Trump wants to end Harvard’s tax-exempt status: Why are some colleges exempt from federal income and property taxes?
President Trump threatened to end Harvard University’s tax-exempt status after the school refused to enact policy changes.
Harvard University, like many universities and colleges, enjoys federal tax-exempt status under Internal Revenue Service rules. The exemption covers property and federal income tax, and means donations to the institution are tax-deductible. The overall benefit to Harvard, as the country’s oldest and richest university, is worth hundreds of millions of dollars a year.
President Donald Trump threatened that tax-exempt status on Tuesday, saying: “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?’” Mr. Trump posted on Truth Social on Tuesday morning. “Remember, Tax Exempt Status is totally contingent on acting in the PUBLIC INTEREST!”
Trump’s push to end Harvard’s tax-exempt status is part of his broader clash with the university, which began after the school rejected Trump’s demands that it make a series of policy changes. That is part of the Trump administration’s push to purge “woke” culture from campuses across the US.
Why is Harvard exempt from federal income tax?
Under Section 501(c)(3) of the Internal Revenue Code, the IRS allows certain organizations to claim tax-exempt status.
Eligible organizations are those which serve the public interest by being “organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes.”
Harvard qualifies as being an institution carrying out scientific and educational activities.
In order to obtain tax-exempt status, the institution must apply to the IRS, and the vast majority of universities both do so and are granted tax-exempt status, according to the Association of American Universities.
Could Harvard lose its tax-exempt status?
According to most experts, it is highly unlikely that Harvard could lose its tax-exempt status since it is extremely rare for the IRS to revoke the tax-exempt status of educational institutions.
An exception was the Bob Jones University in South Carolina, a fundamentalist Christian school that banned interracial dating. The IRS revoked its tax-exempt status on the grounds that its practices were contrary to a compelling government public policy, in this case eradicating racial discrimination.
Harvard has issued a statement saying there is “no legal basis” for rescinding its tax status. Even were the IRS to revoke its tax status, there is little doubt Harvard would challenge that in court and would likely succeed.
What is more, if Trump’s pressure were to cause the IRS to investigate Harvard or revoke its tax-exempt status this would be a clear breach of federal law that prohibits the president from “directly or indirectly” demanding the IRS take specific actions.
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