What it would take for Trump admin to change Harvard’s tax status

In an escalating fight over federal funding, President Trump has threatened to revoke Harvard University’s tax-exempt status.

“Remember, Tax Exempt Status is totally contingent on acting in the PUBLIC INTEREST!” Trump wrote in a post on Truth Social this week. He suggested Harvard should be “Taxed as a Political Entity if it keeps pushing political, ideological, and terrorist inspired/supporting ‘Sickness.'”

The federal government has long exempted universities from taxes because of their “educational purposes” and commitment to public service. Trump’s threat could lead to a stunning retaliation against Harvard for its refusal to comply with the administration’s recent demands – but it is not entirely uecedented.

“Since 1913, the modern income tax has been in place and Harvard has been tax exempt for all of that time,” he says. “And no one has seriously questioned [their] tax exemption until now.”

Not only would Harvard lose the ability to earn revenue on its $53.2 billion endowment, but Graetz says Harvard donors would lose the ability to write off donations when they file their taxes.

Trump’s threat comes as the administration continues to argue that several higher education institutions, including Harvard, are not doing enough to protect their Jewish students from discrimination. On April 11, the administration sent Harvard its latest list of demands, emphasizing concerns around antisemitism on campus. It ordered Harvard to change its hiring, admissions and other policies, and to eliminate diversity, equity and inclusion (DEI) programs.

In response, Harvard said it has already taken substantial steps toward fighting antisemitism, and the administration’s demands go “beyond the power of the federal government.”

What happened to Bob Jones University

For many years, Bob Jones University, a private Christian college in Greenville, S.C., had a policy in place that forbade its students from interracial dating or marriage. In 1976, the IRS found the school was engaging in unlawful racial discrimination and revoked Bob Jones University’s tax-exempt status.

The college sued the federal government and the case made it all the way to the Supreme Court. In question was whether Bob Jones’ discriminatory policy was protected by its right to religious freedom, because the school claimed the Bible prohibited race-mixing.

In 1983, the Supreme Court ruled in favor of the IRS, in an 8-1 decision, saying racial discrimination in schooling violated “fundamental national public policy” and “not all burdens on religion are unconstitutional.”

Larry Zelenak, a professor of law at Duke University, says he believes the Trump administration may lean on the Bob Jones ruling if it were to proceed with revoking Harvard’s tax-exempt status, arguing that Harvard discriminates against Jewish students by failing to protect them from antisemitism on campus.

But Zelenak believes that argument would only work “if the IRS was taking the position that antisemitism was an official policy of [Harvard] in the way that racial discrimination was an official policy of Bob Jones … And I just don’t see the comparison there.”

Olatunde Johnson, a law professor at Columbia University who has written about Bob Jones, points out that even though racial discrimination was an official, written policy at the school, it took a lot for the university to actually lose its tax-exempt status.

“This was explicit [discrimination],” says Johnson. “And it was still a long adjudicatory process to determine that they were in fact discriminating.”

If the IRS were to go after Harvard, Johnson says, “A first step would be the necessity of going through a process – whether it’s an administrative process, and then a litigation process – that really ferrets out the facts.”

Congress acted to keep presidents from using the IRS for political means

This isn’t the first time presidents have tried to use the IRS to advance their political agendas. John F. Kennedy directed the agency to investigate right-wing groups and Richard Nixon tried to use it to target and investigate his political opponents with audits.

In 1998, Congress took steps to protect the IRS from this kind of political pressure, and to preserve its independence. It was, Graetz says, “an overwhelming bipartisan effort to eliminate pressures by presidents and other high ranking officials to audit their adversaries or audit institutions that they found to be ideologically uncomfortable.”

The law bars the executive branch from using the IRS to target any particular taxpayer.

If the IRS were to act on Trump’s suggestion to revoke Harvard’s tax status, Graetz says, “It’s important for the American public to recognize that this [would be] an extraordinary intrusion into the role of the IRS.”

“When the government proposes to revoke tax exempt [status], it doesn’t become effective, assuming the organization challenges the revocation … unless the government wins in court,” says Larry Zelenak of Duke. “And I find that unfathomable.”

Reporting contributed by Adrian Florido
Edited by Nicole Cohen
Visuals by Mhari Shaw
Research contributed by Sarah Knight