in Higher Education

Bold flat-color editorial illustration of a neoclassical building facade with tall columns, symbolizing federal regulatory oversight. — The IRS proposed new regulations in September 2026 that could revoke the tax-exempt status of private universities found to engage in racial discrimination. AI Illustration. Upload story photo >

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Should private universities lose tax-exempt status if they are found to engage in racial discrimination?

The IRS proposed new regulations in early September 2026 that would allow for the revocation of federal tax-exempt status for private universities engaging in racial discrimination. The move follows federal findings that Duke University schools intentionally discriminated against white and Asian applicants.

Why it matters

The administration stated that this measure fulfills executive orders aimed at ending discriminatory practices and restoring merit-based opportunities within educational institutions.

The IRS proposal targets 18,000 private institutions, potentially forcing schools like Duke University to pay estimated annual property taxes of $50 million to local jurisdictions like Durham.

The players

IRS

The IRS is the federal agency responsible for tax collection and the enforcement of tax laws in the United States.

Duke University

Duke University is a private research university located in Durham, North Carolina.

Bob Jones University

Bob Jones University is a private Christian university that lost its tax-exempt status following a 1983 Supreme Court decision.

Treasury Department

The Treasury Department is the executive agency responsible for managing federal finances and enforcing financial regulations.

The details

Federal investigations concluded that Duke School of Medicine and Duke Law School violated Title VI of the Civil Rights Act through intentional discrimination. The Treasury Department and IRS derived the authority for this proposal from the 1983 Supreme Court ruling that revoked tax-exempt status for Bob Jones University.

In 1983, the Supreme Court revoked the tax-exempt status of Bob Jones University.
The Trump administration froze $108 million in Duke research funds in 2025.
The IRS proposed new tax-exempt regulations for private schools in early September 2026.
A Duke official provided a written response to the proposal on September 9, 2026.
The proposed tax-exempt regulations are scheduled to take effect on May 31, 2027.

Roadmap

The current IRS proposal follows a pattern set by the 1983 Supreme Court decision regarding Bob Jones University. The administration is extending this legal precedent to enforce modern anti-discrimination standards across thousands of private educational entities.

Private schools facing the loss of tax-exempt status may be required to pay significant local property taxes, such as the $50 million estimate for Duke University in Durham. This shift could impact the overall budgets and philanthropic contributions of major educational institutions across the country.

The takeaway

This regulatory move underscores a hardening stance on the intersection of federal funding and institutional admissions policies. Schools now face a transition period where they must reconcile their admissions criteria with federal civil rights standards to maintain their non-profit status.