By Samantha Halem, Alicia Ward, Alexandra Mitropoulos, Sarah Ruter December 2, 2025
On September 30, 2025, the U.S. Department of the Treasury’s Office of Tax Policy issued its Priority Guidance Plan (“PGP”) for the 2025-2026 fiscal year. The PGP lists areas of tax law on which the Treasury Department (the “Department”) (including the Internal Revenue Service) intends to issue formal guidance in the future and serves to identify and prioritize issues to be addressed through regulations and other methodologies. According to the Department, the PGP outlines what the Department will focus its resources on and what it believes are the “items that are most important to taxpayers and tax administration.”
In the September 30th PGP, the Department specifically declares its intention to provide more robust guidance focusing on independent schools’ status as 501(c)(3) tax-exempt organizations. Specifically, the Department states that it intends to issue guidance on:
[T]he application of the fundamental public policy against racial discrimination, including consideration of recent case law, in determining the eligibility of private schools for recognition of tax-exempt status under Section 501(c)(3).
Thus, the Department appears to intend to apply the Trump Administration’s policies on diversity, equity, and inclusion (“DEI”) currently applicable to institutions of higher education, public schools, and federal contractors, to independent schools, using their 501(c)(3) status as their entry point.
The Trump Administration’s position on DEI is largely outlined in Executive Orders and agency guidance and memoranda. Most notably, the Executive Order issued on January 21, 2025, entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” details the Administration’s intention to end policies and practices by organizations that “have adopted and actively use dangerous, demeaning, and immoral race- and sex-based preferences under the guise of so-called ‘diversity, equity, and inclusion’ (DEI) or ‘diversity, equity, inclusion, and accessibility’ (DEIA) that can violate the civil-rights laws of this Nation.” The January 21 Executive Order further orders “all agencies to enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.”
Similarly, the agency guidance following the January 21, 2025 Executive Order, including a July 29, 2025 Memorandum from the Department of Justice, have stated that programs and policies that prioritize or focus on race may be considered discriminatory (and therefore, illegal) by this administration. The PGP appears to be signaling an extension of these policies to independent schools, which could result in increased scrutiny on school’s admissions, hiring, and inclusion policies.
Importantly, there is precedent for 501(c)(3) status being used to achieve civil rights objectives. In 1971, the IRS determined that private schools could not segregate or deny admission on the basis of race while receiving taxexempt status. Thereafter, in Bob Jones University v. the United States, 461 U.S. 574 (1983), the Supreme Court ruled that the University was not entitled to 501(c)(3) tax status because it had racially discriminatory policies, that these policies were “contrary to public policy,” and that therefore, the University was not eligible for the exemption.
At this time, there is no change in IRS rules, and the prior requirements of Revenue Procedure 75-50, first enacted in 1975, still apply to independent schools. Revenue Procedure 75-50 requires independent schools to take certain steps to demonstrate that they have a policy prohibiting race discrimination. Additionally, state laws prohibiting discrimination continue to be enforced and are unrelated to efforts by the Trump Administration under federal law. Nonetheless, independent schools should prepare themselves for the Trump Administration’s potential conclusion that DEI efforts which have until now been embraced and championed by their schools might subject them to claims of racial discrimination and attacks on their tax-exempt status.
HRW lawyers have been and will continue to guide independent schools in how to prepare for the Department’s issuance of guidance on racial discrimination in independent schools.
If you have any questions about the upcoming IRS guidance, please contact:
• Samantha Halem (shalem@hrwlawyers.com / 781-235-4878);
• Alexandra Mitropoulos (amitropoulos@hrwlawyers.com / 617-348-4332);
• Alicia Ward (award@hrwlawyers.com / 617-348-4357); or
• Sarah Ruter (sruter@hrwlawyers.com / 781-235-4879).
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