WASHINGTON — The Bill & Melinda Gates Foundation faces a potential crisis as the IRS considers revoking its tax-exempt status following allegations of racial discrimination in its scholarship programs. The American Alliance for Equal Rights (AAER) filed a complaint on April 1, 2025, accusing the foundation of excluding white applicants from opportunities like the Gates Scholarship, which supports “minority” students from low-income backgrounds.
The AAER, led by Edward Blum, argues that the foundation’s race-based criteria violate federal anti-discrimination laws and IRS rules for tax-exempt organizations. Citing the 2023 Supreme Court ruling against racial preferences in college admissions, the group claims the foundation’s practices—also targeting the Lagrant and Creative Capital Foundations—contravene public policy. They’re urging the IRS to strip the foundation’s tax-exempt status, a move that could cost it billions.
The Gates Scholarship, a flagship program, awards full funding to African American, Hispanic, Asian, and Native American students. AAER points to eligibility language and a 2022 promotional video emphasizing “minority” recipients as proof of exclusion. “Tax-exempt status shouldn’t subsidize discrimination,” Blum said. If revoked, the foundation could face a $1.44 billion annual tax bill for 2023 alone, potentially disrupting its global health and education initiatives, like a $1.6 billion vaccine pledge to Gavi.
The foundation may argue its program addresses systemic inequities, not prejudice, aiming to close educational gaps for underrepresented groups. But the Trump administration’s recent push against race-based preferences, including an executive order labeling them “immoral,” could pressure the IRS to act. This scrutiny aligns with broader policy shifts, like the SAVE Act and Elon Musk’s $150 billion government savings plan, reflecting a focus on domestic fairness.
The IRS has been cautious about revoking tax-exempt status historically, as seen in the 1983 Bob Jones University case, where racial discrimination led to such a penalty. Legal battles are likely if the IRS moves forward, possibly reaching the Supreme Court. For now, the Gates Foundation’s future hangs in the balance, with ripple effects for philanthropy and racial equity debates nationwide.
