More than a month after Harvard University filed a lawsuit against President Donald Trump for freezing its federal funding, the President has come back with another financial swing against the university.
“We are going to be taking away Harvard’s Tax Exempt Status,” Trump posted on Truth Social early Friday. “It’s what they deserve!”
The immediate effect of Trump’s declaration is not immediately clear. Per U.S. law, it is illegal for the President and other senior officials to ask the IRS to “conduct or terminate an audit or other investigation of any particular taxpayer with respect to the tax liability of such taxpayer.”
Lily Batchelder, a New York University School of Law professor on tax policy, called the announcement a “lawless action by the President.”
“If the President can announce that he is revoking the tax-exempt status of a charity, we have crossed a rubicon that has no clear end. What will stop him or any President from weaponizing the IRS to intimidate any political opponents or groups he dislikes into silence?” she says.
Harvard University was one of the first higher education institutions in recent weeks to stand firmly against the Trump Administration—which ordered the university to take on anti-DEI policies, among other measures. The school’s pushback has placed $2.2 billion in multi-year federal funding at risk, and the Administration has threatened to pull another $1 billion in grants. Federal funding exceeds the $2.4 billion distributed by Harvard’s endowment for the fiscal year ending in June 2024, which made up nearly 40% of the institution’s total operating revenue..
Much of the university’s staff has cheered the university’s decision, with dozens of professors vowing to take pay cuts in order to help the university battle Trump in court.
Private universities and colleges are tax-exempt if they qualify for 501(c)(3), or nonprofit, status, which requires that they operate “exclusively for…educational purposes,” according to the Association of American Universities (AAU). Higher education schools must show they are complying through tax filings, audits, and reports. An institution can lose its tax-exempt status if it fails to abide by rules regarding the “valuation, disclosure, and use of charitable gifts,” the AAU says. Batchelder lists examples, such as exceeding limits on lobbying and board members or executive directors using the charity for their personal gains.
“The tax exemption means that more of every dollar can go toward scholarships for students, lifesaving and life-enhancing medical research, and technological advancements that drive economic growth. There is no legal basis to rescind Harvard’s tax-exempt status,” a Harvard University spokesperson told TIME in an emailed statement.
The IRS directed TIME to the Treasury Department for comment, which did not immediately respond to a request.
“Such an unprecedented action would endanger our ability to carry out our educational mission,” the Harvard spokesperson added. “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.”
For fiscal year 2024, Harvard distributed more than $749 million in financial aid and scholarships. About 55% of Harvard undergraduates received need-based scholarships.
Harvard University is also under investigation by the Trump Administration over pro-Palestinian campus protests and allegations of anti-semitism on campus. In April, the Department of Homeland Security announced that it would cancel $2.7 million in grants to Harvard because of the participation of some international students in pro-Palestinain protests. “Harvard bending the knee to antisemitism—driven by its spineless leadership—fuels a cesspool of extremist riots and threatens our national security,” said DHS Secretary Kristi Noem.
Noem asked for Harvard’s records pertaining to foreign student visa holders, saying it would lose its Student and Exchange Visitor Program certification if it did not comply. The program allows international students to study in the U.S.
The post Trump Says He’s Revoking Harvard’s Tax-Exempt Status. Here’s What That Means appeared first on TIME.
