Trump’s Latest Shot at Harvard Gives College Ammunition in Court

President Donald Trump’s latest shot at Harvard University heightens concerns he might be violating multiple laws related to IRS targeting and taxpayer confidentiality.

Trump said in a Friday social media post that “We are going to be taking away Harvard’s Tax Exempt Status.” The announcement is the most recent in Trump’s battle with the university and comes amid a years-long push by conservatives to target elite universities over accusations of ideological bias and allegations of a rise in antisemitism.

Harvard could use the post as a defense in its lawsuit filed last month against the Trump administration over federal funding cuts, said Brian Galle, a professor of tax policy at Georgetown Law. Harvard alleges the government threatened its independence and stifled free speech in freezing the funds.

“This just adds fuel to that fire,” Galle said. “It’s one more exhibit that Harvard is going to submit as part of their effort to have all of these proceedings thrown out.”

Revoking Harvard’s tax-exempt status would strip financial benefits from the university, such as its ability to avoid traditional property taxes and receive gifts that its donors can deduct from their taxes. Any tax-exempt bonds outstanding that Harvard has borrowed also would become taxable.

Potential Legal Violations

The Internal Revenue Code states it’s illegal for the president and other executive branch officials to direct the IRS to conduct or terminate an audit or investigation of a specific taxpayer.

But even if the president does violate that law, Section 7217, an audit of Harvard could still move forward, said Eleanor McWaters, counsel at Crowell & Moring LLP.

“That code provision doesn’t stop the audit,” McWaters said. “It doesn’t stop the investigation. It just penalizes the actor that asks for the audit.”

A 2024 US Supreme Court decision that gives the president immunity from criminal charges when acting in an official capacity further complicates Harvard’s options and 7217 challenges, Galle said.

If Trump’s recent statement indicates he has specific information from the IRS that a Harvard audit is underway, that could violate Section 6103, which governs taxpayer confidentiality.

The IRS has a tradition of aggressively protecting taxpayer data. Anyone who discloses it could face prison. Harvard could sue the IRS for the disclosure, but it would only recoup $1,000 per instance of unauthorized inspection and disclosure as well as actual damages, which would be difficult to prove, Galle said.

Trump’s statement has set off a wave of criticism from Democrats and tax-exempt groups, which already are on edge because of the administration’s crackdown on nonprofits.

The National Council of Nonprofits CEO and President Diane Yentel said in a statement that Trump’s message is “a dangerous abuse of executive authority that sets a chilling precedent.”

Revoking Tax-Exempt Status

Harvard can’t take any legal action against the IRS until it receives an official revocation notice from the IRS. That typically would come after a years-long audit and appeals process. If Harvard’s status is revoked after the appeals process, the status will remain revoked during litigation.

The IRS revokes less than 1% of organizations’ tax-exempt status, said Sunita Lough, the former IRS commissioner of the tax exempt and government entities, adding that it’s never a surprise for the nonprofit.

The IRS has shied away from tax-exempt enforcement in the past decade, in part because of a controversy in which an IRS official said right-leaning groups were getting extra scrutiny when applying for tax-exempt status.

“Here, the president is out loud directing the targeting of liberal groups he does not like. Just out loud. If we had massive outrage—which we did, as a culture about the IRS back in 2013—that should be doubled,” said Philip Hackney, a University of Pittsburgh School of Law professor specializing in the tax-exempt sector.

There are generally two ways the IRS will start a tax-exempt exam: irregularities in filings or a referral to the agency. When the agency receives a referral, it evaluates whether it will pursue an exam with the group before starting the exam. The IRS receives roughly 7,000 referrals a year, Lough said.

The agency never gives the person who referred the nonprofit an update on the agency’s actions, Lough said. The IRS would propose a revocation after months of back and forth. Most nonprofits appeal the decision.

“If they’re doing something that they shouldn’t be doing and it’s something minor, they fix it,” Lough said. “And the IRS lets them fix it.”

The IRS has systems in place to prevent targeting, said Hackney, who previously worked at the IRS Office of Chief Counsel. But there may be enough senior IRS leaders who have left that those systems have eroded.

“Harvard has this guillotine hanging over their head,” Hackney said. “But it’s almost an invisible guillotine, as far as the administrative process is concerned.”