President Donald Trump has set his sights on Harvard University after it rebuffed his calls for policy changes regarding antisemitism, and he has reportedly directed the IRS to look into removing its tax-exempt status.
Tax exemptions were created for charitable organizations and educational and religious institutions to continue to do work for the public good without financial worries. Large research universities such as Harvard are dependent on federal grants, the first target of the Trump administration.
Trump’s next move, to strip the country’s most prestigious university of its tax-exempt status, could face major legal challenges.
Why is Harvard tax-exempt?
Harvard, the oldest educational institution in the United States, would normally have to pay billions of dollars in federal income and property taxes. However, since the income tax was rolled out in 1913, Harvard has been exempt.
The Association of American Universities argued that universities should be tax-exempt due to the government’s acknowledgement of their benefit to society.
“This tax exemption enables universities and colleges to maximize the benefits that they provide society, including: an educated citizenry which is essential to our democracy; a highly-educated, skilled, and productive workforce, which is critical to our nation’s competitiveness; and new innovations and technologies that improve health, enhance our quality of life, strengthen national security, and fuel economic growth,” it said.
According to the IRS, organizations that are “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals” are eligible for tax exemptions.
The exemption has helped Harvard save a massive endowment, over $50 billion.
Can Trump remove Harvard’s tax-exempt status?
The IRS is recognized as being one of the most nonpartisan agencies in the U.S., with only two political appointees. One section of the IRS code explicitly bans any direct action requests from the executive branch, saying it’s unlawful for the president or any other executive officer to “request, directly or indirectly, any officer or employee of the Internal Revenue Service to conduct or terminate an audit or other investigation of any particular taxpayer with respect to the tax liability of such taxpayer.”
Mark Mazur, former assistant secretary for tax policy under the Biden administration, told CNN the IRS’s nonpartisan nature is essential to maintaining the U.S.’s high voluntary tax rate “because people feel that their interactions with the tax system are fair and based on law.”
The IRS’s nonpartisanship has come under scrutiny before, especially under the Obama administration. Conservative organizations complained of delays in tax exemption approvals.
Trump floated the idea of revoking Harvard’s tax-exempt status on Wednesday.
“Perhaps Harvard should lose its Tax Exempt Status and be Taxed as a Political Entity if it keeps pushing political, ideological, and terrorist inspired/supporting ‘Sickness?’” Trump posted on Truth Social. “Remember, Tax Exempt Status is totally contingent on acting in the PUBLIC INTEREST!”
Though a direct request from the president would be illegal, Harrison Fields, a White House spokesman, told the New York Times the agency was looking into revoking Harvard’s tax-exempt status before Trump’s request.
Trump’s effort is unlikely to succeed, according to legal experts, as the IRS would first have to warn Harvard of the upcoming rescission so that it could challenge the measure. Such an effort has a good chance of being successful.
“Harvard would argue there’s a violation of its free speech and academic freedom,” said Gowri Krishna, a professor at Fordham School of Law who specializes in nonprofit law. “I think it would be highly, highly unlikely that the government would win.”
Trump does have the ability to freeze federal grants to colleges. He has already frozen funds for seven top-tier universities, including $2.2 billion in grants for Harvard.
TRUMP FLOATS REMOVING HARVARD’S TAX-EXEMPT STATUS IN FEUD OVER CAMPUS POLICIES
Is there any precedent for this move?
Educational institutions have been targeted for tax-exempt status removal in the past, but due to legal challenges, a successful recission is rare. The most well-known example is Bob Jones University, a fundamentalist Christian liberal arts school in South Carolina.
The university banned interracial dating among its students, prompting a challenge from the IRS. The case reached the Supreme Court, which ruled in favor of the IRS. The school had its tax-exempt status revoked.
Bob Jones University ended its interracial relationship policy in 2000, though it took another 17 years to regain its tax-exempt status.
This article was originally published at www.washingtonexaminer.com
