On November 3, 2026, the Liberty Justice Center’s PARENTS Initiative (PARENTS) submitted a public comment to the U.S. Department of the Treasury and the Internal Revenue Service identifying two concerns with a newly proposed regulation titled “Racial Nondiscrimination in Private Schools.” The failure to define discrimination and the lack of specific religious protections in the regulation itself pose serious concerns.
The proposed regulations would make private schools ineligible for federal income tax exemption under Section 501(c)(3) if they discriminate on the basis of race, color or national or ethnic origin in admissions, scholarships, educational policies, athletics or other school-administered or school-supported programs. The proposal covers private elementary and secondary schools, colleges, universities and professional and trade schools.
Under existing IRS guidance, private schools must maintain racially nondiscriminatory policies to qualify for tax-exempt status. Portions of that guidance, however, permit certain preferences for racial minority groups in admissions, programs and financial assistance. The proposed regulations would remove those provisions and specify that discrimination for any purpose—including remedial or diversity-related objectives—is incompatible with a private school’s tax-exempt status.
PARENTS’ comment identifies two issues with the new rule.
First, PARENTS’ comment addresses the proposal’s failure to define “discriminates.” The comment calls for an express intentional-discrimination standard, drawing on Title VI, relevant court decisions and the administration’s guidance. The proposed regulations do not define the term or expressly identify an intentional-discrimination standard, leaving the door open for “disparate impact” theories.
Second, the comment highlights the gap between the proposed rule’s explanation of religious protections and its operative text. The preamble states that the regulations would not prevent private schools from maintaining religious missions, curricula or observances, or selecting students based solely on religious affiliation or membership rather than ancestry or ethnicity. But the proposed regulation itself never mentions religion.
The Treasury Department and the IRS should adopt PARENTS’ proposed changes in the final rule and protect private schools from losing their federal tax-exempt status based solely on unintentional disparate impacts.
The Treasury Department and the IRS published the proposal on September 4, 2026, with a public comment deadline of November 3, 2026. If finalized as proposed, the regulation would apply to private schools’ taxable years beginning after May 31, 2027.
The proposed regulations are available in the Federal Register notice.
Liberty Justice Center’s PARENTS Initiative Raises Concerns About Proposed IRS Regulations on Private Schools’ Tax-Exempt Status
Home > Other Legal Work > Liberty Justice Center’s PARENTS Initiative Raises Concerns About Proposed IRS Regulations on Private Schools’ Tax-Exempt Status
On November 3, 2026, the Liberty Justice Center’s PARENTS Initiative (PARENTS) submitted a public comment to the U.S. Department of the Treasury and the Internal Revenue Service identifying two concerns with a newly proposed regulation titled “Racial Nondiscrimination in Private Schools.” The failure to define discrimination and the lack of specific religious protections in the regulation itself pose serious concerns.
The proposed regulations would make private schools ineligible for federal income tax exemption under Section 501(c)(3) if they discriminate on the basis of race, color or national or ethnic origin in admissions, scholarships, educational policies, athletics or other school-administered or school-supported programs. The proposal covers private elementary and secondary schools, colleges, universities and professional and trade schools.
Under existing IRS guidance, private schools must maintain racially nondiscriminatory policies to qualify for tax-exempt status. Portions of that guidance, however, permit certain preferences for racial minority groups in admissions, programs and financial assistance. The proposed regulations would remove those provisions and specify that discrimination for any purpose—including remedial or diversity-related objectives—is incompatible with a private school’s tax-exempt status.
PARENTS’ comment identifies two issues with the new rule.
First, PARENTS’ comment addresses the proposal’s failure to define “discriminates.” The comment calls for an express intentional-discrimination standard, drawing on Title VI, relevant court decisions and the administration’s guidance. The proposed regulations do not define the term or expressly identify an intentional-discrimination standard, leaving the door open for “disparate impact” theories.
Second, the comment highlights the gap between the proposed rule’s explanation of religious protections and its operative text. The preamble states that the regulations would not prevent private schools from maintaining religious missions, curricula or observances, or selecting students based solely on religious affiliation or membership rather than ancestry or ethnicity. But the proposed regulation itself never mentions religion.
The Treasury Department and the IRS should adopt PARENTS’ proposed changes in the final rule and protect private schools from losing their federal tax-exempt status based solely on unintentional disparate impacts.
The Treasury Department and the IRS published the proposal on September 4, 2026, with a public comment deadline of November 3, 2026. If finalized as proposed, the regulation would apply to private schools’ taxable years beginning after May 31, 2027.
The proposed regulations are available in the Federal Register notice.
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Timothy R. Snowball
Tim Snowball serves as Senior Counsel at Liberty Justice Center, where he fights to keep government power in check while protecting the individual constitutional rights of Americans.
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