Wait, Can He Actually Do That? Part 15: Trump's Threat to Revoke Harvard's Tax-Exempt Status

On Tuesday, President Donald Trump threatened to revoke Harvard's tax exempt status, posting on Truth Social:

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?’

Put aside the absurd suggestion that Harvard is pushing "sickness" (in scare quotes even in Trump's original for no apparent reason) that is inspired by or in support of terrorism. What ground would Trump or his administration have for this action. In other words, . . . wait, can he actually do that?

Professor Buchanan is the resident tax law expert here at Dorf on Law, but he is off this week. Ordinarily, I would just leave the issue for him to address when he returns next week, but given the pace of our stranger-than-fiction reality, by then we will no doubt have moved on to discussing an even more insane proposal from the Trump administration, like whether the president can, by executive order, demote California, Massachusetts, and New York to the status of territories and use the military to keep their representatives and Senators from accessing the Capitol building.

Accordingly, the task falls to me. Let's dive in.

Most readers are probably at least a little familiar with the U.S. Code section that makes non-profits tax-exempt. Excerpted as relevant here, 26 U.S.C. 501(c)(3) grants that status to:

Corporations . . . organized and operated exclusively for . . . educational purposes, . . . no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

It is not plausible to suggest that any of the money Harvard takes in through donations, tuition, grants, or return on investments goes to any private shareholder. Nor is it likely that Harvard has violated the rule forbidding participation or intervention in electoral politics. Every university at which I've worked (Rutgers, Columbia, and Cornell) has had very clear rules forbidding use of university offices and equipment for such purposes. I can't imagine that Harvard is much different.

Moreover, it is apparent that in his social media post Trump was implying that Harvard has been impermissibly "carrying on propaganda" by "pushing political, ideological, and terrorist inspired" ideas. But it's extremely unlikely that Harvard has done anything that crosses the line as defined by RS regulations and case law.

Based on a quick perusal of the relevant materials, it appears that there is no bar on a tax-exempt educational institution engaging in controversial activities. These can certainly include: hosting political candidates in academic settings; advocating for social or civic changes; addressing controversial topics through forums and lectures; teaching controversial subjects; permitting student activism that advances controversial viewpoints; and including among its faculty people whose scholarship advocates particular controversial viewpoints.

Some of the main cases quote the following language from a longstanding IRS regulation:

An organization may be educational even though it advocates a particular position or viewpoint so long as it presents a sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion. On the other hand, an organization is not educational if its principal function is the mere presentation of unsupported opinion.

Trump and/or his IRS might try to argue that Harvard doesn't meet an obligation to provide balance in a way that facilitates the formation of independent opinion. But that would be an unprecedented interpretation of the regulation and at odds with it in numerous ways. The first example the regulation gives of an educational institution that qualifies as tax exempt is this:

An organization, such as a primary or secondary school, a college, or a professional or trade school, which has a regularly scheduled curriculum, a regular faculty, and a regularly enrolled body of students in attendance at a place where the educational activities are regularly carried on.

It gives that example without qualification, even though at every university from time to time there are people advocating particular viewpoints without giving a full airing to alternative viewpoints.

Zoos are another example the reg provides of educational institutions, full stop. Yet anyone who has been to a zoo in the last three or more decades knows that they push a message of conservation, without offering an alternative view that humans should continue to destroy natural habitat for wild animals. It has never been suggested--and it would be clearly contrary to the statutory framework to suggest--that this one-sidedly pro-conservation perspective renders zoos non-educational. (As a vegan, I'm critical of zoos because they hold animals captive and don't do much actual conservation work, but even I don't think that comes close to rendering them anything other than tax-exempt educational institutions for federal statutory purposes.)

Some readers might be thinking: But what about the Bob Jones case? In Bob Jones University v. United States (1983), the Supreme Court held that the IRS was justified in stripping Bob Jones University of its tax-exempt status because it forbade its students from interracial dating. Chief Justice Burger's opinion for the Court stated that 501(c)(3) incorporated the common law definition of a charity, which excluded organizations with a purpose that is "illegal or contrary to public policy." He explained that "racial discrimination in education violates deeply and widely accepted views of elementary justice."

Perhaps most crucially, Bob Jones University was denied tax-exempt status because of what it did--discriminated based on race--rather than because of positions it or its students or faculty avowed.

Accordingly, I see no sound legal basis for the Trump administration to strip Harvard of its tax-exempt status. But, as I conclude in almost all of the essays in this series, that doesn't mean it won't try to get away with doing so. And indeed, a news report yesterday stated that Trump's acting IRS Director is preparing to attempt the feat.

How would that go? Should the Trump administration actually revoke Harvard's 501(c)(3) status, Harvard would have the right to judicial review in the Tax Court, the Court of Federal Claims, or the Federal District Court for the District of Columbia.

Wherever Harvard litigates, I would expect it to win, at least if it does not draw a super-Trumpy judge or (in the appeals court) panel. Harvard clearly is an educational institution within the meaning of the statute, the regs, and the case law.

In addition, the administration is targeting Harvard for its speech in violation of the First Amendment--a claim strengthened by last year's unanimous decision in NRA v. Vullo. The cases upholding 501(c)(3)'s prohibition against partisan electioneering by tax-exempt organizations all make clear that the grant, denial, or revocation of tax-exempt status cannot be viewpoint-based. (Again, Bob Jones didn't lose its status because of its views, but because of its conduct.)

So, to paraphrase Tom Lehrer: Litigate fiercely, Harvard! 

--Michael C. Dorf

Find all the essays in the Wait, Can He Actually Do That? series here.