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Proposed federal rules put college diversity programs and tax status in question

The Trump administration’s proposed regulations could expose colleges to losing their tax-exempt status over diversity initiatives, but schools and lawmakers say the boundaries remain unclear. The potential penalty could bring major tax bills and higher borrowing costs.

Proposed federal rules put college diversity programs and tax status in question
WASHINGTON — Colleges are seeking clarity on proposed Trump administration rules that could revoke their tax-exempt status over diversity programs, raising questions about which campus activities might be targeted and how far the government’s authority would reach. The proposal is aimed at ending policies that support minorities on college campuses. But its reach is unclear, leaving schools concerned that ordinary programming could trigger penalties, including events recognizing Black history. “What if a university has Black History Month?” Sen. Sheldon Whitehouse, a Rhode Island Democrat who serves on the Senate Finance Committee, asked in a recent interview. Losing tax-exempt status could have far-reaching financial consequences for colleges, which might face new tax bills as well as higher borrowing costs and other expenses. The proposed rules have not yet resolved how regulators would distinguish between prohibited policies and routine campus activities. Sen. Raphael Warnock, a Georgia Democrat who also serves on the Finance Committee, said Democrats would “have to respond to” the administration’s proposed rules. The committee plays a role in shaping federal tax policy. The proposal puts universities in a difficult position: They must assess potential risks to their finances while the rules leave uncertainty about what diversity-related programs could bring federal scrutiny.

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