When ending race preferences, the process is as important as the policy

Until 1970, the IRS granted private schools tax-exempt status regardless of their racial policies. In July 1970, the IRS announced it could no longer justify exemptions for schools that practice racial discrimination, and in 1971 a federal court in Washington backed that change in Green v. Connally, a case over Mississippi private schools. Half a century later, schools are still using race in student selection, but it now comes dressed up under justifications such as “affirmative action” and “diversity.”

A new proposal from the Treasury Department may put an end to that as well. But the devil is in the details and conservatives should think this through before they cheer it on.

The original anti-discrimination effort also had a tortured history of evasions.

Bob Jones University did not admit any black students until 1971, shortly after receiving an IRS warning that racial discrimination placed its tax exempt status in jeopardy. Then, from 1971 to 1975, the South Carolina school accepted applications only from black students who were already married to someone of their own race. In May 1975, Bob Jones opened enrollment to unmarried black students but added yet another racist rule that barred interracial dating and marriage. The university claimed its religious beliefs about interracial marriage justified the rule.

The IRS wasn’t buying it, according to the Supreme Court’s 1983 majority opinion in Bob Jones v. United States:

Thereafter, on April 16, 1975, the IRS notified the University of the proposed revocation of its tax-exempt status. On January 19, 1976, the IRS officially revoked the University’s tax-exempt status, effective as of December 1, 1970, the day after the University was formally notified of the change in IRS policy.

The Bob Jones v. United States decision upheld the IRS position. Today, a charity qualifies for a tax exemption only if its work serves a public purpose that does not violate fundamental public policy. And by the 1980s a university excluding black students because of their race or the race of their romantic partners was clearly in violation of that standard.

The IRS still has the power to decide when a school crosses (what should have been) a bright line: no tax exemption if there is special admissions treatment based on race, sex, or other immutable human characteristics. But affirmative action policies and other efforts to “reverse” past discrimination have made it much harder to find that line.

Bob Jones 2.0

A new proposal from the Department of Treasury aims to remedy the confusion. On September 3, Treasury and the IRS announced a proposed rule that would expand the “fundamental public policy” standard from the Bob Jones era. If implemented, the new standard would prohibit tax exemptions for schools practicing racial discrimination for any purpose:

These proposed regulations would provide that all forms of racial discrimination in education, regardless of the intent behind or the legality of such discrimination (for example, where such discrimination is defended as serving remedial or diversity-related objectives), are against a fundamental public policy of the United States and thus preclude a school’s exemption from Federal income tax under section 501(c)(3). In so doing, the proposed regulations would make clear that discriminating based on race, color, or national or ethnic origin for any purpose by a private school is contrary to a fundamental public policy of the United States.

If this regulation is implemented, then the IRS will treat private university admissions policies that favor minority applicants the same as the old Bob Jones policy that excluded minority applicants. It may seem that this is a bright and clear line: admissions based on race, regardless of supposedly good intentions, will be grounds to yank the school’s tax exemption.

But this is a regulatory proposal, not a law, and it is not final. Treasury and the IRS estimate it may affect as many as 18,000 private schools. An analysis from the Gibson Dunn law firm notes that Treasury counts 750,000 students at those schools who may qualify for scholarships based on racial, ethnic, or national identity. Comments are due November 3, 2026. The Treasury expects to finalize the rule before May 31, 2027, and it would apply to tax years that begin after that date. (This means the rule takes effect for most schools in the tax year after the paperwork is done, not retroactively, as was the case with Bob Jones University.)

Treasury did not publish a complete list of banned policies. What follows comes from the law firms that have analyzed the proposed law. I separated it into what the rule covers and what the lawyers expect to draw scrutiny.

Covered by the rule text or the preamble:

• Admissions preferences based on race, color, or national or ethnic origin
• Scholarships and financial aid limited by race
• Programs that restrict participation by race
• Race-based “diversity” goals for any purpose, including remedial ones
• Any “school-supported program” that discriminates, a phrase the rule does not define

Likely to draw scrutiny, according to the lawyers and not the rule itself:

• Affinity graduations and race-specific orientation programs like all-black graduations
• Race-restricted mentoring and summer pipeline programs
• Race-targeted recruitment and outreach
• Essay questions or admissions “tags” that work as stand-ins for race
• Race-restricted housing or clubs the school funds or sponsors

Some things stay legal. Schools can still choose students by religious affiliation. They can still use race-neutral criteria such as family income, geography, first-generation status, hardship, military service, and academic achievement.

If you want to know how this enforced rule might play out, look at Duke University. On August 6, 2026, the Justice Department’s Civil Rights Division found that Duke Law intentionally discriminated in its school admissions for the years 2023, 2024, and 2025 classes. This was done after 2023, when the Supreme Court banned affirmative action policies that included racial preferences in admissions.

But, like Bob Jones fifty years earlier, Duke Law found a way to sneak around the ban. In this case, Duke revised its mission statement to include a line about “diversity of perspective” and added short-answer essay questions asking applicants how they would advance it. Reviewers tagged answers with phrases that signaled that the applicant was higher on the “diversity spectrum” than, let’s say a white male student, and also tagged traits that correlate with race, such as Pell Grant status.

Duke’s published policy claimed reviewers did not see or use racial data before making their decisions. But the Department of Justice (DOJ) found that “Duke Law directed its admissions staff to highlight applicant information that could be used to advance Duke Law’s racial diversity goals.” According to the DOJ, Duke’s policy led directly to racial discrimination:

As a result, a black or Hispanic applicant has a substantially higher likelihood of admission to Duke Law than a white or Asian applicant with the same academic credentials. When qualifications are not similar, the result is starker: in 2024 and 2025, the median LSAT scores of rejected white and Asian applicants exceeded the median LSAT scores of admitted black applicants.

Harmeet Dhillon, who leads the DOJ’s Civil Rights Division, said Duke Law “doesn’t get a free pass to discriminate” against white and Asian students.

The Justice Department has said it will first try to settle with the school. If those talks fail, DOJ says it will file suit and keep monitoring Duke’s compliance with Title VI, the federal civil rights law that covers schools that take federal money. The Duke Chronicle reports that two federal investigations found discrimination at both the Law School and the School of Medicine, and that Duke endured a $108 million federal research funding freeze in 2025.

There outta be a law

However, investigations, funding freezes, and lawsuits are the old toolbox. The proposed new Treasury rule would add a new tool, and it reaches as many as 18,000 private schools, not just the ones that make headlines.

From a right-center perspective, or just the perspective of a good American opposing racial discrimination, this all may seem like terrific policy. But the problem isn’t the policy: it’s the process. Remember that this is not a discussion about laws that are passed by the people’s representatives and signed by the president. Instead, these are rules implemented by the administrative state.

The administrative state is controlled by the president, not the Congress. It can issue new rules when a president with a different definition of “discrimination” orders it to do so. Referencing the new proposed rules from the Treasury Department, Preston Cooper of the right-leaning American Enterprise Institute raised this concern: “If the Trump administration were to use this regulation to start revoking tax-exempt status from colleges right and left, I think that would represent a really serious escalation and would be potentially something the Democrats would want to retaliate against when they return to power.”

A boomerang does not care who throws it and conservatives should think hard before supporting an escalation in this rule-changing process.

The Bob Jones principle says the IRS can strip a school’s exemption when the school violates a public policy the government defines. Today the government defines that policy as race. Tomorrow, a different administration can define it based on gender identity.

Imagine a left-leaning administration’s IRS reads a Christian college’s hiring and firing code when it comes to LGBTQ staff members and sees a rule that treats employees differently based on their sexual orientation or gender identity. That federal bureaucracy could cite the Bob Jones decision, which held that public policy can override religious belief, and apply that logic to target the Christian college.

A decade ago, leaders of culturally conservative Christian colleges were already afraid of the IRS taking away their tax-exempt status over their rules regarding same-sex relationships. They were and still are correct to worry. A 2024 Southern California Law Review article lays the groundwork by asserting the most promising route to strip tax exemptions over LGBTQ discrimination is, you guessed it, IRS regulation, while citing the Bob Jones precedent.

And the “escalation” in retaliatory rulemaking Mr. Cooper warns about could even spill into bad lawmaking. The Equality Act, H.R. 15, introduced in April 2025, would add sexual orientation and gender identity to the Civil Rights Act, including in education and in programs that receive federal funds. An earlier version of the proposal passed the House twice when it was under Democratic control but was eventually stalled in the Senate both times.

As these serial failures demonstrate, passing a law is far harder than merely imposing a new IRS rule; and more so when the Senate’s supermajority filibuster threshold is in place. But there is a flipside: laws bind future presidents and the IRS bureaucracy they control far more than mere administrative rules ever will.

Let me be clear. The principle of opposing racial discrimination in institutions that receive federal nonprofit status is a good thing to support. The problem is, I can’t help but see this going the opposite way for conservatives in the near future. Race-blind equal treatment should not forever depend on which president controls the administrative state. If we truly want to end racial discrimination, for everyone, and forever, then–as the saying goes–“there outta be a law.”