In Robert F. Kennedy Center for Justice and Human Rights v. McMahon, the United States District Court for the District of Columbia concluded last week that the Secretary of Education exceeded her regulatory authority under the applicable statute when that Department issued final regulations excluding certain section 501(c)(3) tax-exempt organizations from eligibility for their employees to participate in the Public Student Loan Forgiveness program. After addressing threshold standing and ripeness issues, the court concluded that the plain text of the statute did not give the Secretary the authority to choose among the section 501(c)(3) organizations eligible for their employees to participate in the program, which is exactly what the final regulations did. While the court acknowledged that the Internal Revenue Service has the authority to revoke the tax-exempt status of organizations for activities that are illegal or contrary to (fundamental) public policy, as upheld by the Supreme Court in the 1983 Bob Jones University decision , it concluded that the Secretary of Education lacked that authority.
The decision, if it stands in the face of the likely government appeal, underscores an important point about the decision of Congress both here and in many other contexts to use section 501(c)(3) status as a qualification for government benefits. For organizations that rely on such benefits, this use makes maintaining that status critically important. This in turn gives a presidential administration a significant lever to influence tax-exempt organizations but also a narrow path to do so, if the Treasury Department and the IRS are the only agencies with authority to revoke that status.
UPDATE: The United States District Court for the District of Massachusetts also vacated the final regulations for similar reasons and also based on a finding that they violated the First Amendment. For commentary on these decisions, see Benjamin Leff, Judges block Trump administration’s attempts to deny access to public service loan forgiveness to its perceived foes, The Conversation, July 9, 2026.