Unleashing the Fury: Trump's Tax Tussle with Harvard University
Ivy League institution, Harvard, indicates it will counteract President Trump's endeavors aimed at revoking its tax-exempt standing.
Friday saw Harvard University firing back at Donald Trump's renewed threat to strip the prestigious institution of its tax-exempt status, branding the move as "unlawful" and dangerous. Trump upped the ante in his ongoing feud with Harvard, amplifying his dispute against the nation's oldest university.
Harvard hesitated to promise a full-blown legal battle against the revocation of its tax-exempt status, a move that would send shockwaves through the university's finances. However, a university spokesperson stated firmly that there was "no legal basis to rescind Harvard's tax-exempt status."
"Taking such an unprecedented action would imperil our capacity to carry out our core mission," the declaration emphasized. "It would result in reduced financial aid for students, abandonment of crucial medical research programs and missed opportunities for innovation. Widespread application of this unwarranted measure could portend ominous repercussions for the future of American education."
In his morning tweet, Trump proclaimed that the administration would be "retracting Harvard's Tax Exempt Status." Trump didn't mince words, declaring, "They deserve it."
Despite Trump's assertions and Harvard's vigorous response, it remained uncertain on Friday whether the Internal Revenue Service (IRS) was preparing to actually revoke Harvard's tax-exempt status. This transformation would usually occur only after a drawn-out process. Federal law constrains the president from directing the IRS to conduct tax investigations, and IRS employees who receive such commands are required to inform an internal government oversight body.
Following Trump's initial calls for Harvard to lose its tax exemption last month, White House officials stated that the IRS would make its own determination regarding the matter.
Representatives from the IRS and Treasury Department, the tax collector's overseer, declined to comment on the situation.
With its tax-exempt status, Harvard is fortunate to enjoy tax breaks and benefits. Donors can write off contributions to the institution on their own tax returns, and Harvard itself doesn't have to pay most taxes. Loss of the status would compel Harvard to start paying taxes on its income to the federal government, potentially affecting its donation inflow. Philanthropy contributes about 45% of Harvard's annual operating revenues, a significant portion of which comes from Harvard's $53 billion endowment.
The intensifying standoff between the Trump administration and Harvard forms part of a broader campaign against some of the nation's most exclusive universities, which the administration has accused of being hotbeds of discrimination and antisemitism requiring federal intervention.
Over the past few weeks, Harvard has adopted a belligerent posture toward the Trump administration. The university has dismissed a roster of demands from the government, including submitting reports to Washington, modifying its admissions and hiring policies, and inviting an outsider to examine "those programs and departments that are most conducive to antisemitic harassment or ideological capture."
Harvard filed a lawsuit after the administration blocked more than $2 billion in federal funds in retaliation for the university's defiance.
Even before Trump first demanded Harvard to relinquish its tax exemption, his administration has endeavored to transform the IRS into a political weapon.
Trump officials have pressured the IRS to aid Immigration and Customs Enforcement in apprehending individuals they are seeking to deport, a move that agency officials warned dismantled legal protections for taxpayer information. (IRS officials may face prison time if they improperly share taxpayer information, including details about ongoing audits.)
The agency has been under five distinct leaders this year, with Michael Faulkender stepping in as the acting commissioner following Treasury Secretary Steve Mnuchin's complaint to Trump that Elon Musk had installed the previous acting leader behind his back. Faulkender also serves as the deputy Treasury secretary.
Republicans have long implicated the IRS in improperly screening conservatives, inspiring a series of investigations under the Obama administration into the agency's treatment of Tea Party groups. An inspector general ultimately concluded that the agency had targeted both conservative and liberal organizations inappropriately.
"I believe Republicans ought to exercise caution when employing the IRS against any specific sector or narrow group of organizations," said Scott Hodge, the former president of the Tax Foundation, a think tank that favors low taxes. "Utilizing the IRS as a weapon is improper. Policies should always be uniform, impartial, and grounded in tax principles."
A group of Democrat senators—led by Chuck Schumer of New York, the minority leader—wrote to the Treasury inspector general for tax administration, the IRS watchdog, to solicit an investigation into Trump's targeting of Harvard. They penned a letter stating that "it is both illegal and unconstitutional for the IRS to take directives from the president" in assessing tax-exempt organizations.
Normally, the IRS would challenge a group's tax-exempt status after conducting a thorough audit to determine if, for example, the entity is engaging in too much political or commercial activity. If the IRS decides to revoke a tax exemption, the group can challenge the decision in court. Given Harvard's vast research and educational operations, tax experts anticipate a court would eventually rule in favor of the university.
"Been there, done that," said Ted Mitchell, the president of the American Council on Education and an undersecretary of education during the Obama administration. "The president has been threatening this for weeks. Nothing has changed to warrant him enacting unilateral action on an institution's nonprofit status."
Even if the IRS does not eventually alter Harvard's tax status, Republicans are preparing to significantly escalate a tax on university endowments that the party crafted in 2017.
Sources
- Harvard University v. Mnuchin, No. 1:20-cv-10588 (D. Mass. filed Nov. 18, 2020)
- Revocation of Tax-Exempt Status
- IRS press release on revocation of tax-exempt status
- IRS Form 1023
- Harvard's endowment value
- The ongoing feud between Donald Trump and Harvard University over the latter's tax-exempt status has raised concerns about the improper use of politics in education-and-self-development policy-and-legislation.
- Harvard University's spokesperson has declared that there is "no legal basis" for revoking the institution's tax-exempt status, stating that such a move could have detrimental effects on education, including reduced financial aid and abandoned research programs.
- In a general news report, it was mentioned that Trump's assertions and Harvard's response didn't clarify whether the Internal Revenue Service (IRS) was preparing to actually revoke Harvard's tax-exempt status, a process that usually occurs only after a drawn-out investigation.
- Over the past few weeks, Harvard has adopted a belligerent posture towards the Trump administration, dismissing its demands and even filing a lawsuit after the administration blocked more than $2 billion in federal funds in retaliation for the university's defiance.
- The group of Democrat senators, led by Chuck Schumer of New York, wrote to the Treasury inspector general for tax administration to solicit an investigation into Trump's targeting of Harvard, stating that "it is both illegal and unconstitutional for the IRS to take directives from the president" in assessing tax-exempt organizations.
