Harvard University fired back at President Donald Trump on Friday, telling ABC News that he has no “legal basis” to rescind their status as a tax-exempt 501(c)(3) non-profit entity.
The school's response came hours after Trump's social media post Friday morning to say his administration would take away Harvard’s tax-exempt status. He has previously suggested Harvard should lose it for acting as a “political entity.”
Removing tax-exempt status would significantly increase Harvard’s tax burden. Bloomberg News estimates that Harvard saves nearly $500 million a year by being tax-exempt.
"Such an unprecedented action would endanger our ability to carry out our educational mission," the Harvard spokesperson told ABC News. "It would result in diminished financial aid for students, abandonment of critical medical research programs, and lost opportunities for innovation. The unlawful use of this instrument more broadly would have grave consequences for the future of higher education in America."
There is precedent, however.
The Supreme Court in 1983 upheld lower court decisions that denied tax-exempt status to Bob Jones University for banning interracial dating and marriage on campus, and Goldsboro (North Carolina) Christian Schools for racially discriminatory admissions policies, Fortune reported.
“I think to dismiss it out of hand as over-the-top bluster and that the administration has no power to unilaterally pursue it, I think that’s naive,” Edward McCaffery, who teaches tax policy at the University of Southern California Gould School of Law, told Fortune. “This could happen.”
House Ways and Means Committee Chairman Jason Smith, R-Mo., first raised Harvard's — and other universities' — tax-exempt status two weeks after Hamas terrorists massacred more than 1,200 Israelis beginning on Oct. 7, 2023. He assailed the 34 Harvard student organizations who blamed Israel for the massacre and for the university taking three days to condemn Hamas.
“Some organizations that have celebrated the unspeakable acts of terror that claimed the lives of 30 Americans and hundreds of Israeli men, women, and children currently enjoy tax-exempt status in the United States, and their statements call into question the academic or charitable missions they claim to pursue," Smith said in a statement. "University administrators, for example, have weaponized their institutions to attack speech and free inquiry as ‘violence,’ yet fail to condemn actual violence that threatens our way of life all while their institutions enjoy lucrative federal tax-exempt status."
The Trump administration has already frozen $2.2 billion in federal grants $60 million in contracts over Harvard’s refusal to adhere to new government policies on admissions, masking, hiring, and activism, specifically its handling of pro-Palestinian protests.
Harvard earlier this week vowed to review its policies in the aftermath of two internal reports on antisemitic incidents on campus the past 2 1/2 years. Harvard, however, did not address the Trump administration’s call to end all preferences “based on race, color, national origin, or proxies thereof” and implement “merit-based” policies by August.