Trump Threatens Harvard with Revocation of Tax Exempt Status

President Donald Trump suggested another weapon in his battle against Harvard University. Invoking a decades-old precedent from the United States Supreme Court, he railed against what he called a “Sickness” presumably at Harvard.

Trump’s Truth Social Post

In a post on Truth Social, Trump invited scrutiny of Harvard’s tax exempt status. For purposes of commentary, this is the full text of Trump’s post:

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!

Nonprofit Charitable Purpose and the Public Interest

If you are associated with a nonprofit, then you undoubtedly know that the purpose of the organization must be exclusively for charitable purposes. In the full text of the Internal Revenue Code, the organization must be exclusively operated for “religious, charitable, scientific, testing for public safety, literary, or educational purposes.”

Related article: Nonprofit Law Developments in Private Inurement

Bob Jones University Racial Discrimination Against the Public Interest

Harvard University certainly complies with this mandate. Right? Well, not so fast says the President. In the case of Bob Jones University v. United States,  the Supreme divined another requirement based on what the common law understanding of what a “charity” is.

Not only must the organization be operated under one of the purposes as enumerated in the Internal Revenue Code, the Court held that “an institution must fall within a category specified in that section and must demonstrably serve and be in harmony with the public interest.”

Bob Jones University at the time discriminated in its admission policy based on race. Racial discrimination in education, according to the Court, “beyond doubt . . . violates a most fundamental national public policy…”

Harvard University Not in Harmony with the Public Interest?

You would think that Harvard is in harmony with the public interest. There is at least one person with a lot of influence who thinks that it is not so clear.

The New York Times quoted former IRS Commission John Koskinen, that “The chances of getting the I.R.S. to actually revoke the 501(c)(3) status of a major university is almost nonexistent.”

That may have been true under previous administrations. Indeed, there is a special prohibition against the President of the United States and other high government officials from “directly or indirectly, any officer or employee of the Internal Revenue Service to conduct or terminate an audit or other investigation of any particular taxpayer with respect to the tax liability of such taxpayer.”

The application of these rules may shift under the current administration with little or no objection from Congress. And the courts are simply not equipped to handle the tidal wave of cases that may ensue.

Conclusion

Mr. Koskinen suggested, according to the New York Times article, that even the threat of revoking the tax exempt status is going to throw a lot of nonprofit organizations into chaos: “The problem is you’re causing people to spend a lot of time and money responding and defending their actions.”