For Immediate Release

OAKLAND, Calif. — The National Center for Youth Law (NCYL) today submitted a formal comment that calls on the U.S. Department of the Treasury and the Internal Revenue Service  to withdraw a proposed rule that would let the IRS strip tax-exempt status from private schools for practices the administration labels racially discriminatory, even when those practices are lawful and designed to include and support students.

The proposed rule would revoke or deny tax exemption for any private school that “adopts, maintains, or enforces” a policy or practice touching on race, color, or national or ethnic origin, “regardless of the intent behind or the legality of” that practice. The proposed rule, which is premised on a fundamentally flawed interpretation of federal law, is overly vague. It contains no minimum standard for how serious a violation must be and no chance for a school to correct a problem. By the agencies’ own estimate, it would reach more than 18,000 private schools and as many as 750,000 students who may qualify for scholarships tied to racial, ethnic, or national identity. Today is the final day of the public comment period.

“No school should ever exclude a child because of race,” said Johnathan Smith, NCYL’s Managing Director for Education and Federal Strategic Advocacy. “But this rule doesn’t enforce that principle, it turns it upside down. It takes a civil rights safeguard and makes it a cudgel against the very children it was built to protect.”

NCYL’s comment letter lays out five core problems with the proposed rule:

• It defies the Supreme Court’s holding in Bob Jones University v. United States. That 1983 decision affirmed the IRS can deny exemption to schools that excluded Black students in light of a broad consensus across all three branches of federal government that such practices were illegal. The proposed rule flips that logic. It would penalize practices that Congress and the courts treat as lawful, and it targets schools working to include students rather than shut them out.
• It chills lawful work that helps students succeed. Reviewing discipline data for racial disparities, recruiting from underserved neighborhoods, culturally responsive curricula, mentoring and tutoring, affinity groups, and long-standing donor scholarships could all be swept in as impermissible under the proposed rule. Faced with losing their exemption, many schools may simply drop these programs, or stop collecting the data needed to ensure students are treated fairly.
• It abandons more than 50 years of IRS precedent without explanation. The agencies have identified no harm from current practice and say little about the families, donors, and schools who rely on the current framework.
• It’s too vague to follow. The rule never defines what “discriminates” means. Promises in the preamble that anti-bias efforts and religious mission are protected appear nowhere in the regulatory text. The rule provides no guidance to help schools understand what conduct is and is not permissible. 
• It weaponizes the IRS. The IRS plays no role in civil rights enforcement, and does not have the expertise to make determinations about what constitutes discrimination. By handing the IRS broad discretion to decide which schools to target, the rule opens the door to selective, politically motivated enforcement.

“Tax-exempt status should never be used as leverage to force schools to abandon programs an administration dislikes,” said Smith, with NCYL. “When a school loses its exemption, children lose their teachers, their programs, and their stability. Students with disabilities, children placed in nonpublic schools by public agencies, and low-income families who depend on scholarship aid will be hit hardest.”

NCYL urges the Treasury and the IRS to withdraw the rule. You can read NCYL’s full comment letter here.

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The National Center for Youth Law (NCYL) advances justice for children and youth through impact litigation, policy advocacy, collaboration, and research. For more than 50 years, NCYL has worked to ensure that young people have the resources, opportunities, and support they need to thrive.