The National Association of Diversity Officers in Higher Education (NADOHE) has submitted a public comment urging the U.S. Department of the Treasury and Internal Revenue Service (IRS) to revise a proposed federal regulation that could jeopardize private schools' tax-exempt status for engaging in lawful educational activities involving race.
In formal comments submitted Nov. 3, NADOHE urged the IRS to change its stated position that even lawful activities intended to be nondiscriminatory may result in a private school’s disqualification from 501(c)(3) tax-exempt status. Specifically, NADOHE is asking the agency to use the term “illegal discrimination” in the final rule.
“There is an important distinction between discrimination prohibited by law and activities that are both lawful and central to an educational institution's mission,” said NADOHE President and CEO Emelyn A. dela Peña. “Without that distinction, institutions may feel compelled to abandon legitimate programs, partnerships and academic activities simply because they are uncertain about how the federal government will interpret the rule.”
The request follows a recent legal victory for NADOHE, which has twice taken legal action as a plaintiff to challenge federal restrictions on diversity, equity and inclusion (DEI) activities. In its most recent lawsuit involving federal contractors, NADOHE sought to protect lawful educational activities and clarify the scope of federal restrictions.
In an October ruling, a federal court clarified that the challenged executive order prohibits only discrimination already barred by federal law, not otherwise lawful DEI activities. The decision provided important clarity for institutions concerned that legitimate educational activities could put their federal contracts at risk. NADOHE documented how uncertainty surrounding federal contractor requirements had prompted institutions to limit educational partnerships, discussions of racial and ethnic health disparities, and recruitment efforts involving historically Black colleges and universities and Hispanic-serving institutions.
“The October ruling was a clear win for NADOHE and our members,” dela Peña said following the decision. “As a result of this ruling, leaders of colleges and universities no longer need to second-guess whether their lawful activities to support inclusive and diverse campus communities violate the executive order.”
The association cautions that the proposed IRS regulation could create similar uncertainty, discouraging legitimate educational activities such as efforts to expand access, examine historical discrimination, address barriers to participation and discuss racial disparities.
The requested revision would preserve the federal government's authority to deny tax-exempt status to schools engaging in unlawful racial discrimination while providing greater clarity for institutions pursuing legitimate educational objectives.
NADOHE urged the Treasury Department and IRS to incorporate the clarification into the final regulation. The IRS has scheduled a public hearing for Dec. 2 at 10 a.m. ET to hear testimony on the proposed regulations. The agency will consider the comments and testimony received as it determines whether to revise the proposal before issuing a final rule, which is expected before May 31, 2027. The regulations would apply to private schools' taxable years beginning after that date.