CNN
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The Internal Revenue Service is planning to withdraw Harvard’s tax-free status, according to two sources familiar with the issue. This is an extraordinary step in retaliation as the Trump administration attempts to put pressure on universities that have violated demands to change employment and other practices.
A final decision on revoking the university’s tax exemption is expected soon, sources said.
The administration has already blocked more than $2 billion in funding from the country’s oldest university fighting the White House policy demands, citing the constitutional rights of private universities to determine their educational practices.
President Donald Trump recently raised the idea of punishing Ivy League universities for failing to comply with what the administration tried to portray as a campaign to combat anti-Semitism.
“Maybe Harvard should be taxed as a political entity if he loses his tax-exempt status and continues to support the “disease” because he is inspired by political, ideological, and terrorists? “Duty-free status is entirely conditional on acting in the public interest! ” posted by Trump The true society on tuesday.
Harvard’s attorneys did not immediately respond to requests for comment.
CNN contacted the Ministry of Finance, the IRS’s department, for comment.
Asked about CNN’s report on the “arena,” Education Secretary Linda McMahon said he was unsure whether Harvard would lose his tax-free status, but he insisted that it was “certainly worth considering.”
“We’ll see what the IRS comes back compared to Harvard,” McMahon told CNN’s Kasie Hunt. “I certainly think you should probably look into that, especially in elitist schools that have these incredibly large donations.”
McMahon added that her “speculation” is that the IRS is also considering tax-exempt status at other universities.
Gary Shapley, who Trump chose as his proxy IRS commissioner this week, has the authority to withdraw tax exemptions under federal law. Typically, an agency comes after it decides that an organization violates rules governing tax exemptions for nonprofits.
Nonprofit organizations that benefit from tax exemptions may lose if they violate many rules, including political activity.
However, the withdrawal will be a rare move by the IRS.
In the 1980s, the institution revoked the tax exemption from Christian universities, which the IRS determined had used racist admissions policies.
“To my knowledge, this is the first time the administration has attempted something like this,” R. William Snyder, professor of accounting and tax at George Mason University’s Costello College of Business, told CNN.
Snyder added: “The overall purpose of higher education is to educate the masses. Is it the basis for ending your tax-free status just because they educated you in a way you don’t like?
Nina Olson, who served from 2001 to 2019 as an advocate for independent national taxpayers within the IRS from 2001 to 2019, said the cancellation process usually starts with a full audit.
The entity said it would first receive notifications from the IRS, notify them of the audit and request documentation for the agency to review it. On the line, nonprofit representatives meet with IRS officials to explain their position. In many cases, the IRS is considering fixing issues, so transactions are generally resolved to avoid cancellation, explains Olson, adjunct professor at Harvard, where he teaches the annual half-day seminar on tax issues. She doesn’t talk about university.
“It’s a lot of interaction, a lot of give and take, a lot of document production, and everything is before the cancellation notice,” Olson said. “It takes a long time. There’s a basic requirement for the IRS to tell people what their concerns are, and then they can explain things. They have the right to challenge the government’s position and the right to hear.”
If the IRS ultimately revokes its tax-free status, federal law grants nonprofits the right to file a lawsuit in US tax courts or other federal courts. They can appeal to the Supreme Court all the time.
These audits are typically processed and approved by carrier IRS staff.
“Revocation is a nuclear option,” said Olson, who now runs a nonpartisan centre for taxpayer rights. “We usually protect the IRS commissioners, the political appointees, from these cases. They work by civil servants and may be reviewed by senior executives.”
It is unclear whether the IRS is considering such moves from other universities.
The Trump administration is threatening numerous universities across the United States with funding cuts if school policy changes were not made, and Harvard’s resistance appears to be the first time an elite university has denounced the White House for these demands.
Trump on Wednesday escalated social Trump’s attacks at school, calling it a “joking” and said he should no longer receive federal funds.
Rene Marsh, Kaanita Iyer and Kara Scannell contributed to this report.
This story has been updated with additional information.
Corrected: This story has been updated to correct the spelling of Gary Shapley’s name.
