On April 1, 2025, the American Alliance for Equal Rights (“AAER”) filed complaints with the Internal Revenue Service (“IRS”) alleging three tax-exempt private foundations—the Gates Foundation, the Lagrant Foundation and the Creative Capital Foundation—have engaged in racial discrimination by excluding white citizens from benefits and opportunities based on their race. Each complaint requests that the IRS open an investigation into the activities and tax-exempt status of the foundations.
AAER’s letters claim that “white Americans” are being excluded from benefits offered to the public by the foundations. Regarding the Gates Foundation, the AAER alleges that the Gates Scholarship program provides tuition, mentorship, and career development opportunities only to individuals who identify as racial or ethnic minorities. The AAER alleges that the Lagrant Foundation offers scholarships, mentorships, and career development opportunities exclusively to applicants who are African American/Black, Alaska Native/Native American, Asian American/Pacific Islander, or Hispanic/Latino. Similarly, the AAER asserts that the Creative Capital Foundation’s Creative Capital Forward Fund provides grants and career support solely to Asian, Black, Indigenous, and Latinx creators. In each case, the AAER asserts that White applicants are ineligible.
According to the AAER’s letters, such exclusionary programs violate IRS rules and guidance, the Supreme Court’s ruling in Students for Fair Admissions, Inc. v. Harvard College (2023), prior Supreme Court precedent (specifically, Bob Jones University v. United States, 461 U.S. 574 (1983)), and President Trump’s recent Executive Orders (14173, 14151, and 14148). The AAER argues that charitable organizations practicing racial discrimination violate anti-discrimination law and public policy. Each of the complaints assert race-based discrimination, but the legal argument extends to allegations of sex-based discrimination as well. According to the letters:
President Trump “order[ed] all agencies to enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” Exec. Order No. 14173, 90 Fed. Reg. 8633 (Jan. 21, 2025). Executive Order 14173 is unequivocal: “race- and sex-based preferences” are “dangerous, demeaning, and immoral” and “violate the civil-rights laws of this Nation.” Id. Taken together, there can be no doubt that “[t]he Executive Branch has consistently placed its support behind eradication of racial discrimination” in all its forms. Bob Jones, 461 U.S. at 594.
In a press release, Edward Blum, the president of AAER, stated:
These organizations are free to operate as they wish—but not with the public subsidy that tax-exempt status provides. Racial discrimination—whether in scholarships, professional development, or artistic grants—violates public policy and must not be underwritten by American taxpayers. . . . Organizations that discriminate based on race—whether their intentions are benevolent or not—are not eligible for public subsidies through the tax code. The IRS must act to uphold the law.
The letters propose that the foundations can resolve the issue by opening their programs to all races.
Ballard Spahr will continue to monitor developments in this area.