Trump administration proposes removing tax-exempt status from universities with DEI programs

The Trump administration proposed regulations on Thursday that could strip the tax-exempt status of universities offering specific support to minority students.

A Sept. 3 Department of the Treasury press release stated that the rule is designed to “end federal tax-exempt status for private schools that engage in racial discrimination.” The regulation — which targets diversity, equity, and inclusion policies — is set to take effect next May and could affect up to 18,000 institutions.

“Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature,” Treasury Secretary Scott Bessent wrote in the memo.

A request for comment was left with the University. It is currently unclear how the policy would affect Penn, which rolled back many of its diversity initiatives in 2025.

Undergraduate Assembly President Musab Chummun wrote in a statement that to “punish schools with race-based programs is a direct act of suppression of minorities in higher education.”

“With DEI-related funding already under constant threat, this attempt from the Federal Government is another encroachment upon the values that make higher education great,” Chummun — a College senior — continued. “Our University, and nation as a whole, has progressed due to the contributions from minority students.”

Chummun added that the UA has “already started conversations with student governments in peer universities.”

President Donald Trump previously threatened to end Harvard University’s tax-exempt status, arguing that the institution should be taxed as a “Political Entity.”

“Perhaps Harvard should lose its Tax Exempt Status and be Taxed as a Political Entity if it keeps pushing political, ideological, and terrorist inspired/supporting ‘Sickness?’” Trump — who graduated from The Wharton School in 1968 — wrote in an April social media post. 

In January 2025, the Trump administration signed an executive order requiring universities that receive federal funding — such as Penn — to terminate any DEI programs that could violate federal civil rights laws. In the following weeks, Penn scrubbed any references to DEI from webpages across its four undergraduate and 12 graduate schools.

The University also deleted its central DEI website and information about academic inclusion programs, demographic data, and student affinity groups with a three-sentence statement on Penn’s “commitment to equal opportunity.”

Next month, the Department of Education published a letter threatening to revoke federal funding for all schools and universities that do not remove diversity, equity, and inclusion initiatives. The department expanded its interpretation of the United States Supreme Court’s 2023 decision in Students for Fair Admissions v. Harvard to apply the ruling not only to academic programs. 

At the time, institutions had two weeks to comply with the new requirements in order to continue receiving federal funding.

In August 2025, a U.S. District Court struck down the letter, ruling that the Education Department’s regulations caused “millions of educators to reasonably fear that their lawful, and even beneficial, speech might cause them or their schools to be punished.”

Earlier this year, the University Council voted to rename its “Committee on Diversity and Equity” to the “Committee on Community and Equal Opportunity" — dismantling the last major vestige of DEI on Penn's campus. 

“I think symbols, names, titles, they’re important,” then-Faculty Senate Chair-Elect Roy Hamilton said at the time. “The old name of this Committee was a concise reflection of the values that it stood for — that’s not to be done away with lightly, and it’s not to be treated as if it’s trivial.” 

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