Comments to the Proposed Regs: Racial Nondiscrimination in Private Schools – Part Two

Published on: by Gene Takagi Category:CURRENT AFFAIRS & OPINION, DIVERSITY EQUITY INCLUSION, IRS & FEDERAL TAX ISSUES
person in suit sitting at desk holding a sign that reads "One More Thing"

For the past couple of weeks, we have posted on the Proposed Rule by the Internal Revenue Service titled Racial Nondiscrimination in Private Schools published on September 4. The comment below is from Professors Philip T. Hackney and Ellen P. Aprill. I have reproduced the Executive Summary and Parts I (INTRODUCTION) and II (BACKGROUND). The full comment can be viewed or downloaded in its entirety at the bottom of the post.

COMMENTS ON PROPOSED REGULATIONS
Racial Nondiscrimination in Private Schools
REG-119986-25, 91 Fed. Reg. 56,811 (September 4, 2026)
November 3, 2026

Internal Revenue Service
CC:PA:01:PR (REG-119986-25)
Room 5503
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

Submitted electronically via www.regulations.gov

Re: Comments on Proposed Regulations, Racial Nondiscrimination in Private Schools, REG-119986-25, 91 Fed. Reg. 56,811 (Sept. 4, 2026) (“NPRM”)

We submit these comments on the notice of proposed rulemaking titled Racial Nondiscrimination in Private Schools. We are professors of law who study the law of tax-exempt organizations and write here in our individual capacities.

We conclude that the proposed regulations should be withdrawn.

Bob Jones University v. United States upheld the IRS’s denial of exemption to schools whose practices contravened a fundamental public policy. Establishing such a policy requires the sustained convergence of all three branches of government on the same position, and the Court required that convergence to be beyond doubt. The NPRM rests instead on a single divided decision addressing two universities and on executive orders that reverse from one administration to the next.

Moreover, Bob Jones recognized that entitlement to exemption “depends on meeting certain common law standards of charity.” That common law condemns restrictions that exclude a group from a charitable benefit but not those that direct a benefit toward one. The IRS has recognized remediation of discriminatory harm as a charitable purpose continuously since 1959, through regulations, published revenue rulings, revenue procedures reaffirmed as recently as 2019, and the formal legal advice of its Office of Chief Counsel. The Preamble engages three items in that record and does not mention the remainder. And the standard the NPRM would impose is unlimited in scope, and indifferent to purpose in a statutory scheme built on purpose.

If the administration believes Students for Fair Admissions requires this result, it needs to ask Congress to change the law.

Respectfully submitted,

Philip T. Hackney
Professor of Law
University of Pittsburgh School of Law

Ellen P. Aprill
John E. Anderson Professor Emerita of Tax Law
LMU Loyola Law School, Los Angeles

cc: Hon. Scott Bessent, Secretary of the Treasury
Kevin Salinger, Acting Assistant Secretary (Tax Policy), Department of the Treasury Frank J. Bisignano, Chief Executive Officer, Internal Revenue Service
Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes)

EXECUTIVE SUMMARY

The NPRM would deny or revoke the tax-exempt status of any § 501(c)(3) private school that adopts, maintains, or enforces a policy or practice discriminating on the basis of race, color, or national or ethnic origin, in the administration of any program the school operates or supports, for any purpose. It would delete the provisions of Revenue Procedure 75-50 that have authorized minority-favoring admissions and financial assistance programs since 1975. Part I introduces these comments and Part II describes the proposed regulations. Parts III through VI set out four independent grounds requiring withdrawal.

  • The NPRM exceeds the authority Bob Jones conferred. That decision permitted the IRS to act only where a fundamental public policy is established beyond doubt through the convergence of all three branches of government over decades. A single, divided decision and recent executive orders subject to reversal by the next administration do not supply that convergence. See Part III.
  • The NPRM is inconsistent with the charitable standard it claims to implement. Bob Jones recognized that entitlement to exemption “depends on meeting certain common law standards of charity.” Common law condemns restrictions that exclude a group from a charitable benefit, but permits criteria that direct a benefit toward one. The NPRM collapses that distinction without acknowledging this key principle of common law. See Part IV.
  • The NPRM reverses sixty years of the agency’s own guidance without acknowledgment. The record includes the 1959 regulation, a 1972 regulation treating a private foundation’s ethnic-minority scholarship program as consistent with § 501(c)(3), ten published revenue rulings from 1967 through 1977, six Chief Counsel memoranda from 1968 through 1989, two determinations concerning Kamehameha Schools, revenue procedures the agency expressly retained in 2019, and private letter rulings approving race-conscious scholarship programs as recently as 2024. The Preamble engages three items in that record and does not engage the rest. That record documents a construction of § 501(c)(3) consistent with what the common law permits, and it establishes the position the NPRM departs from without explanation. See Part V and Appendix A.
  • The NPRM is arbitrary and capricious. The economic analysis examines scholarships and admissions while the regulatory text reaches every program a school administers or supports, a category the Preamble dismisses as “relatively narrow, miscellaneous.” The standard supplies no criteria for what conduct is prohibited and disregards purpose in a statutory scheme built on purpose. And Treasury and the IRS nowhere acknowledge or explain their departure from the agency’s own longstanding position. Each of these is also among the grounds above; together they show a failure of reasoned decisionmaking the Administrative Procedure Act does not permit. See Part VI.

Requested action. The proposed regulations should be withdrawn. If Treasury and the IRS proceed, Part VII sets out the minimum the Administrative Procedure Act requires before a final rule may issue.

I. INTRODUCTION

A. The Question These Comments Address

On September 4, 2026, the Treasury Department and the Internal Revenue Service published a notice of proposed rulemaking titled Racial Nondiscrimination in Private Schools (the “NPRM”).1 The administration presents the NPRM as an application of the principle that all persons should be treated equally under the law. That principle is not in dispute. What is in dispute is whether the IRS has authority to determine that a purpose it has recognized as charitable for sixty years has ceased to be charitable and whether it has followed the law in attempting to do so.

Organizations pursuing the elimination of prejudice and discrimination have done so under a Treasury regulation in force since 1959, under published revenue rulings the IRS has never withdrawn, and under a revenue procedure the agency expressly reaffirmed in 2019.2 The NPRM would strip exemption from such organizations, not because they fail the charitable purpose standard, but because of the means by which they choose to pursue that purpose. An equality principle as applied to the government’s longstanding treatment of charitable organizations requires that the IRS not single out organizations for adverse treatment based on the means they choose to pursue a purpose the agency itself recognizes as charitable. The NPRM does exactly that.

These comments rest on four legal grounds, each sufficient to require withdrawal: that the NPRM exceeds the authority Bob Jones University v. United States conferred;3 that it is inconsistent with the common law charitable standard on which § 501(c)(3) is grounded; that it reverses the agency’s longstanding guidance without acknowledgment; and that it is arbitrary and capricious under the Administrative Procedure Act (APA). Parts III through VI develop each in turn.

Two features of the NPRM inform each of these grounds and warrant notice at the outset.

The first is the gap between the rule the NPRM would impose and the rule its Preamble analyzes. Proposed § 1.501(c)(3)-2(b) reaches “any educational policy, admissions policy, scholarship or loan program, athletic program, or other school-administered or school-supported program.” The final term is a residual category with no limit. The Preamble’s economic analysis addresses scholarships and admissions. It characterizes everything else a school does as a “relatively narrow, miscellaneous group of activities” whose effects would be “insignificant.” A regulation whose text extends to curriculum, faculty hiring, student organizations, and cultural programming, but whose supporting analysis assumes those activities are peripheral, fails to satisfy the APA’s requirement of reasoned decisionmaking.4

The second is the absence of any intent requirement. The Preamble rests on Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (SFFA),5 which applied the Equal Protection Clause and its understanding of Title VI. Both require proof of discriminatory purpose.6 Section 501(c)(3) itself conditions exemption on an organization being operated for exempt purposes, and so many other doctrines giving that condition content asks why an organization acts as it does. But the NPRM reaches discrimination “for any purpose.” By those words it makes the organization’s purpose irrelevant. It eliminates § 501(c)(3)’s focus upon charitable purpose. Under that standard a school that operates a scholarship program to remedy its own documented history of exclusion stands in the same position as a school that refuses to admit minority students. Nothing in the Preamble explains why purpose, which governs every other question in this field, is irrelevant to this one.

B. Identity and Interest of Commenters

We submit these comments in our individual capacities as professors of law who study the law of tax-exempt organizations. Philip Hackney is a Professor of Law at the University of Pittsburgh School of Law and previously served as an attorney in the Office of Chief Counsel of the Internal Revenue Service, where his work included the private school nondiscrimination rules the NPRM would revise. Ellen Aprill is the John E. Anderson Professor Emerita of Tax Law at LMU Loyola Law School, Los Angeles. She served as an attorney-advisor in the Office of Tax Policy at the Department of the Treasury, where her work included the development of regulations under section

501(c)(3). She has written on the public policy doctrine and the revocation of exempt status for more than three decades. Neither of us represents any organization affected by the proposed regulations. Institutional affiliations are provided for identification only; these comments reflect our own views and not those of our institutions.

C. What These Comments Do Not Argue

We note that these comments do not argue that SFFA was wrongly decided. They do not argue that racial discrimination in education is permissible. They do not address whether race-conscious remediation is sound policy. They address instead whether the charitable standard of § 501(c)(3) permits such remediation.

II. BACKGROUND

This Part II describes what the proposed regulations would do, what they preserve, what they delete, as well as what the Treasury and the IRS said and did not say about the scope and economic effects of the rule. The legal arguments that follow from this Part are developed in Parts III through VI. The purpose of this description is to establish the regulatory text and Preamble record against which those arguments are made.

A. Operative Text

The proposed regulations would add new Treasury Regulation § 1.501(c)(3)-2 to 26 CFR Part 1, titled “Racial nondiscrimination requirement for private schools.” The proposal is issued under the Secretary’s general rulemaking authority in § 7805(a) and would apply to taxable years beginning after May 31, 2027.

Proposed Regulation § 1.501(c)(3)-2(a) states the general rule: a private school must be operated exclusively for one or more exempt purposes within the meaning of Treasury Regulation § 1.501(c)(3)-1(d) to be an organization described in § 501(c)(3). It further provides that a private school that fails to satisfy the nondiscrimination requirement of paragraph (b) is not an organization described in § 501(c)(3) for taxable years beginning after May 31, 2027.

Proposed Regulation § 1.501(c)(3)-2(b) states the operative prohibition in full:

A private school is not operated exclusively for exempt purposes if it adopts, maintains, or enforces any policy or practice that discriminates on the basis of race, color, or national or ethnic origin in the administration of any educational policy, admissions policy, scholarship or loan program, athletic program, or other school-administered or school-supported program. For purposes of this section, discrimination on the basis of race, color, or national or ethnic origin includes any discrimination on the basis of race, color, or national or ethnic origin for any purpose.

Section 1.501(c)(3)-2(c) defines “private school” as an organization described in § 501(c)(3) and classified as an educational organization described in § 170(b)(1)(A)(ii). That is, a private school includes any private primary or secondary school, college, professional or trade school, or university. Governmental units and their instrumentalities are excluded.

Three features of the proposed rule warrant attention. First, the prohibition applies to “any policy or practice.” The text supplies no threshold. Section 501(c)(3)’s own “exclusively” requirement reads as absolute on its face. The Supreme Court and the regulations alike read the exclusively requirement to permit insubstantial non-exempt activity.7 Whether the NPRM’s “any” admits a similar insubstantiality standard is a question Treasury and the IRS leave open in the regulatory text and the Preamble. Second, the enumerated categories conclude with an unlimited catchall: “other school-administered or school-supported program.” The preceding examples do not limit that catchall, which reaches every program a school administers or supports. Third, the definition of discrimination explicitly extends to policies or practices that discriminate “for any purpose.” Thus, the proposed rule operates without regard to the school’s intent or the program’s goal. It does not ask whether the purpose is remedial, educational, or otherwise benign.

B. What the Preamble Says is Preserved

The proposed regulations do not repeal or amend Treasury Regulation § 1.501(c)(3)-1(d)(2)(ii), which provides that the term “charitable” includes “the promotion of social welfare by organizations designed to . . . eliminate prejudice and the regulation discrimination” (the “charitable anti-discrimination purpose”). That provision remains in effect.

The Preamble, however, adds a provision not in the language of that regulation. It states that the proposed regulations do not end a private school’s ability “to take actions or adopt policies intended to eliminate prejudice and discrimination, consistent with existing Treasury Regulation § 1.501(c)(3)-1(d)(2), provided the organization achieves these purposes by means other than actions or policies that discriminate on the basis of race, color, or national or ethnic origin.”8

In the Preamble’s Explanation of Provisions, Treasury and the IRS also state that the proposed regulations preserve the ability of private schools to maintain a religious mission, curriculum, or program of observance, and to select students on the basis of religious affiliation or membership. The Preamble states that the use of a religiously-based criterion does “not become discrimination on the basis of race, color, or national or ethnic origin merely because members of the relevant religious community may also share ancestry or ethnic characteristics (so long as the selection criteria is based solely on religion and not on shared ancestry or ethnic characteristics).”9

The operative regulatory text of proposed regulation § 1.501(c)(3)-2(b), however, contains no such religious exception. The text prohibits “any policy or practice that discriminates on the basis of race, color, or national or ethnic origin . . . for any purpose” without qualification. A school whose religious admissions criteria correlate with ancestry or ethnic characteristics would need to rely on Preamble language, which does not have the force of law, or some other form of law to avoid the prohibition contained in the language of the proposed regulation. The significance of this gap between the Preamble’s religious protection and the regulatory text, as well as its relationship to the Court’s treatment of religious justifications in Bob Jones itself, is developed in Part VI.

C. What the NPRM Would Delete

If finalized as proposed, the regulations would modify Revenue Procedure 75-50, 1975-2 C.B. 587, as updated by Revenue Procedure 2019-22, 2019-22 I.R.B. 1260, by deleting two specific provisions. The Preamble states that these provisions “would be incompatible with the new rules.”10

The first provision to be deleted is the second sentence of Section 3.02 of Rev. Proc. 75-50, which currently provides: “[a] policy of a school that favors racial minority groups with respect to admissions, facilities and programs, and financial assistance will not constitute discrimination on the basis of race when the purpose and effect is to promote the establishment and maintenance of that school’s racially nondiscriminatory policy as to students.”

The second provision to be deleted consists of the third and fourth sentences of Section 4.05 of Rev. Proc. 75-50, which currently provide:

Consistent with section 3.02, supra, scholarships and loans that are made pursuant to financial assistance programs favoring members of one or more racial minority groups that are designed to promote a school’s racially nondiscriminatory policy will not adversely affect the school’s exempt status. Financial assistance programs favoring members of one or more racial groups that do not significantly derogate from the school’s racially nondiscriminatory policy similarly will not adversely affect the school’s exempt status.

hese provisions have been in effect since 1975. They were expressly retained when the IRS updated Revenue Procedure 75-50 in 2019. Rev. Proc. 2019-22 modified certain provisions of Rev. Proc. 75-50 but left the minority-favoring program authorizations in Sections 3.02 and 4.05 intact. Apart from these two deletions, all other provisions of Rev. Proc. 75-50 as modified by Rev. Proc. 2019-22 would remain in effect. Revenue Ruling 71-44711 is not formally amended by the proposed regulations.

D. The NPRM’s Legal Theory

The Preamble’s Explanation of Provisions states that the proposed regulations are grounded in three propositions. First, Bob Jones established that racial discrimination in education violates a fundamental public policy of the United States.12 Second, Treasury and the IRS state that SFFA establishes that race-conscious programs, including those defended as serving remedial or diversity-related objectives, constitute racial discrimination.13 Third, on the basis of these two propositions, the Treasury and the IRS assert in the Preamble 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.”14

The Preamble identifies the sources of this fundamental public policy: “antidiscrimination law such as the Equal Protection Clause of the Fourteenth Amendment, the Civil Rights Act of 1964, Supreme Court case law such as Brown to Runyon to Bob Jones to Students for Fair Admissions, and the actions taken by the Executive Branch to ensure racial nondiscrimination is instituted throughout the United States.”15 The executive branch actions cited in footnote 3 to the Preamble are three executive orders: Executive Order 10730 (1957, authorizing the National Guard to enforce desegregation at Little Rock); Executive Order 14173 (Jan. 21, 2025, directing agency heads to create plans to deter illegal discrimination, including at higher education institutions); and Executive Order 14280 (April 23, 2025, directing the Secretary of Education and Attorney General to take action to prevent racial discrimination in school disciplinary systems).

E. The Regulations’ Reach and the Preamble’s Economic Analysis

The Preamble acknowledges in footnote 6 that “private primary and secondary schools were not directly affected by SFFA.”16 As the basis for applying the proposed regulations to K-12 schools, it points to “several prominent advisors to private primary and secondary schools anticipated that this decision would ultimately come to apply to K-12 private schools as well and advised schools to adapt their admissions processes accordingly.” The sources cited for this proposition are two law firm client advisories published in 2023.17 The Preamble cites no judicial decision holding that SFFA applies to K-12 private schools, no congressional legislation extending SFFA‘s principles to K-12 private schools, and no executive order directed specifically at K-12 private school admissions under SFFA.

The Preamble’s economic analysis identifies three categories of economic effect: compliance costs for private schools; changes in the recipient population of scholarships and loans; and the charitable giving behavior of donors to scholarship funds.18 The affected entities are described as “the 18,000 private elementary, secondary, and post-secondary schools in the United States that currently qualify for tax exempt status and the 750,000 students attending these schools who may qualify for scholarships allocated on the basis of racial, ethnic, or national identity.”19

The economic analysis does not include costs associated with curriculum content or course offerings, faculty hiring or fellowship programs, student affinity organizations, research centers or academic institutes, cultural programming, mentorship programs, or targeted recruitment and outreach activities. Each of these categories falls within the reach of “other school-administered or school-supported program” as that phrase appears in proposed regulation § 1.501(c)(3)-2(b). The Preamble addresses this gap in a single sentence, stating that while the regulations “might also affect any other school-supported programs or education policies administered by private schools, the Treasury Department and the IRS assume that any economic effects arising from this relatively narrow, miscellaneous group of activities would be insignificant.”20

The Preamble cites none of the published guidance through which the IRS implemented the charitable anti-discrimination purpose: the revenue rulings from 1967 through 1977, the 1972 regulation treating a private foundation’s ethnic-minority scholarship program as consistent with § 501(c)(3), or the 2019 retention of Revenue Procedure 75-50’s minority-favoring provisions. Nor does it acknowledge the analytical framework the Service applied in the intervening decades, which general counsel memoranda and the determinations regarding Kamehameha Schools document.21 Part V discusses this record.

F. The K-12 Origins of the Doctrine

The judicial history underlying the nondiscrimination requirement for private schools arose, with one exception, in the K-12 context. Brown v. Board of Education,22 addressed K-12 public schools. Green v. Connally,23 addressed K-12 private schools. Revenue Ruling 71-447 addressed private schools generally. Bob Jones involved a university that also operated an elementary and secondary school, consolidated with a case involving a K-12 school.

In contrast, SFFA addressed Harvard College, a private university and federal funding recipient, and the University of North Carolina, a state university. The case was decided under the Equal Protection Clause of the Fourteenth Amendment, which is also the standard under Title VI.24 The Court’s majority held that the admissions programs at these two specific institutions failed strict scrutiny because they “lack sufficiently focused and measurable objectives warranting the use of race, unavoidably employ race in a negative manner, involve racial stereotyping, and lack meaningful end points.”25 The majority simultaneously preserved space for race-conscious consideration, stating that universities “may consider” how race affected an applicant’s life and “how he or she overcame discrimination, inspired others, or developed skills.”26 Three Justices dissented and would have upheld the programs entirely.27

The proposed regulations apply a broad uniform standard — “any policy or practice . . . for any purpose” — to all private schools covered by proposed regulation § 1.501(c)(3)-2(c), from small K-12 institutions to major research universities, without distinguishing between them. Moreover, it fails to address why SFFA‘s holding about two specific universities under specific constitutional and statutory doctrines establishes the same fundamental public policy for all private schools regardless of type, size, or relationship to the federal government.

  1. Racial Nondiscrimination in Private Schools, 91 Fed. Reg. 56,811 (proposed Sept. 4, 2026) (to be codified at 26 C.F.R. pt. 1) (REG-119986-25, RIN 1545-BS05).
  2. See Part V infra.
  3. Bob Jones Univ. v. United States, 461 U.S. 574 (1983).
  4. 5 U.S.C. § 706(2)(A); see Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
  5. Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023).
  6. Washington v. Davis, 426 U.S. 229, 239-42 (1976); Village of Arlington Heights v. Metro. Hous. Dev. Corp., 429 U.S. 252, 264-68 (1977); Alexander v. Sandoval, 532 U.S. 275, 280-81 (2001) (Title VI).
  7. Better Bus. Bureau of Washington D.C. v. U.S., 326 U.S. 279, 283 (1945) (“an organization must be devoted to [its exempt] purposes exclusively. This plainly means that the presence of a single non-[exempt] purpose, if substantial in nature, will destroy the exemption regardless of the number or importance of truly [exempt] purposes.”); Treas. Reg. § 1.501(c)(3)-1(c)(1) (an organization will be considered to operate exclusively for exempt purposes “only if it engages primarily in activities which accomplish” an exempt purpose; furthermore, “[a]n organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.”).
  8. 91 Fed. Reg. at 56,815.
  9. Id.
  10. Id.
  11. Rev. Rul. 71-447, 1971-2 C.B. 230.
  12. 461 U.S. 574 (1983).
  13. 91 Fed. Reg. at 56,815.
  14. 91 Fed. Reg. at 56,815.
  15. Id.
  16. 91 Fed. Reg. at 56,816, n. 6.
  17. Smith, Kristin L., 6 Steps for Private and Independent Schools in the Wake of the SCOTUS Affirmative Action Ruling (2023) https://www.fisherphillips.com/en/insights/insights/private-andindependent-schools-scotus-affirmative-action-ruling. Pass, Caryn G., Grace H. Lee, Janice P. Gregerson, and Ashley E. Sykes, No More Affirmative Action: What Does the Supreme Court’s Decision Mean for Independent Schools? (2023) https://www.venable.com/insights/publications/2023/07/nomore-affirmative-action-what-does.
  18. 91 Fed. Reg. at 56,817-56,818.
  19. Id. at 56,816.
  20. Id. at 56,817.
  21. We do not suggest that a preamble must canvass nonprecedential internal advice. We do suggest that an agency abandoning a framework it applied for two decades must say so.
  22. 347 U.S. 483 (1954).
  23. 330 F. Supp. 1150 (D.D.C. 1971).
  24. The Court held that UNC’s program violated the Equal Protection Clause and that Harvard’s violated Title VI. The analysis was the same, because Title VI “proscribes only those racial classifications that would violate the Equal Protection Clause or Title VI.” SFFA, 600 U.S. at 198 n.2 (quoting Gratz v. Bollinger, 539 U.S. 244, 276 n.23 (2003)).
  25. 600 U.S. at 230.
  26. Id.
  27. SFFA, 600 U.S. 181, 317 (2023) (Sotomayor, J., dissenting, joined by Kagan and Jackson, JJ.); see also id. at 384 (Jackson, J., dissenting) (Justice Jackson took no part in the consideration or decision of the Harvard case).

Download the Comment below to read Parts III through VI setting out the following four independent and compelling grounds requiring withdrawal of the proposed regulations:

III: THE PROPOSED REGULATIONS EXCEED THE IRS’S LAWFUL AUTHORITY UNDER BOB JONES

IV. THE COMMON LAW OF CHARITABLE TRUSTS AND REMEDIAL DISCRIMINATION

V. THE IRS’S LONGSTANDING RECOGNITION OF REMEDIAL DISCRIMINATION AS A CHARITABLE PURPOSE

VI. THE NPRM IS ARBITRARY AND CAPRICIOUS UNDER THE ADMINISTRATIVE PROCEDURE ACT

Aprill Hackney Comments on Regulation 119986Download