By Brian Schwartz and Douglas Belkin

The Trump administration has requested that the Internal Revenue Service start the process of revoking Harvard University's tax-exempt status, according to people familiar with the matter.

Officials at the Treasury Department asked the IRS's acting chief legal counsel, Andrew De Mello, to move ahead with a plan to revoke Harvard's key status, which lets donors get tax deductions for contributions and keeps the university from paying taxes on any net earnings. Harvard is exempt from federal income tax as it operates as a 501(c)(3) educational institution.

The move would be an extraordinary step for the government to take against a major university, akin to a long IRS battle with Bob Jones University over its racial policies. Revocations of tax-exempt status typically happen only after a detailed IRS audit and the process can be mired in legal challenges.

The effort to try to revoke Harvard's crucial status comes after the university recently declined a variety of demands from the administration, including a request for the school to share all admissions data with the federal government.

Trump and Republicans in Congress have been battling with Harvard, accusing it of not doing enough to combat antisemitism while also pressuring it to end diversity, equity and inclusion, or DEI, programs. The administration also recently announced it was freezing just over $2.26 billion in federal funds for multiyear research grants and contracts.

The tax code prohibits the president and other senior officials from directly or indirectly requesting certain investigations of particular taxpayers. To become a tax-exempt 501(c)(3), the IRS requires the organization to operate exclusively for religious, charitable, scientific, educational or one of a few other specific purposes. The IRS also requires 501(c)(3)s to not be organized for the benefit of private interests.

"I don't see how it's kosher," said Ellen Aprill, a retired professor at Loyola Marymount University Law School. "There's criminal penalties, possibly a fine or prison," she added.

Though it is unclear how the administration could argue Harvard should lose its status, Trump hinted in a recent Truth Social post that the school should be taxed as a "political entity" instead because, in his view, the college is pushing political viewpoints.

Harvard and the Treasury Department didn't return requests for comment.

To be sure, it is difficult for the IRS to terminate a nonprofit's tax-exempt status and it is unusual for the department to take such a drastic step. The effort was earlier reported by CNN.

The most high-profile school to lose its tax exemption was Bob Jones University in the 1970s, said Phil Hackney, professor of law at the University of Pittsburgh. The decision was made because the school was found to have discriminated on the basis of race.

A legal path forward for Trump to challenge Harvard's status would be on the grounds that it was out of step with the administration's stance on diversity, equity and inclusion, Hackney said. But because that precedent isn't set -- and might never be set -- it is an uphill climb, which would take years.

"I can see the administration trying to implement regulations that find that DEI is now held to be wrong and illegal under the law, and that they can revoke on that basis," he said. "That's pushing the bounds of the law extremely but they might try, but that would be a much longer process than just yanking their status tomorrow."

The financial implications for Harvard, should the government move ahead, would be devastating, said Robert Kelchen, head of the department of educational leadership and policy studies at the University of Tennessee, Knoxville.

The school could owe taxes on their considerable real-estate holdings in Cambridge, Boston and beyond. And the removal of tax-exempt status means donors would no longer get a tax break by making contributions to the school, which would likely diminish donations.

Beyond that, the administration has talked about a 35% endowment tax for universities with large endowments. That could potentially cost Harvard more than a billion dollars a year if, for instance, Harvard earned a 10% return on its $52 billion endowment.

"The administration is trying to pull every financial lever they have, and tax status is arguably more important than the research grants," Kelchen said.

Write to Brian Schwartz at brian.schwartz@wsj.com and Douglas Belkin at Doug.Belkin@wsj.com

(END) Dow Jones Newswires

April 16, 2025 21:15 ET (01:15 GMT)

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