Warnock, Colleagues Question IRS Over Administration’s Threats to Revoke Tax-Exempt Status for Universities with Diversity Programs

U.S. Senators Reverend Raphael Warnock, Ron Wyden, and Bernie Sanders are seeking answers from the Internal Revenue Service about a Trump administration proposal to revoke the tax-exempt status of private universities and K-12 programs with diversity programs

The Treasury Department's proposed rule would affect secondary schools and universities with policies the Trump administration deems racially discriminatory, including certain admissions and scholarship programs

Throughout President Trump's second term, his administration has threatened universities' tax-exempt status over diversity policies and programs it opposes as it pushes to eliminate initiatives directed at Black, Hispanic, and other minority students

Senator Warnock launched an inquiry into reports of the Trump administration's political targeting of nonprofits and authored bipartisan legislation to protect organizations facing the loss of their tax-exempt status

Senator Reverend Warnock, colleagues: "This rulemaking appears to further President Trump's repeated attempts to weaponize the IRS against those he dislikes"

Washington, D.C. - Today, Senate Finance Member U.S. Senator Reverend Raphael Warnock (D-GA), Ranking Member of the Senate Finance Committee Senator Ron Wyden (D-OR), and Ranking Member of the Senate HELP Committee Senator Bernie Sanders (I-VT) are seeking answers from the Internal Revenue Service (IRS) about a Trump administration proposal to revoke the tax-exempt status of secondary schools and universities with diversity programs. Throughout President Trump's second term, his administration has threatened universities' tax-exempt status over diversity policies and programs it opposes as it pushes to eliminate initiatives directed at Black, Hispanic, and other minority students.

"Prior to the proposed rule's release, President Trump repeatedly and publicly threated to revoke the tax-exempt status of specific private universities he dislikes" wrote the senators. "This rulemaking appears to further President Trump's repeated attempts to weaponize the IRS against those he dislikes."

The Treasury Department's proposed rule would deny tax-exempt status to any private school, including secondary schools and universities, if it has any policy or program-including admissions and scholarships-that the IRS finds to be racially discriminatory. If finalized, the new rule would go into effect in May 2027.

The proposal comes amid broader efforts by the Trump administration to pressure schools and universities to eliminate diversity, equity, and inclusion policies across the country. This latest effort demonstrates the Trump administration's willingness to put its political interests ahead of the American people and erode opportunities for middle class students across the country. In September, Senators Warnock and Wyden launched an inquiry into reports that the Trump administration is developing plans to weaponize the IRS's tax enforcement authority to target perceived ideological opponents. Senator Warnock also authored bipartisan legislation with Senator James Lankford (R-OK) to give nonprofit organizations the right to appeal IRS decisions denying or revoking their tax-exempt status.

A copy of the letter can be found HERE and text is below:

"Secretary Bessent and Mr. Bisignano:

We write regarding the U.S. Department of the Treasury's (Treasury) proposed rule, which threatens to remove federal tax-exempt status from an estimated 18,000 private K-12 schools, professional or trade schools, colleges, and universities based on the Administration's subjective findings. The proposed rule reinterprets the public policy doctrine and chills lawful actions designed to advance educational opportunity. We urge Treasury to rescind this proposal.

On September 3, 2026, Treasury issued proposed regulations to "end federal tax exempt status for private schools that engage in racial discrimination, delivering on President Trump's Executive Orders ending discrimination and restoring merit-based opportunity." This is a clear attempt by the Trump Administration to weaponize the tax code and punish educational institutions for political or subjective reasons using a definition of racial discrimination not endorsed by Congress or the Supreme Court. Under the proposed regulations, private K-12 schools, colleges, and universities will no longer be able to maintain policies or practices to support educational opportunities for historically-underserved students in a manner consistent with the Students for Fair Admission v. Harvard (SFFA) decision-or risk their tax-exempt status. This attack on our education system will severely limit admissions, scholarships and loans, athletics, and academic assistance programs that students of all backgrounds rely on to access a quality education.

In its proposal, Treasury notes that it plans to rely on the 1983 Supreme Court case Bob Jones Univ. v. United States, which upheld the IRS's revocation of tax-exempt status from a pervasively segregationist institution because its racially discriminatory policies violated "fundamental public policy." In that case, the Supreme Court noted that "there can be no doubt as to the national policy" prohibiting racial segregation because "the position of all three branches of the Federal Government were unmistakably clear." As Bob Jones makes clear, the IRS must look at the decisions issued by courts, federal statutes, and Congressional intent, not just the administration's subjective interpretations, when applying the public policy doctrine.

Private schools can lawfully advance diversity, equity, inclusion, and accessibility, even under recent Supreme Court precedent. In the SFFA decision, which Treasury references in its proposed rulemaking, the Supreme Court repeatedly affirmed this point. For example, the Supreme Court noted universities can continue to employ "race-neutral" policies, such as "focus[ing] on socioeconomic and geographic diversity." Further, earlier this year, the Supreme Court reiterated that the government can take action based on race in order to remedy specific instances of past discrimination.

Treasury's proposed rule, however, indicates that educational institutions are ineligible for tax-exempt status "regardless of the intent behind or the legality [of] racial discrimination (for example, where such discrimination is defended as serving remedial or diversity-related objectives)." The proposed rule prohibits what Treasury deems "discrimination . . . for any purpose," including to achieve commendable goals.

This prohibition is particularly concerning since the Trump Administration has repeatedly claimed lawful programs designed to advance diversity, equity, inclusion, and accessibility involve "discrimination." Indeed, guidance from the Department of Justice has stated that universities may violate the law even if they use "[f]acially neutral criteria" such as "geographic targeting." The administration has also repeatedly targeted educational institutions that admit Black and Latino students, often based on little evidence.

The proposed rule is subjective in its definition of discrimination, and rather than make educational opportunities more equitable, it will threaten academic opportunity and achievement for decades to come. There is substantial evidence that the policies schools and universities employ to create more inclusive learning environments benefit all students and foster critical thinking, empathy, and student achievement. Notably, the Trump administration's prior attempts to impose extralegal requirements on recipients have frequently been blocked by the courts.

It is unclear why Treasury believes it has the authority to revoke private schools' or colleges' tax-exempt status based on supposed violations of fundamental public policy when those actions are explicitly permitted by federal courts, including the Supreme Court.

If Treasury only intends to apply existing law, it is unclear why the proposed rule is necessary. The IRS has a three-part test to determine whether an organization's activities are consistent with exemption under section 501(c)(3): (1) whether the purpose of the organization is charitable; (2) whether the activities are not illegal, contrary to a clearly defined and established public policy, or in conflict with express statutory restrictions; and (3) whether the activities are in furtherance of the organization's exempt purpose and are reasonably related to the accomplishment of that purpose.

IRS also already has established procedures clarifying that Section 501(c)(3) schools cannot racially discriminate. In 1971, the IRS issued Revenue Ruling 71-447, providing that a private school with racially discriminatory policies is not "charitable" within the common law concepts reflected in Section 190 and 501(c)(3). Further, in 1975, the IRS issued Revenue Ruling 75-50, setting guidelines for private schools to prove they operate on a racially nondiscriminatory basis to qualify for tax-exempt status under Section 501(c)(3). Revenue Ruling 75-50 includes exceptions that allow schools to adopt certain policies regarding racial minority groups if the explicit goal was to promote or maintain a racially nondiscriminatory environment. Treasury has never advanced the view that it has the unilateral power to revoke 501(c)(3) status from schools based on its own determination of "public policy" in conflict with views advanced by the Supreme Court and Congress.

Finally, the context around Treasury's proposed rulemaking raises serious legal concerns regarding the politicization of IRS enforcement. Prior to the proposed rule's release, President Trump repeatedly and publicly threatened to revoke the tax-exempt status of specific private universities he dislikes. Furthermore, in April 2025, his administration reportedly directed then-IRS Acting Chief Counsel De Mello to revoke Harvard University's tax-exempt status. In recent years, the politicization of the IRS has raised bipartisan concern. This dramatic expansion of the public policy doctrine risks further undermining the IRS's mission of nonpartisan tax administration and enforcement and, to the extent it responds to the President's requests to audit specific institutions, may violate federal law.

In light of these significant concerns, we urge the Treasury to rescind this proposal. Furthermore, we also ask Treasury to respond to the following questions by November 19, 2026:

1. The IRS listed its authority for creation of the Proposed Rule as 26 U.S.C. § 7805(a). This is the Secretary of the Treasury's general rulemaking authority. No other authority was cited. Do you believe this authority is sufficient to promulgate a rule to deny tax exemptions to private schools absent specific congressional authorization?
2. The Supreme Court reiterated again this year that the government can take action based on race in order to remedy specific instances of past discrimination. However, the proposed rule indicates that educational institutions are ineligible for tax-exempt status "regardless of the intent behind or the legality of [racial] discrimination (for example, where such discrimination is defended as serving remedial … objectives)." How can remedial actions violate fundamental public policy if they are explicitly permitted by the Supreme Court?
3. In upholding the IRS' decision to revoke Bob Jones University's tax-exempt status for policies excluding Black students, the Supreme Court noted "there can be no doubt as to the national policy" prohibiting these policies because "the position of all three branches of the Federal Government was unmistakably clear." Do you agree the IRS must look at the decisions issued by courts, federal statutes, and Congressional intent when determining what activities are "discrimination"? How is the IRS determining Congressional intent in this instance?
4. What expertise do IRS personnel possess to make determinations of unlawful discrimination?
5. The preamble to the Proposed Rule states that the IRS "expects" donors may continue making gifts to universities to benefit first-generation college students, as well as low-income and geographically diverse students. Will you advise the IRS that these gifts do not constitute unlawful discrimination? Will you affirm that such gifts will not risk a school's 501(c)(3) exemption?
6. How would the IRS ensure that any procedure is grounded in the Internal Revenue Code and applicable civil rights law, applied consistently across institutions, and does not improperly penalize organizations for lawful efforts to advance racial equity or equal educational opportunity?
7. Currently, numerous scholarship programs exist to provide financial assistance to people of Irish, Greek, or other European descent. Would these scholarships violate the proposed rule?
8. Why did Treasury schedule a telephonic hearing, rather than an in-person hearing, on a topic of this importance?
9. Do you commit to being forthright, cooperative, and transparent to this Committee as we exercise oversight over the IRS to ensure there is no political interference in tax administration?

Sincerely,"