A proposed rule that could deny tax benefits to private schools that discriminate based on race, including through DEI efforts, doesn’t just raise tax questions. It creates a collision between tax law and employment law that schools, colleges, and universities will need to manage simultaneously — or risk solving one problem by creating another.
For private schools, colleges, and universities, tax-exempt status is becoming another enforcement tool in the federal government’s heightened scrutiny of race-conscious practices. The institutions that move first and most carefully will be best positioned when the final rule arrives.
The IRS has conditioned tax-exempt status on racial nondiscrimination since 1971, when it published its position in Revenue Ruling 71-447. The US Supreme Court affirmed that authority in Bob Jones University v. United States in 1983, which involved a school that prohibited interracial dating and marriage.
But the framework that followed, built largely on Rev. Proc. 75-50 and related guidance, focused on exclusionary discrimination, in part to avoid inquiries into subjective intent. Its silence on affirmative uses of race left room for schools to maintain race-conscious scholarships or diversity-focused admissions criteria without jeopardizing its exemption.
The proposed regulation would largely eliminate that ambiguity with a uniform nondiscrimination standard under which any use of race, color, national or ethnic origin —...
Millions of Aussies will be cheering Ben Roberts-Smith after seeing his publicity campaign. But we must leave all these matters to a criminal court to decide – this time beyond reasonable doubt.