Civil Right Groups Oppose IRS Proposal That Would Politicize Tax Exempt Status to Enable Discrimination in Private Schools

WASHINGTON — Today, the American Civil Liberties Union, the Legal Defense Fund, the Lawyers’ Committee for Civil Rights Under Law, and 34 other organizations submitted a public comment in opposition to a rule proposed by the Internal Revenue Service (IRS) that would allow it to revoke tax exempt status from private schools if they engage in activities the IRS unilaterally decides constitute “racial discrimination” — even if those activities are lawful. In effect, the proposed rule could undermine educational institutions’ obligation to ensure equal opportunity and freedom to teach, learn, and research by threatening to strip their tax-exempt status based on vague standards determined by the IRS alone.

The comment explains that the IRS has no legal authority to unilaterally decide what constitutes racial discrimination, untethered to what the law actually prohibits. This unauthorized power grab would allow the IRS to politicize its decision-making process to impose the administration’s radical view of the law and target the president’s enemies. If implemented, the rule would go into effect in June 2027.

“The IRS proposed rule could effectively re-segregate schools and open the door to more widespread discrimination. The IRS can’t trample constitutional rights when private institutions don’t fall in line with the Trump administration’s extreme political agenda,” said ReNika Moore, director of the ACLU’s Racial Justice Program. “This is not an isolated attack. It’s part of a larger pattern of the Trump administration scapegoating diversity and inclusion efforts and politicizing tax dollars.”

“The IRS is attempting to seize an unprecedented power: unilateral discretion to define what counts as discrimination in the United States absent any limitations, including legality or constitutionality,” said Kellen McCoy, counsel at the Educational Opportunities Project at the Lawyers’ Committee for Civil Rights Under Law. “And the proposed rule and this administration’s prior actions make plain that the IRS will use this authority to harm Black students and other students of color by forcing private schools to shutter lawful programs that foster equity.”

“For generations, civil rights laws have helped open doors that were once closed to Black students and other historically excluded communities,” said Demetria McCain, director of policy at the Legal Defense Fund. “This proposal threatens that progress by allowing the IRS to treat lawful diversity, equity, inclusion, and accessibility efforts as discrimination. Private institutions shouldn’t be punished for advancing equal opportunity, and the federal government cannot rewrite the meaning of discrimination. This is a flagrant abuse of the IRS’s authority.”

Because the proposed rule fails to provide a reasoned basis for the regulation or the IRS change in position, the groups urge for it to be withdrawn. An estimated 18,000 schools would be immediately affected if it is implemented.

The full public comment is available here.