Schools Giving Aid to Minority Students Could Lose Tax Exemptions Under Trump’s New Rules

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Published: 2026-09-11T17:01:22.252Z • Permanent link

Secretary of the Treasury Steven Mnuchin announced new rules that would significantly alter the tax-exempt status of schools that participate in race-based programs. These programs, also known as affirmative action initiatives, are designed to promote diversity and inclusion in higher education. The proposed rules would prevent schools from qualifying for tax-exempt status unless they can demonstrate that these programs are not primarily motivated by a desire to increase diversity. This move is seen as a major blow to the Higher Education Act of 1965, which provides tax-exempt status to non-profit educational institutions.

Mnuchin's decision is expected to have far-reaching consequences for institutions of higher learning across the United States. Many schools rely on their tax-exempt status to attract students, faculty, and donations. Without this status, these schools could face significant financial losses and may be forced to reduce their programs or even close their doors. The University of California, for example, has a long history of affirmative action initiatives, and the loss of its tax-exempt status could have a significant impact on its ability to attract top talent.

The new rules are part of a broader effort by the Trump administration to roll back civil rights protections for minority groups. The administration has been critical of affirmative action initiatives, arguing that they are unconstitutional and unfairly disadvantage white students. However, civil rights advocates and many educators argue that these programs are essential to promoting diversity and inclusion in higher education.

The impact of the new rules on the Higher Education Act of 1965 will be felt across a range of affected companies, research communities, and markets. Many private schools and non-profit institutions rely on their tax-exempt status to attract students and donations. The loss of this status could lead to a significant decline in enrollment and revenue, making it difficult for these institutions to remain viable. This, in turn, could have a broader impact on the economy, as these institutions often serve as hubs for innovation and entrepreneurship.

The loss of tax-exempt status could also have significant implications for research communities and policymakers. Many research institutions rely on their tax-exempt status to attract funding and talent. Without this status, these institutions may struggle to compete for funding and resources, which could limit their ability to conduct research and drive innovation. This could have significant implications for fields such as science, technology, engineering, and mathematics (STEM).

The Trump administration's efforts to roll back civil rights protections for minority groups are part of a broader pattern of policy shifts aimed at reducing government intervention in the economy. The administration has been critical of affirmative action initiatives, arguing that they are unconstitutional and unfairly disadvantage white students. However, this approach is not new, and similar efforts have been made by previous administrations.