Trump Could Have a Strong Case to Revoke Harvard’s Tax-Exempt Status

In a recent Truth Social post, President Trump wrote: “Perhaps Harvard should lose its Tax Exempt Status and be Taxed as a Political Entity if it keeps pushing its political, ideological, and terrorist inspired/supporting ‘Sickness?’” This followed an earlier threat to cut off $9 billion in federal funding unless Harvard agreed to a list of administration demands for reforms, including merit-based hiring, an end to preferences in admissions based on “race, color, national origin, or proxies thereof,” an outside audit of “programs and departments that most fuel antisemitic harassment,” and the discontinuation of DEI. Rejecting these demands, Harvard declared that “antisemitism and discrimination of any kind not only are abhorrent and antithetical to Harvard’s values but also threaten its academic mission.” Since that exchange, it has been reported that the Department of Justice has asked the IRS to review and revoke Harvard’s tax-exempt status.

Thanks to a 1983 Supreme Court opinion widely hailed by progressives at the time, the Trump administration may have stronger grounds than at first appears to reconsider Harvard’s tax status. Harvard is a tax-exempt organization as an educational institution under Section 501(c)(3) of the Internal Revenue Code. Section 501(c)(3) exempts organizations “operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes.” Tax-exempt status carries great advantages, because it frees Harvard from federal income tax and its donors can make tax-deductible contributions. Loss of the exemption would cost Harvard an estimated $500 million annually.

But the IRS can remove 501(c)(3) designation if the organization engages in conduct that violates “established public policy.” The Supreme Court recognized this public policy doctrine in Bob Jones University v. United States (1983). Bob Jones was a private Christian university that prohibited interracial dating and marriage based on its understanding of biblical teachings. The IRS concluded that Bob Jones’s rule violated fundamental national policy. Agreeing with the IRS, the Supreme Court found that the institution’s purpose “must not be so at odds with the common community conscience as to undermine any public benefit that might otherwise be conferred.” It concluded, “it would be wholly incompatible with the concepts underlying tax exemption to grant the benefit of tax-exempt status to racially discriminatory educational entities.”

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