How the threat of federal punishment can dismantle programs for minority students before a court ever decides whether the government has the power to do it.
by Alvin Blackshear | Historian & Researcher <ablackshear@gmail.com>
Here is a fact that should be reassuring: on September 4, 2026, the Treasury Department and the IRS published a proposed regulation, not a final one. Nothing has actually changed. Nothing is yet required.
Now turn that fact upside down. Colleges do not have the luxury of pretending REG-119986-25 doesn't exist. The administration has explicitly warned that private educational institutions maintaining what it regards as racially discriminatory programs could lose their federal tax-exempt status, a penalty severe enough to end most private schools outright. Treasury itself estimates that as many as 18,000 private educational institutions could be affected. The rule does not have to become law to change higher education. The threat may be enough.
What is being proposed
The proposal covers admissions, scholarships and loans, athletics, and other school-supported programs. It would treat any use of race, color, or national or ethnic origin in distributing benefits as disqualifying, even when the purpose is explicitly remedial. Schools could still target assistance using income, geography, first-generation status, individual hardship, and other race-neutral criteria. Crucially, the regulation would apply only to taxable years beginning after May 31, 2027. That gap between now and then is where the real story lives.
Anticipatory compliance
Imagine yourself as a university president, trustee, or general counsel. Do you maintain a scholarship established specifically for Black students and risk an eventual confrontation with the IRS? Or do you quietly rewrite the eligibility requirements now, while no one is forcing you to?
For a risk-averse institution, the rational response is to comply before anyone has required compliance. A Black student scholarship becomes an "economically disadvantaged" scholarship. A minority mentoring program opens to everyone. Targeted recruitment changes. Donors are gently discouraged from establishing race-conscious funds in the first place. No IRS agent has to show up. No exemption has to be revoked. No judge has to rule on anything. The program simply disappears, quietly, as a matter of institutional self-preservation.
How power like this operates
It is a fact that the administration proposes treating race-conscious remedial programs as disqualifying discrimination. Whether that reflects hostile intent is a separate question, one this argument doesn't need to resolve. What matters is how the power functions: government need not command a result directly to produce it. It can identify a category of conduct as risky, attach an extraordinary financial consequence to it, and let institutions, lawyers, and administrators do the rest. American racial policy has often worked this way, through funding conditions, tax treatment, and the threat of losing government benefits, long before any court weighs in. The pressing question isn't only "will this regulation survive review?" It's "what will disappear while we're waiting to find out?"
The strongest counterargument
Supporters can fairly respond that the administration isn't banning help for disadvantaged students. Schools can still aid poor, first-generation, and geographically disadvantaged students; Treasury's own framing insists on this. What's demanded is that aid follow individual disadvantage, not race. That's a coherent principle. But it invites a historical question worth sitting with: can a race-neutral remedy fully repair an inequality that was created through explicitly race-conscious discrimination? Reasonable people disagree, and this piece won't settle it for them.
The question nobody can answer
Congress has noticed. Representatives Lloyd Doggett and Terri Sewell have introduced the PROOF Act, aimed at guaranteeing due process before the IRS can strip an organization's tax-exempt status. It's a meaningful check, but it doesn't touch the underlying rule, and it does nothing to stop an administrator today from asking, "why risk an IRS examination at all? Just change the program now."
Which returns us to the real stakes. Courts may eventually uphold this regulation. They may strike it down. But by then, the more important consequence may have already occurred: scholarships rewritten, programs eliminated, recruitment quietly redirected, donors steered elsewhere. If universities voluntarily dismantle these programs in anticipation of a rule, and courts later strike that rule down, how many of those programs will ever come back?
For further reading:
Federal Register, REG-119986-25, "Racial Nondiscrimination in Private Schools" (Sept. 4, 2026).https://www.federalregister.gov/documents/2026/09/04/2026-18127/racial-nondiscrimination-in-private-schools
U.S. Department of the Treasury, press release on the proposed rule (Sept. 3, 2026). https://home.treasury.gov/news/press-releases/sb0621/
H.R. 10258, the PROOF Act, introduced Sept. 3, 2026.
https://www.congress.gov/bill/119th-congress/house-bill/10258
