The Trump administration is escalating its battle against Harvard University, reportedly threatening to revoke its federal tax-exempt status and costing the institution potentially a billion dollars annually.
Reports from CNN and The Washington Post both cite unnamed administration officials who confirmed that the Internal Revenue Service has been asked to consider if the university has violated any of the requirements of charitable organizations, such as engaging in political activity.
“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?’ Remember, Tax Exempt Status is totally contingent on acting in the PUBLIC INTEREST!,” President Trump posted on his social-media site.
The White House responded to questions about the situation by forwarding a statement from Harrison Fields, principal deputy press secretary and special assistant to the president. “Any forthcoming actions by the IRS will be conducted independently of the president,” Fields said, adding that the agency began investigations into any institution’s potential violations before Trump’s post.
The loss of tax-exempt status “would endanger our ability to carry out our educational mission,” Harvard spokesperson Jason A. Newton wrote in an email. “It would result in diminished financial aid for students, abandonment of critical medical research programs, and lost opportunities for innovation. The unlawful use of this instrument more broadly would have grave consequences for the future of higher education in America,” he wrote.
If the IRS rules against Harvard, much of the university’s annual revenues could become subject to both federal and state corporate taxes — including the money it earns from tuition and room and board, said Julee Gard, vice president for administration and finance at the University of St. Francis, in an email.
In addition, Gard wrote, donations to the university would no longer be tax-deductible for the donor.
Revoking the university’s tax-exempt status would be a much broader version of an increase in the endowment tax that Republican lawmakers may propose in a budget-reconciliation bill, said Phillip Levine, professor of economics at Wellesley College and a nonresident senior fellow at the Brookings Institution.
Levine estimated that taxing the earnings on Harvard’s $50-billion endowment at the current corporate tax rate of 21 percent could total some $800 million annually. Harvard is now among just a few dozen colleges that pay 1.4-percent tax on their endowment earnings.
Another downside of losing tax-exempt status is that a university would no longer be able to issue tax-exempt bonds, said Alexander L. Reid, a lawyer specializing in tax law at the firm Baker Hostetler. In that case, he said, the bondholders would be taxed on the interest that they earn.
While the stakes for Harvard are high, Reid said, the process of actually revoking tax-exempt status could take months or years.
First, the IRS must conduct an audit of the university, he said. Harvard can offer its own response to the audit before the agency makes a determination, and that can be appealed to either a special tax court or a federal district court in Massachusetts.
Eventually, the issue could end up at the U.S. Supreme Court, Reid said — in some ways similar to another rare occasion when the government rescinded the tax-exempt status of a university. In 1983, the nation’s high court ruled that Bob Jones University was not eligible for tax-exempt status because the Christian institution discriminated by prohibiting students from interracial dating. Bob Jones regained tax-exempt status in 2017 after dropping those policies.
Scrutiny from the IRS is just the latest step in the Trump administration’s efforts to penalize Harvard for allegedly failing to combat antisemitism on campus and supporting diversity, equity, and inclusion programs that the president and his allies consider discriminatory.
The administration had demanded that the university give the federal government broad oversight of campus operations. On Monday, the university rejected those demands, with Harvard’s president, Alan Garber, later saying in a public statement that “no government — regardless of which party is in power — should dictate what private universities can teach, whom they can admit and hire, and which areas of study and inquiry they can pursue.” The administration responded later on Monday by announcing it was freezing some $2 billion in grants and contracts to the university.
As in that instance, and many others, higher-education experts said the move to rescind Harvard’s designation as a charitable organization seemed well outside normal legal and regulatory bounds. The administration is also considering revoking the tax-exempt status of other wealthy, private colleges and scrutinizing endowments for investments in China and clean energy, Semafor reported.
Institutions like Harvard are given tax-exempt status because they’re providing social and economic benefits that replace the taxes that are being forfeited, Levine said. Those benefits include the technical innovations and medical advancements that are made possible from the research it conducts.
Despite the perception that they are unaffordable, Ivy League institutions are often the most affordable option for low- and middle-income students, Levine said — in large part because endowment earnings support generous financial aid.
Just 3 percent of the university’s undergraduates take out federal student loans, according to federal data, and the university now promises to cover tuition, room and board, and fees for students from families that earn less than $100,000 annually. In 2024, the university awarded nearly $750 million in financial aid, a spokesperson said.
Liz Clark, vice president for policy and research at the National Association of College and University Business Officers, said “it is very clear when an institution’s mission is dedicated to education and inquiry that it meets the requirement for tax-exempt status.”
