Harvard University has made it clear that it will not back down in the face of President Trump’s renewed threat to revoke its tax-exempt status. The university stated that there is “no legal basis” for such a move and that it would have dire consequences for its ability to fulfill its educational mission.
While Harvard did not explicitly state that it would challenge any attempt to revoke its tax-exempt status, it emphasized the importance of maintaining this status for the sake of its students, research programs, and overall innovation. The university’s financial aid programs and critical medical research initiatives would be at risk if its tax-exempt status were revoked.
President Trump took to social media to declare that the government would be “taking away Harvard’s Tax Exempt Status,” adding that it is what the university deserves. However, it is unclear whether the IRS is actively pursuing the revocation of Harvard’s tax-exempt status at this time. Federal law prohibits the president from directing the IRS to conduct tax investigations, and IRS employees are required to report any such command to an internal government watchdog.
Harvard’s tax-exempt status not only exempts the university from paying most taxes but also allows donors to write off their gifts to the school on their tax returns. Losing this status would mean Harvard would have to start paying taxes on its income to the federal government and could potentially lead to a decrease in donations. Philanthropy accounts for a significant portion of Harvard’s annual operating revenues, with most of it coming from the university’s substantial endowment.
The escalating conflict between the Trump administration and Harvard is part of a broader pressure campaign against elite universities, which the administration has accused of harboring antisemitism and discrimination. Harvard has pushed back against the government’s demands, leading to a lawsuit after federal funds were frozen in retaliation for the university’s defiance.
The Trump administration has been criticized for attempting to politicize the IRS, with officials pressuring the agency to assist Immigration and Customs Enforcement in locating individuals for deportation. The agency has seen a high turnover in leadership this year, with the current acting commissioner, Michael Faulkender, taking over after Treasury Secretary Scott Bessent raised concerns about the previous acting leader’s appointment.
While the IRS has the authority to challenge a group’s tax-exempt status after conducting an audit, tax experts believe that a court would likely side with Harvard given the university’s extensive research and educational operations. Democrats have called for an investigation into President Trump’s targeting of Harvard, arguing that it is illegal and unconstitutional for the IRS to take direction from the president on assessing tax-exempt groups.
Regardless of the outcome of the IRS’s review of Harvard’s tax-exempt status, Republicans are gearing up to increase a tax on university endowments that was created in 2017. This move could have significant financial implications for institutions like Harvard and further escalate the ongoing conflict between the Trump administration and elite universities.
