At Inter CPA LLC, we aim to keep nonprofit leaders informed about evolving public policy trends that may impact their organizations. Recent events involving Harvard University and the IRS highlight the importance of understanding how government scrutiny, especially when politically motivated, can potentially affect tax-exempt status.
⚖️ The Harvard Case: A New Precedent?
In April 2025, the IRS reportedly considered revoking Harvard University’s tax-exempt status following the university’s refusal to comply with politically charged demands from the federal government. These included changes to admissions policies, oversight of academic programs, and cooperation with federal law enforcement.
Harvard leadership pushed back, citing academic freedom and the First Amendment. Still, the IRS, under political pressure, suggested that Harvard’s lack of cooperation could be interpreted as violating public policy—a requirement for maintaining exemption under Section 501(c)(3) (Reuters, 2025; Axios, 2025).
🚨 Implications for Nonprofits
While Harvard is a major academic institution, this situation raises important concerns for all 501(c)(3) organizations. If political actors begin to interpret “public policy” more broadly—or use it selectively—there is a real risk of misinterpretation and weaponization of tax laws.
The IRS and courts have historically emphasized that 501(c)(3) organizations must operate in accordance with clearly established public policy. Past rulings, such as:
- Rev. Rul. 71-447 and Rev. Rul. 75-231, which deny tax-exempt status to racially discriminatory schools;
- Bob Jones University v. United States (1983), which reaffirmed that racial discrimination disqualifies an organization from exemption;
- Green v. Connally (1971), which ruled that tax benefits cannot be extended to discriminatory private schools;
…all highlight the government’s role in defining public interest.
Today’s challenge lies in the potential for evolving or politically influenced interpretations to threaten even well-meaning nonprofits.
🛡️ What Can Nonprofits Do?
- Review and document nondiscrimination policies. Ensure your policies are current, accessible, and reflective of your mission.
- Ensure alignment with mission and transparent governance. Demonstrate public benefit through inclusive practices and clear oversight structures.
- Stay informed about IRS rulings and court decisions. Monitor changes in regulations and key legal precedents that may affect your status.
- Consult regularly with professionals on public policy risk. Partner with advisors who understand the legal and financial nuances of nonprofit operations.
- Hold the line for human and civil rights. Tax-exempt status is not just a financial designation—it’s a public trust. Defending core values like equity, justice, and freedom of expression is essential to maintaining legitimacy and impact.
At Inter CPA LLC, we don’t offer public tax advice—but we stand with nonprofit leaders committed to justice, equity, and long-term impact. We believe in holding the line for human and civil rights—and building a future of financial sustainability rooted in trust, transparency, and compliance.
This blog post is intended for educational purposes only and does not constitute legal or tax advice.
References:
- Axios. (2025, April 16). How Trump wants to assert control at Harvard and elite colleges. https://www.axios.com/2025/04/16/harvard-columbia-demands-trump-vision-universities-influence
- Reuters. (2025, April 16). US IRS planning to rescind Harvard’s tax-exempt status amid Trump feud, CNN reports. https://www.reuters.com/world/us/us-irs-planning-rescind-harvards-tax-exempt-status-cnn-reports-2025-04-16
- Supreme Court of the United States. (1983). Bob Jones University v. United States, 461 U.S. 574.
- Green v. Connally, 330 F. Supp. 1150 (D.D.C. 1971), aff’d, 404 U.S. 997 (1971).
- Internal Revenue Service. (1971). Rev. Rul. 71-447, 1971-2 C.B. 230.
- Internal Revenue Service. (1975). Rev. Rul. 75-231, 1975-1 C.B. 158.
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