Trump Admin Pushes to Cancel Tax Exemption for Schools With DEI Policies

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Trump Admin Proposes Rule That Could Revoke Tax Exemption for 18,000 Schools

The Trump administration proposed a new rule Thursday that would revoke the tax exempt status of any private school that the Internal Revenue Service deems to discriminate on the basis of "race, color, or national or ethnic origin" - a dramatic escalation of the president's clash with the American educational system and his push to combat policies promoting diversity, equity and inclusion.

The proposal, issued by the Treasury Department, makes clear that it targets "discrimination" of any kind, including in admissions and the awarding of scholarships, no matter if the policy is intended to serve "remedial or diversity-related objectives" - and it makes clear that the change is expected to have sweeping effects.

"The Treasury Department and the IRS estimate that the proposed regulations may affect 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," the rule says.

It adds: "The Treasury Department and the IRS expect that all private primary and secondary schools will adjust their admissions criteria to conform to the proposed regulations, so that they may retain their tax-exempt status."

The Treasury Department characterized the plan as restoring merit-based opportunity. "Under President Trump, this Administration is standing up for America's students by ensuring racial discrimination has no place in American education," Treasury Secretary Scott Bessent said in a statement. "Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature."

The Trump administration has waged a long battle with colleges and universities as it tries to crack down on what it decries as "woke" policies that unfairly harm white and Asian American students. It has pulled federal grant funding and pushed for curriculum and staffing changes. President Trump has also explicitly threatened the tax status of leading universities, including Harvard, Columbia and Princeton. Last year, he publicly floated the idea of a broad crackdown on tax-exempt entities, describing the exemption as a privilege that has been abused.

The Treasury proposal comes after a 2023 Supreme Court ruling that struck down universities' race-based affirmative action programs.

The American Association of University Professors reportedly blasted the new proposal as an attack on minorities.

"Weaponizing the IRS to attack colleges and universities that uphold and expand civil rights is outrageous," Todd Wolfson, the group's president, said in a statement. "This is blatantly racist political coercion intended to deny minority students reparative opportunities to further their education."

Tax-exempt status reportedly saves many schools millions of dollars a year, and the administration's proposal could have even greater impact on the universities' fundraising efforts, given that their exemption allows donors to deduct the gifts they make.

The new rule is subject to public comment for 60 days and is likely to face a legal challenge. It would take effect after May 2027 if it is finalized.

House Republicans Cancel Two Weeks of Pre-Election Sessions

House Republican leaders announced today that they are canceling the last two weeks of sessions planned for this month, meaning that House lawmakers are now scheduled to be in Washington, D.C., for just four more days before the November elections - and will have worked in the capital for a grand total of four weeks from July through early November.

House members are now in recess until September 14 and are set to head home again no later than September 17. Lawmakers are eager to get back to campaign in their home districts as much as possible in the final weeks before November.

Speaker Mike Johnson has faced repeated challenges in keeping the House floor open as Republican rebels repeatedly managed to shut down the legislative process. Johnson also kept his chamber out of session for seven weeks during a government shutdown last year, arguing that his members had done their jobs and it was the Senate's turn to pass funding legislation.

It all adds up to ... relatively little time legislating. Punchbowl News reported earlier this week that the House had held votes on just 65 of the first 244 days of the year.

Yet Johnson and House Republican Conference Chair Lisa McClain tried to argue this week that the GOP-led 119th Congress has been among the most productive ever. "This has literally been the most productive, successful and aggressive Congress since 1949 - and I think it's in the top five of all time," Johnson claimed at a news conference.

NOTUS columnist Dana Milbank wrote this week that the numbers show otherwise. "I checked the official stats," he wrote, "and the 'objective data' show that the 119th Congress is indeed on pace to set a record - as the least productive Congress in modern history."

Despite unified Republican control of the House, Senate and White House, this Congress has enacted just over 100 pieces of legislation, a historically low number.

Democrats on the House Ways and Means Committee - who undoubtedly are also happy to have more time to campaign at home - responded to the cancellation of late September sessions by jabbing at Republicans, posting a meme on X that suggested the GOP is as afraid of the House floor as vampires are of sunlight.

Number of the Day: 100%

The Trump administration on Thursday imposed a tariff of up to 100% on foreign-made drones. The 100% rate applies to imported drones that weigh more than 55 pounds or use thermal imaging.

The move is part of a "long-running campaign to thwart the Chinese drone industry and promote domestic manufacturing," Farah Stockman writes at The New York Times. She adds that the administration says the United States must curb its reliance on Chinese drone technology; one company is estimated to manufacture more than 70% of the world's commercial drones. "But critics say that the domestic drone industry cannot fill the gap and that the administration's abrupt policy changes will do more harm than good," Stockman writes.

Fiscal News Roundup

• Trump Administration Pushes to Remove Tax Exemption for Private Colleges With DEI Policies – Associated Press
• Trump Moves to Strip Tax Exemption From Schools That Aid Minority Students – New York Times
• House Plans Quick September Exit – Roll Call
• Diesel Prices Hit All-Time High as Trump Administration Brandishes Energy Policies – Politico
• Trump Puts Tariffs of Up to 100% on Foreign-Made Drones – New York Times
• US Trade Gap Widens to Largest Since Early 2025 on AI Push – Bloomberg
• White House Defends Trump's Beef Import Plan After Report on Billionaire's Influence – The Hill
• Trump Says He'll Ask Europe to Pay Back US for Munitions Sent to Ukraine – Politico
• Bipartisan Insulin Price Cap Introduced in House as Lawmakers Seek Affordability Win – The Hill
• States Sue Over Move to End Federal Funds for Youth Gender Transition Treatment – New York Times
• Democrats Seize on Two GOP Midterm Vulnerabilities: Data Centers and the 'Big Beautiful Bill' – Politico
• Fed Governor Waller Indicates He Will Support Holding Rates Steady at September Meeting – CNBC
• 'I Wouldn't Call It a War,' Vance Says After Iran Hostilities Flare – The Hill

Views and Analysis

• There Are Four Forces Pressuring Bonds: War Is No. 1 – Jack Pitcher, Shradha Dinesh and Ryan Dezember, Wall Street Journal
• Rate Rise in Play as Fed Officials Await Inflation Data – Colby Smith, New York Times
• Why We'll Have to Get Used to 'Meh' Job Reports – Justin Lahart, Wall Street Journal
• Trump Is Set to Mark a Dangerous First for the Labor Force – Stuart Anderson and Mark Regets, Washington Post
• Why Trump's Venezuela Oil Grab Is No Quick Fix for Gas Prices – Benoît Morenne, Wall Street Journal
• Defunding the U.S. Military – Wall Street Journal Editorial Board
• The Food Stamp Reform Is Working – Wall Street Journal Editorial Board
• House Republicans Decide to Do Even Less Work Ahead of the Midterm Elections – Steve Benen, MS Now
• California's Pro-Business Wealth Tax Proposition – Rep. Ro Khanna (D-CA), Wall Street Journal
• What Five Revenue Raisers in the Options Guide Tell Us About Sound Tax Reform – Andrew Lautz, Tax Foundation
• Going Bold: Paul Ryan & Kevin Brady on Tax Reform – Erica York, Kyle Hulehan, Dan Carvajal, Tax Foundation (podcast)