Treasury’s Proposed Rule on Race-Based School Policies Offers Practical Lessons for Health Care Foundations

The useful part

Treasury's Proposed Rule Offers Lessons for Foundations on Donor Intent and Endowment Management | Hall Render Resources Blog Health Law News Print PDF Health Care Philanthropy Update: Treasury's Proposed Rule Offers Lessons for Foundations on Donor Intent and Endowment Management Posted on September 9, 2026 in Health Law News Published by: Department of the Treasury ("Treasury") and the IRS recently proposed regulations that would deny § 501(c)(3) tax-exempt status to private schools that maintain race-based admissions, scholarship or related programs.

How it works

• Treasury's proposal illustrates how quickly changes in law or public policy can force charitable organizations to revisit donor restrictions that may have existed for decades.
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• While the proposal is directed at educational institutions, the preamble contains important lessons for health care foundations and other charitable organizations managing donor-restricted funds.
• In discussing the potential impact of the rule, Treasury expressly acknowledges that donor-imposed restrictions may require modification.
• Although the proposed regulations focus on scholarship funds, the underlying issue is broader.

What to take from it

Health care foundations routinely administer donor-restricted funds intended to support specific programs, populations, facilities or charitable purposes. As laws, regulations, reimbursement systems and community needs evolve, restrictions that once appeared straightforward may become difficult, impracticable or even impermissible to administer. Health care foundations that document both the restriction and the donor's rationale are often better positioned if modification later becomes necessary.

Example or evidence

• Hall Render blog posts and articles are intended for informational purposes only.
• If modification is later required, evidence of the donor's overarching charitable intent may be critical.
• Consider including alternative-use, variance or successor-program provisions that allow the health care foundation to adapt to future changes while remaining faithful to donor intent.
• Now may be an appropriate time to identify funds tied to outdated programs, terminology or assumptions that could create future administrative challenges.

Details worth keeping

For ethical reasons, Hall Render attorneys cannot give legal advice outside of an attorney-client relationship.

Related coverage

• Natlawreview: Treasury and IRS Propose New Section 501(c)(3) Racial Nondiscrimination Rules for Private Schools
• Currentfederaltaxdevelopments: Department of the Treasury, Internal Revenue Service, Notice of Proposed Rulemaking: Racial Nondiscrimination in Private Schools, REG-119986-25, RIN 1545-BS05, FR Doc.