In a variety of Executive Orders, departmental memoranda, and public statements, President Trump and others in his administration have indicated this year that they believe that diversity, equity, and inclusion (DEI) programs and practices constitute “illegal discrimination.” These recent executive actions come in the wake of the 2023 Students for Fair Admission v. Harvard case, in which the U.S. Supreme Court ruled that affirmative action admission programs at Harvard University and the University of North Carolina were unconstitutional because they violated the equal protection clause of the Fourteenth Amendment. Notably, Chief Justice Roberts wrote in his majority opinion: “Eliminating racial discrimination means eliminating all of it.”
Separately, in 2024, the Fearless Foundation in Atlanta discontinued a grant program for businesses owned by black women in light of a pending ruling from the Court of Appeals for the 11th Circuit that a grant program for businesses owned by Black women violated the Civil Rights Act of 1866 (which prohibits racial discrimination in private contracts).
Major recent actions affecting DEI by nonprofits include:
- On January 20, President Trump issued EO 14151 directing the Office of Management and Budget and Office of Personnel Management to work with federal agencies to end DEI programs in federal agencies and federal grant programs.
- On January 21, President Trump issued EO 14173 directing every federal grant or contract recipient to certify that it complies with federal anti-discrimination laws and that it does not operate programs promoting DEI that violate federal antidiscrimination laws. The Executive Order also directs OMB to remove all references to DEI principles in federal grant programs, requirements, and activities, and it directs the U.S. Department of Justice (DOJ) to identify major private-sector entities that have DEI programs and practices and to develop steps to deter private entities, including nonprofits, from having DEI programs and practices in place.
- Several federal agencies have required grant recipients to agree to amended grant agreements and/or have required new grant applicants to agree to grant agreements that prohibit grantees from having DEI programs and practices in place.
- In March, the Equal Employment Opportunity Commission (EEOC) published two fact sheets on its new interpretation of the ways that DEI initiatives, policies, programs, and practices may be impermissible discrimination under Title VII. One of the fact sheets provides answers to 11 common questions about the EEOC’s position on DEI and Title VII discrimination, noting (among other things) that “[t]he EEOC’s position is that there is no such thing as ‘reverse’ discrimination, there is only discrimination.” The other fact sheet provides tips for how employees can identify DEI-related workplace discrimination and the steps they can take to initiate legal action against their employers. Small nonprofits should be aware that Title VII generally does not apply to organizations with fewer than 15 employees.
- On April 23, President Trump issued EO 14281 directing federal agencies to stop using disparate impact theory. Disparate impact liability is a principle of civil rights law that allows individuals or groups to have protection against a wide range of policies – such as height and weight requirements, criminal history or credit history tests, and educational requirements – that disproportionally affect people who are part of a protected class (based on race, sex, age, and other factors).
- In June, the U.S. Department of Justice (DOJ) issued a memo with guidance on the types of policies and practices that are deemed “unlawful discrimination” for recipients of federal funds, including nonprofits with federal grants or contracts. Among other things, the memo asserts that diversity, equity, and inclusion (DEI) policies and practices are unlawful discrimination and asserts that “unlawful proxy discrimination” is unlawful discrimination, explaining that “facially neutral criteria . . . that function as proxies for protected characteristics violate federal law if designed or applied with the intention of advantaging or disadvantaging individuals based on protected characteristics.” The memo gives several examples of “proxy discrimination” in hiring and promotion decisions and determinations about program recipients for nonprofits receiving federal funding. Examples of “proxy discrimination” include the use of criteria like “cultural competence,” “lived experience,” “overcoming obstacles” narratives, and targeting programs and services to specific geographic areas based on their racial or ethnic composition. The memo implies that federal agencies could freeze or discontinue grant funding for nonprofits that are engaged in practices or policies that DOJ deems discriminatory, either directly or through proxy criteria.
- President Trump has threatened to direct the IRS to revoke the tax exempt status of Harvard Universities, one of the oldest and largest 501(c)(3) organizations in the country, this year, in part because of the school’s commitment to DEI. A conservative nonprofit also sent a letter to the IRS this year asking for an investigation of several large, prominent private foundations and charitable nonprofits that have DEI policies and programs on the grounds that these DEI programs are illegal discrimination based on the Students for Fair Admission decision. So far, the IRS has not taken any adverse action on any 501(c)(3) organization based on its DEI programs or practices.
- On September 30, the IRS announced that it plans to issue “guidance on the application of fundamental public policy against racial discrimination, including consideration of recent caselaw, in determining the eligibility of private schools for recognition of tax-exempt status under §501(c)(3).” The concept of a “fundamental public policy against racial discrimination” comes from the 1983 U.S. Supreme Court ruling in Bob Jones v. United States where the Court found that the IRS could revoke a nonprofit private college’s tax-exemption under Section 501(c)(3) because its policy of denying admission to individuals in interracial relationships violated a “fundamental public policy” of eradicating racism in education. It is quite likely that the “consideration of recent caselaw” is a reference to the Students for Fair Admission v. Harvard decision. Potentially, IRS guidance combining the reasoning from these two cases could lead to a conclusion that nonprofit private schools with race-based practices – including those with diversity, equity, and inclusion (DEI) policies and practices – are not eligible for tax-exemption under Section 501(c)(3) of the Internal Revenue Code.
Final (and important) note: Other than the Students for Fair Admission decision, which is applicable only to government entities and government grantees through the Fourteenth Amendment equal protection claims, none of the insinuations that DEI is “illegal discrimination” is settled law.
