Trump Threatens Harvard’s Tax Status After Freezing Funds

Trump Threatens Harvard’s Tax Status, Escalating Billion-Dollar Pressure Campaign

Harvard has rejected an effort by the White House to exert more control over its programs. Federal law prohibits the president from telling the I.R.S. to conduct specific tax investigations.

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By Tyler PagerAndrew DuehrenMaggie Haberman and Jonathan Swan

Reporting from Washington

President Trump threatened Harvard University’s tax-exempt status on Tuesday after the school rebuffed his administration’s demands for a series of policy changes, a dramatic escalation in the feud between the president and the nation’s richest and oldest university.

The threat came a day after the Trump administration halted more than $2 billion in federal funding for Harvard because the university rejected changes to its hiring and admissions practices and curriculum. Mr. Trump decided to ratchet up his pressure campaign after watching news coverage of Harvard’s resistance on Monday night, according to a person with knowledge of the president’s deliberations, who spoke on the condition of anonymity to discuss private conversations.

“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?’” Mr. Trump posted on Truth Social on Tuesday morning. “Remember, Tax Exempt Status is totally contingent on acting in the PUBLIC INTEREST!”

White House officials said Tuesday that the Internal Revenue Service would make its decision about Harvard’s tax-exempt status independently, but the president has made clear in private that he has no intention of backing down from the fight with the university.

Losing its tax-exempt status could over time cost Harvard billions of dollars.

It’s the latest turn in a battle between Mr. Trump and academia more broadly, in which the Trump administration threatened to withhold billions in federal funding from various colleges and universities, ostensibly as a way to purge “woke” ideology from America’s college campuses. Trump officials have suggested that schools like Harvard have been hotbeds of antisemitism, elitism and suppression of free speech.

Federal law prohibits the president from “directly or indirectly” telling the I.R.S. to conduct specific tax investigations, and it is unclear whether the agency would actually move forward with an investigation. A spokeswoman for the I.R.S. declined to comment.

“Selective persecution of your political adversaries through the tax system is the stuff of dictatorship,” said Lawrence Summers, the former Treasury secretary and former president of Harvard. “This is unconscionable and wrong but a continuation of trends we have seen in President Trump’s approach both to universities and to tax enforcement.”

Officials at Harvard did not respond to a request for comment.

Organizations have to apply to become tax-exempt. The I.R.S. will conduct audits and in some cases revoke an organization’s tax-exempt status if, for example, the I.R.S. finds that the group is engaging in too much political or commercial activity. Entities can appeal such a decision in court or enter into a settlement to try to preserve their status, former I.R.S. officials said.

John Koskinen, a former I.R.S. commissioner, said that it was unlikely that the I.R.S. could successfully revoke Harvard’s tax-exempt status, given its array of research and teaching functions. Still, having to litigate the question in court could be its own form of intimidation for Harvard.

“The chances of getting the I.R.S. to actually revoke the 501(c)(3) status of a major university is almost nonexistent,” Mr. Koskinen said, referring to a tax-exempt category of organizations. “The problem is you’re causing people to spend a lot of time and money responding and defending their actions.”

Because of its exempt status, Harvard for the most part does not have to pay taxes, though Mr. Trump’s 2017 tax bill instituted a tax on large university endowments that Republicans now want to substantially increase.

Moreover, donations to the research university are tax deductible. That helps draw gigantic donations from ultrawealthy donors who want to choose how to spend their earnings rather than give their money to the federal government. Some prominent Republican donors, like the billionaires John Paulson and Ken Griffin, have given hundreds of millions of dollars to Harvard.

Tax-exempt organizations have long been a political minefield for the I.R.S. During the Obama administration, Republican lawmakers accused the agency of unfairly targeting conservative political groups seeking tax-exempt status, though a watchdog later concluded that the agency had improperly scrutinized both conservative and liberal organizations.

“Economists have extensively studied and documented that tax deductible charitable contributions have a massive effect on support for universities,” Mr. Summers said. “Removal of Harvard’s 501(c)(3) status, which won’t happen because we are a nation of laws, would, if it did happen, devastate progress in medical and scientific research, maintenance of American and Western values, opportunity for the next generation of Americans and an important magnet for the United States in the world.”

The Trump administration has repeatedly tried to turn the I.R.S. into a political tool, upending longstanding protections of sensitive taxpayer information by pushing the I.R.S. to help Immigration and Customs Enforcement deport undocumented immigrants.

Administration officials have also dramatically cut the I.R.S. work force and moved to install Billy Long, a former Republican congressman with little background in tax, beyond promoting a fraud-ridden tax credit, to lead the historically apolitical agency. Nonprofit groups aligned with Democrats and liberal causes are bracing for the I.R.S. to scrutinize their tax-exempt status under the Trump administration.

Last week, Trump officials sent Harvard a letter demanding changes at the university and routine progress reports on how they were being put in place, in order to continue to “maintain” the financial relationship with the government. Harvard rejected the demand.

“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,” Alan Garber, Harvard’s president, said in a statement to the university on Monday.

The Trump administration responded by instituting a funding freeze of more than $2 billion, though details of the funds were unclear. Harvard receives some $9 billion in federal funding, with $7 billion going to the university’s 11 affiliated hospitals in Boston and Cambridge, Mass., including Boston Children’s Hospital and the Dana-Farber Cancer Institute. The remaining $2 billion goes to research grants directly for Harvard, including for space exploration, diabetes, cancer, Alzheimer’s disease and tuberculosis.

Harvard is uniquely positioned to withstand the funding loss, with an endowment of more than $50 billion. By contrast, Columbia University, which has a far smaller endowment, settled with the Trump administration when it was pressed to make changes to its policies and programs.

Karoline Leavitt, the White House press secretary, deferred questions about Harvard’s tax-exempt status to the I.R.S.

“All the president is asking: Don’t break federal law, and then you can have your federal funding,” Ms. Leavitt told reporters on Tuesday. “I think the president is also begging a good question. More than $2 billion out the door to Harvard when they have a more than $50 billion endowment: Why are the American taxpayers subsidizing a university that has billions of dollars in the bank already? And we certainly should not be funding a place where such grave antisemitism exists.”

Anemona Hartocollis contributed reporting.

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• Cutting the State Department: The Trump administration could cut nearly 50 percent of the State Department’s funding next fiscal year, according to an internal memo laying out a downsizing plan.
• Rescinding NPR and PBS Funding: Trump administration officials want legislators to rescind $1.1 billion for the Corporation for Public Broadcasting, which provides some support for public media.
• Harvard: Federal officials said they would freeze $2 billion in grants to Harvard after the university said it would not submit to requests to overhaul hiring and report international students who break rules.
• Wrongly Deported Man: In an Oval Office meeting with President Trump, President Nayib Bukele of El Salvador said that he would not return a Maryland man who was wrongly deported from the United States and sent to a notorious Salvadoran prison.

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