The clash between the U.S. President and the country’s oldest and most prestigious university is intensifying. Donald Trump has openly threatened to cut off federal funding to Harvard—an amount exceeding $2 billion—and to revoke its tax-exempt status, a benefit enjoyed by all educational and research institutions in the United States.

The key question now is whether it’s even legally possible for Harvard to lose this tax status, and why the President is using this as a pressure tactic.

Who Decides on Tax-Exempt Status?

Under U.S. law, the Internal Revenue Service (IRS) is the only authority empowered to grant or revoke tax-exempt status. Not even the President can order an investigation into an individual or institution. The IRS operates independently, with the Secretary of the Treasury as its political overseer—yet even they cannot issue direct commands.

U.S. tax law, specifically Section 501(c)(3) of the Internal Revenue Code, grants tax exemption to organizations that serve charitable, religious, educational, scientific, literary, public safety testing, amateur sports, or child/animal protection purposes. Institutions like Harvard fall under this statute, gaining significant financial and reputational advantages.

Why Tax-Exempt Status Matters for Harvard

In simple terms, tax exemption equates to huge financial benefits and enhances a university’s credibility. It also makes it more attractive to wealthy donors whose contributions are tax-deductible. Losing that status could cost Harvard billions of dollars.

Universities must apply for tax-exempt status through the IRS—a standard procedure most follow. According to the Association of American Universities, educational institutions have long been recognized by the federal government as crucial to the development of citizens’ productive and civic capacities.

Can the IRS Revoke Harvard’s Status?

Yes. The IRS has the authority to revoke tax-exempt status if an organization no longer meets the eligibility criteria—especially if found engaging in political or commercial activities that violate the terms.

That said, such revocations are extremely rare for educational institutions. Furthermore, organizations have the right to appeal any unfavorable IRS decisions.

The IRS reports receiving numerous complaints each year about the misuse of tax-exempt status—from the public, members of Congress, state and federal agencies, and even internal whistleblowers. However, federal law prohibits the President or any executive official from directly or indirectly requesting the IRS to investigate specific entities.

In summary, while Trump’s threats are politically powerful, legally they carry little weight unless the IRS independently finds grounds for action. Still, the mere suggestion of removing Harvard’s privileges is enough to stir serious public and academic debate.