Harvard University could lose hundreds of millions of dollars annually if the federal government is able to revoke its tax-exempt status.
But University of Pittsburgh law professor Philip Hackney suspects the move, vocalized by President Donald Trump for a second time Friday, could mean big trouble for higher education institutions and nonprofits nationwide — not just Harvard.
“If the government is able to yank Harvard’s (tax-exempt) status,” Hackney said, “I don’t think any exempt organization’s status is worth the paper it’s written on.
“You would have a lot of organizations running in fear if Harvard loses. It would be a bad, bad harbinger of what’s to come.”
The Trump administration sent a letter to Harvard on April 3 outlining a list of demands it claims the university must meet to keep its federal grants and contracts. The letter came in response to pro-Palestinian protests that took place on the Massachusetts campus last spring.
The demands include clarifying campus speech policies to limit the time, place and manner of protests; reviewing and addressing bias in academic departments that “fuel antisemitic harassment;” adopting merit-based admissions and hiring policies; ending diversity, equity and inclusion programs; and banning face masks, which sometimes are used by pro-Palestinian protestors to hide their identities.
Harvard said April 14 it would not comply with the demands. Trump posted on social media the next day suggesting Harvard should lose its tax-exempt status “if it keeps pushing political, ideological, and terrorist inspired/supporting ‘Sickness?’ ”
Harvard announced April 21 that it was suing the Trump administration to halt a freeze on more than $2 billion in grants. The university receives about $9 billion total in federal funding.
Trump doubled down on his threat to strip the university’s tax-exempt status Friday, writing on social media, “We are going to be taking away Harvard’s Tax Exempt Status. It’s what they deserve!”
Financial impact
If Harvard loses its federal tax-exempt status, it will be required to pay taxes on its earnings — including tuition and $53.2 billion in endowments — and miss out on state and local tax benefits, Hackney said.
The university generated $6.5 billion in total operating revenue in 2024, according to its annual financial report.
But the change could also impact the dollars Harvard has been loaned to complete campus renovations and other similar projects, Hackney said. It would force lenders to pay tax on the interest payments they receive from Harvard in return for loaning the money.
And because donations to Harvard would no longer be considered tax deductible, private donors would be hard to come by, said Johnny Rex Buckles, a law professor at University of Houston.
“That would be a major hit for a school like Harvard,” he said.
Harvard received $525 million in charitable donations in 2024, the second highest in the university’s history, the financial report said. More than 30,000 alumni donate to the university each year, according to Harvard’s annual giving website.
Tax earnings on Harvard’s endowment at the current 21% corporate tax rate could total about $800 million annually, according to the Chronicle of Higher Education.
Legal experts weigh in on tax-exempt threat
Nonprofit organizations that serve charitable, religious or educational purposes — designated under section 501(c)(3) of the Internal Revenue Code — are exempt from paying federal income tax. This includes private K-12 schools, colleges and universities, churches and hospitals.
It is unlikely Harvard’s educational purpose could be put into question, Hackney said.
“I have no idea what the government would base this so-called revocation upon,” he said. “Were they to try to do it, I would expect them to open up an audit of Harvard and do a full analysis of the organization.”
It is more likely the Trump administration would use a 1980s Supreme Court decision surrounding public policy to argue for Harvard losing its tax exemption, Buckles said.
Bob Jones University, a private Christian liberal arts school in South Carolina, lost its tax-exempt status in 1983 for refusing admission to prospective students on the grounds of interracial dating or interracial marriage.
The Supreme Court ruled this practice was contrary to public policy.
The Trump administration seems to be arguing that Harvard fostered an antisemitic environment by failing to adequately respond to the pro-Palestinian protests that took place on campus last year, Buckles said.
Pitt students held similar protests last spring at Schenley Plaza in Oakland.
“It’s not enough for there to be private Palestinian protests,” Buckles said. “The question is, is the university doing anything or not doing anything that would cause its overall activities to be deemed in violation of this discrimination-free environment?”
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Loss of tax-exempt status could have sprawling impact
The Bob Jones University decision rarely has been used to revoke a nonprofit’s tax-exempt status, Buckles said. He said he believes it should stay that way.
“The doctrine is very, very imprecise, and if the government were aggressively to use this doctrine, it could really have the effect of cutting down the intellectual diversity of the nonprofit sector,” he said. “It could force the charitable sector to act like a government entity, and that is not what the charitable sector is about.
“The charitable sector is about experimentation, innovation, different approaches — a kind of marketplace of ideas.”
The Trump administration could use the same argument, Buckles said, to attempt to revoke the tax-exempt status of colleges and universities that refuse to cut their diversity efforts — highlighted in an executive order Trump signed April 23.
“I think it’s great that you could have Harvard University exempt alongside a small liberal arts college on the West Coast alongside a religious college in the South,” Buckles said.
“The more vigorously you enforce this public policy doctrine, the more that you try to make the charitable sector conform to an idea of whatever the government says is the public policy, the less kinds of diversity within the charitable sector you will have.”
No official ruling or action has been taken to revoke Harvard’s tax-exempt status.
The Pennsylvania State System of Higher Education declined to comment directly on Harvard’s situation but noted that, unlike privately owned Harvard, the systems’ 14 public schools are all owned by the state.
“Therefore, the local, state and federal tax exemptions that apply to state government also apply to our universities,” the school system said in a prepared statement.
Pitt spokesman Jared Stonesifer said the university had no comment on the Harvard situation.
Carnegie Mellon University is the only Southwestern Pennsylvania university or college of 200 that signed a letter condemning “unprecedented government overreach and political interference by the federal government” in response to the Trump administration freezing billions of dollars in federal higher education funding.
Many of the nation’s higher education institutions, including Pitt, are part of the American Association of Colleges and Universities, which published the letter.
Carnegie Mellon and Duquesne University did not return multiple messages seeking comment.