Iowa Supreme Court Addresses Race-Restrictive Scholarships in Wake of SFFA Decision

Nearly 30 years ago, Dr. Ezra L. Totton, a distinguished Black professor of chemistry, bequeathed $35,000 to the University of Iowa to establish a scholarship for "Black students majoring in the physical sciences, preferably chemistry." If the funds could not be used for this purpose, they were to return to his estate.

Concerned that the reasoning in the U.S. Supreme Court's Students for Fair Admissions, Inc. v. President & Fellows of Harvard College (SFFA), 600 U.S. 181 (2023), decision regarding race-based student admissions effectively rendered administration of race-restrictive scholarships unlawful, the university, through the Iowa Attorney General's Office, petitioned the courts to replace "Black students" with "first generation students" pursuant to Iowa's version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). The state district court dismissed the action without prejudice, concluding that the university had not demonstrated that SFFA conclusively applied to donated scholarship funds. The university appealed.

The Court's Decision

The Iowa Supreme Court issued its decision on June 5, 2026. See In re Ezra L. Totton Scholarship, No. 25-0462 (Iowa 2026). Writing for a five-justice majority, Justice Edward Mansfield read SFFA as "banning all race-based action by the government unless the strict scrutiny standard has been met," with a rationale that "extends beyond admissions." The court surveyed post-SFFA developments, including a Wisconsin decision striking down race-based scholarships, a U.S. Department of Justice memorandum that federally funded scholarships cannot favor specific races and U.S. Department of Education investigations into race-limited university scholarships. In light of these legal developments, the court held that administering a race-based scholarship is at least "impracticable" under UPMIFA, which means that an institution need not wait for a definitive ruling that such restrictions are illegal before seeking judicial modification.

Nonetheless, the court declined to approve the university's proposed replacement of "Black students" with "first generation students," finding "no indication that Dr. Totton would have wanted to assist first-generation students as a backup plan." The court observed that the proposed modification impermissibly "adds a new restriction" rather than preserving the donor's intended purpose. The court specifically noted there was "a world of difference" between Dr. Totton's experience under legal segregation and the circumstances of today's first-generation students.

On remand, the court directed that 1) an advocate for the donor's intent should be allowed to participate, given that the Attorney General represented the university and no one independently appeared to protect the donor's purpose, 2) the full will and relevant extrinsic evidence may be considered, and 3) permissible modifications include "release of the restriction" or directing funds to other institutions, such as historically black colleges and universities (HBCU). Justice Christopher McDonald, joined by Justice David May, concurred in reversing the dismissal but declined to join the majority's remand guidance, finding that those issues were not properly before the court.

Key Takeaways

The In re Ezra L. Totton Scholarship decision carries immediate practical implications for colleges and universities holding race-restrictive donor funds:

• Review Restricted Funds. The Iowa Supreme Court joins a growing consensus that SFFA's principles extend beyond admissions to all race-based action by government entities, including scholarship administration. Institutions need not wait for a court to declare these restrictions illegal. Potential impracticability under UPMIFA or state cy pres doctrine is usually sufficient to initiate gift modification proceedings.
• Propose Modifications Aligned with Donor Intent. Courts may not rubber-stamp an institution's proposed modification simply because it serves a similar diversity-related goal. The modification should be demonstrably consistent with the donor's expressed charitable purposes and supported by the gift instrument and extrinsic evidence when feasible. Modifications that add new restrictions are unlikely to be approved if they are unrelated to the donor's intent.
• Expect External Involvement. Courts may consider the viewpoints of various interested parties, such as local government officials, the Attorney General, donor family members, alumni organizations or civil rights groups. Institutions should expect and prepare for potential opposition or, at minimum, intervention by such individuals or groups and may decide to coordinate with such groups before petitioning a court for modification.
• Build an Evidentiary Record. The court rejected the university's modification in large part because the record was not sufficiently supportive of the modification. Before seeking court approval, institutions should marshal their strongest and most compelling evidence, which may include the full gift instrument, donor correspondence, charitable giving history and any available extrinsic evidence of intent.

For more information on this topic or assistance with best practices, please contact the authors or another member of Holland & Knight's Education Team.

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