The battle between President Trump and Harvard University moved to a new front, with the IRS now considering Yes revoke The exempt taxes of the Ivy League School.
A final decision has not yet taken the leg by the IRS, reports Aaron Navarro of CBS News. But the effort occurs after Trump suggested on Tuesday that Harvard could lose his tax exemption. Fiscal agencies move to consider whether CNN previously informed Harvard of his designation as a 501 (c) (3) organization.
The IRS has granted a tax exemption status to almost 2 million organizations, ranging from universities such as Harvard to charges such as churches and foundations. The designation exempts these groups from paying federal taxes on income, while donations to these groups are considered tax deductible by IRS.
Trump’s scrutiny about Harvard’s fiscal state occurs after the University on Monday Rejected its administrations It requires changing many of the policies and leadership of the school, including audition of the student body and teachers for the “diversity of views.” After Harvard announced his decision, the Trump administration this week moved to freeze $ 2.2 billion in subsidies for Harvard.
The Trump administration has also been to cut federal funds in other The best universities As it exerts pressure on the policies of the institutions that govern the expression of the students on the campus and the academic programs.
But stripping an organization of its tax status is an unusual step, especially for an institution, the size and reputation of Harvard, experts said.
“It would be unprecedented historical,” said Brian Galle, a professor of fiscal policy at Georgetown University, to CBS Moneywatch. “Certainly, no important university of investigation has lost its tax exemption.”
This is what you should know about the subject.
Why is Harvard tax exempt?
Organizations that have a purpose considered “charitable, religious, educational, scientific, literary, tests for public security, national or international amateur sports competition and the prevention of children or animals” to qualify for taxes.
The majority of universities and private and public conferences have granted the tax status by the IRS due to their educational mission, which the federal government has recognized for its importance in promoting productivity and civic contributions of US citizens.
Can Mr. Trump order the IRS to eliminate Harvard taxes from Harvard tax?
Not legally, according to Sam Brunson, professor at the Law Faculty of the University of Loyola Chicago and a federal tax expert on income and non -profit organizations.
This is because Congress in 1998 approved a law that prohibits the president from ordering the IRS to audite or investigate taxpayers, he explained. If Trump instructed the IRS to eliminate Harvard’s tax exemption, “that is exactly contrary to the law,” Brunson said.
In an email to CBS Moneywatch, the White House said: “The next IRS actions will be carried out independently of the president, and the investigations on the violations of the institutions of their fiscal state will begin before” to the Trump social media post this week questioning the Harvard tax state.
The IRS did not respond to a request for comments.
Could IRS eliminate Harvard tax exemption?
The IRS has legal authority to strip the organizations of their tax exempt from taxes, and occasionally exercises that power. But that is generally to not meet the tax requirements, such as neglecting the presentation of an annual information declaration for more than three consecutive years.
A famous case involved a university that lost its tax exempt from tax, said Galle and Brunson. In the 1970s, the University of Bob Jones in Greenville, South Carolina, a Christian institution, lost its tax -free state due to a policy that prohibited interracial relations.
That case ended in the Supreme Court, which ruled in 1983 that IRS was correct by depriving Bob Jones of the State because their rules had violated a “fundamental national policy” on racial discrimination in education.
IRS could argue that Harvard violates public policy, either by not taking energetic measures against protesters who join against Israel’s actions in Gaza or by refusing to comply with the impulse of the Trump administration against diversity. But both he and Galle expressed skepticism that such foundations would remain in court, partly because universities have a constitutional right to freedom of expression, while representing problems that huen very different from the prosthes of the pravies of the prafios of the praffments of the practices of the practices of the practices of the practices of the practices.
“There is no agreement throughout society that allowing protests on their campus is inconsistent with fundamental public policy,” Galle said.
He added: “Let’s be clear: there is absolutely no basic for Harvard to lose his exemption. Zero.”
What happens if IRS strips Harvard or its tax extract status?
The IRS would first do an investigation and then inform Harvard about his reason to eliminate his tax -free state, Brunson said. Harvard could present an appeal to IRS. If that appeal failed, the university could take the issue to court.
As the case processed, a court is likely to issue an order or order to stop the IRS decision, which Harvard would like it to work as an institution exempt from taxes until the case was resolved, experts said.
“Harvard is not going to lose this: they have money and resources and alumni so that the best people who represent them,” Brunson said. He predicted that Harvard would win a judicial case and “establish a precedent.”
How could the loss of Harvard tax exemption state affect?
Harvard could receive a financial coup if I lost the tax exempt from taxes. But the scope of any result damage would not be clear since Harvard could use fiscal strategies to merge their taxable income, similar to the way in which large corporations depend on sophisticated techniques to reduce the fiscal responsibility of tea. For example, Harvard could reduce your taxable income by deducting commercial costs, including your salaries of the Faculty.
On the contrary, Harvard donors could feel the impact because they could deduce their contributions to the university from their own taxes. That could make it less appealing that donors make great financial contributions.
“The biggest cost would be the reduction of donations,” Brunson said. “And the other cost is its endowment, which would no longer be exempt from taxes.”
Harvard’s endowment is $ 52.3 billion, which makes it the largest among all American universities.
What does Harvard say about the risk for your tax extract state?
In a statement to CBS News, Harvard reiterated that such a decision would be illegal.
“The Government has long exempted tax universities to support their educational mission,” wrote a spokesman in an email. “Tax exemption means that more of each dollar can be used for students’ scholarships, medical research that comes out with life and that increase life and technological advances that drive economic growth.”
The spokesman added: “There is no legal basic to terminate Harvard’s tax statement.”