IRS Making Plans to Rescind Harvard’s Tax-Exempt Status After It Defied Trump — Nearly Half a Billion Dollars at Risk: Report

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The White House is moving beyond just cutting off federal funds and grants to Harvard University after it defied President Donald Trump’s demands, with the IRS “making plans to rescind the tax-exempt status” of the Ivy League university, according to CNN. At risk is nearly half a billion dollars in tax benefits currently enjoyed by America’s oldest university.

Earlier this month, Trump issued a list of demands to Harvard, including calling for it to end its diversity, equity, and inclusion (DEI) programs, ban masks at protests, expel students involved in pro-Palestinian protests, and commit to “full cooperation” with the Department of Homeland Security. Harvard President Alan M. Garber rejected the president’s orders as nothing more than a “political ploy disguised as an effort to address antisemitism on campus.”

“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,” he said. “The University will not surrender its independence or its constitutional rights.”

In response, Trump has moved to withhold over $2 billion in grants, cancel $60 million in federal contracts, and called for the university to lose its tax-exempt status.

The report by CNN’s Evan Perez and Alayna Treene cited “two sources familiar with the matter” to spell out how the Trump administration is pursuing this “extraordinary step of retaliation” against Harvard:

Gary Shapely, whom Trump this week picked as acting IRS commissioner, has the authority to rescind the tax exemption under federal law. Doing so typically comes after the agency has made a determination that an organization has violated the rules that govern tax exemptions for not-for-profit entities.

Not-for-profit organizations that benefit from the tax exemption can lose it if they violate a number of rules, including for political activity.

But a rescission would be a rare move by the IRS.

As the CNN report noted, such revocation of tax-exempt status usually requires a high bar, such as in the 1980s when the IRS pulled the status from a Christian college “that the IRS determined had used a racially discriminatory admissions policy.”

Losing the tax-exempt status “would deal a painful financial blow to the university,” reported Bloomberg earlier this week in light of Trump’s looming threats.

The benefits from that status include being exempt from paying traditional property taxes on buildings used for educational purposes, being able to sell bonds to raise funds with the interest exempt from federal taxes, and alumni and supporters who donate to the university being able to deduct their contributions on their income taxes.

According to Bloomberg, Harvard raked in $528 million of donations classified as current use gifts in fiscal year 2024. A previous analysis of Harvard’s tax-exempt status by Bloomberg News calculated the value of Harvard’s tax benefits as totaling at least $465 million in 2023.

Mediaite reached out to Robert Corn-Revere, chief counsel of the nonpartisan free speech advocacy nonprofit Foundation for Individual Rights and Expression (FIRE), for comment on this story.

Corn-Revere, a First Amendment litigator for more than four decades who is leading FIRE’s defense of Iowa pollster Ann Selzer against Trump’s defamation suit, was adamant the White House’s actions conflicted with free speech protections.

“President Trump suggested revoking Harvard’s tax-exempt status because of what he called ‘political, ideological, and terrorist-inspired’ ideas being expressed on campus,” he said. “But retaliating against a university because of its curriculum or the views expressed by its students and faculty would violate academic freedom and the First Amendment. The president can’t use the machinery of government to dictate which ideas are acceptable in higher education.”

This article has been updated with additional information.