Proposed Treasury rule could put Indiana private colleges’ tax-exempt status at risk
A Treasury Department proposal would make private schools and colleges ineligible for tax-exempt status if they give race-targeted aid, with the rule slated to take effect after May 2027 and an estimated 18,000 institutions potentially affected.
The Treasury Department this week proposed a regulation that would withdraw nonprofit tax benefits from private elementary, secondary and higher education institutions that provide race-targeted advantages in areas such as admissions, scholarships and facilities. The department says the change would begin after May 2027. Treasury and IRS officials estimate as many as 18,000 private schools, colleges and other education institutions could fall under the new standard if it is finalized.
Higher-education leaders and advocacy groups pushed back, warning of donor, scholarship and compliance consequences. Treasury Secretary Scott Bessent said policies repackaged as equity or inclusion can still be treated as race-based, and IRS CEO Frank J. Bisignano warned institutions could lose exemption if they promote discriminatory practices. College associations and presidents said the proposal could create legal uncertainty and affect donations earmarked for aid, and the Justice Department has separately opened probes into several medical-school admissions programs.
BusinessIndy examines this development and its implications for Indiana businesses and communities using the linked sources.
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