501(c)(3) Is Not a Vibe Check

Being mad online isn’t grounds for revoking tax-exempt status. There’s a process. There are laws. This ain’t vibes-based governance.

[Disclaimer: I work at Harvard, I’m a lawyer, and I’ve founded or co-founded more nonprofits than most people have reusable tote bags. Written in my personal capacity, with caffeine and strong opinions. The views are mine—all mine.]

Earlier this week, Harvard said no to a jaw-dropping list of federal demands including: revising tenure and promotion systems (prioritizing faculty who support the administration’s agenda and reduce influence of faculty "more committed to activism than scholarship”), screening international students for their political views, changing all disciplinary policies for students, defunding certain student groups the administration does not like, enforcing a strict mask ban (with a mandatory minimum penalty of suspension, regardless of context or health-related needs), and eliminating all DEI programs.

In response to Harvard’s “No” the government moved fast—and hard—by suspending (or at least claiming to suspend) more than $2 billion in funding. As if this wasn’t enough, the President took to social media and mused:

“Perhaps Harvard should lose its Tax Exempt Status and be Taxed as a Political Entity if it keeps pushing political, ideological, and terrorist inspired/supporting ‘Sickness’? Remember, Tax Exempt Status is totally contingent on acting in the PUBLIC INTEREST!”

Well that’s another no. But this is an even larger “No.”

[And my answer is taking a cue from Dean Samuel Brunson who noted on Bluesky: 100% no. ... and there is literally no legal argument that Harvard doesn't meet the requirements of 501(c)(3).” ]

So, it’s worth re-iterating clearly: the President cannot just strip a university’s tax-exempt status—or suspend its federal funding—based on ideology. That’s not how tax law works. That’s not how constitutional governance works. That’s not even how basic due process works.

Speaking of due process, federal financial assistance can't be suspended, terminated, or denied at a whim—there’s a formal, legally mandated process in 34 CFR 100.7 et al. First, the recipient must be notified of a specific legal violation (not just a political disagreement). Then, an administrative hearing must be scheduled and conducted by an independent hearing examiner under federal administrative law. Only if that hearing finds an actual violation can any sanction move forward. After that, the relevant congressional committees must be given 30 days’ notice with a full report of the findings. And even then, any action must be narrowly tailored to the specific program and recipient involved. Here, there has been no hearing, no evidence presented, and no finding of noncompliance—just an illegal freeze on funding with no lawful process. Phew.

And now, back to the supposed tax-exempt “issue.” Let’s start with the basics. Tax exemption for educational institutions isn’t some recent bureaucratic quirk - it’s an age-old concept from the origins of the common law landing on American soil. That’s right - tax-exempt universities are older than America! The Statute of Charitable Uses (1601) established the framework for organizations and the types of purposes considered “charitable.” This statute influenced the legal basis for charitable tax exemptions and, later, helped establish American nonprofit law. It specifically includes “the maintenance of schools of learning, free schools, and scholars in universities” as charitable purposes. U.S. tax law has always exempted institutions organized and operated for educational purposes. That includes universities like Harvard. And this exemption is so well established that some states even grant it to for-profit schools.

Also, just because Harvard has been saving their money since 1636 (imagine the compound interest people!) doesn’t mean they are not a tax-exempt non-profit. Some people hear “non-profit” and imagine a shoestring operation scraping by on bake sales. So, when they see multibillion-dollar institutions like the Catholic Church or major hospitals claiming non-profit status, they think something must be amiss. But “nonprofit” doesn’t mean “penniless”—it means that profits aren’t distributed to private shareholders and that the organization serves a public purpose. Whether these wealthy nonprofits should be exempt is a valid policy debate, and scholars have written about it for decades. But under current law? Harvard qualifies.

As for the “public interest” claim: yes, tax-exempt organizations must serve the public interest. But that doesn’t mean the President—or any official—gets to redefine that on the fly. The Internal Revenue Code defines specific categories that Congress has deemed to be in the public interest: education, religion, science, and so on. The Executive Branch doesn't get to pull an exemption just because it dislikes an institution’s politics or culture. If it could, we’d be staring down major constitutional problems—think First Amendment violations galore.

Speaking of public interest, nonprofit law also requires that the organization benefit the broader public, not just a few insiders. By any reasonable standard, Harvard clears that bar. It educates thousands, conducts world-class research, supports students with financial aid, and shares scholarship globally. Whether you love or loathe its campus culture, it’s serving a public—not private—purpose.

Then there’s the confusion between “political” and “ideological” activity. Yes, 501(c)(3) organizations are banned from participating in campaigns for or against political candidates. But they’re allowed to take positions on policy issues. They can host controversial speakers, publish strong opinions, and advocate for change. That’s not only permitted, it’s often core to their missions.

Also important: tax exemption rules don’t limit the speech rights of students, faculty, or staff. If a student holds a protest, that doesn’t jeopardize the university’s exemption. If a professor publishes a politically charged op-ed, that’s called academic freedom—not a tax code violation.

There is one narrow exception: the so-called “public policy” doctrine, established in Bob Jones Univ. v. United States, 461 U.S. 574 (1983). There, the Supreme Court held that a racially discriminatory institution could lose its tax-exempt status. But that doctrine has only ever been applied to race-based discrimination, and even if it were extended, it would require a clear, institution-wide policy of discriminatory behavior. Harvard is nowhere near that.

Finally, even if someone wanted to try pulling Harvard’s tax exemption because of its speech, as noted above, that runs headlong into the First Amendment. Courts have made clear that the government can’t condition tax benefits on ideological conformity. In Big Mama Rag, Inc. v. United States, 631 F.2d 1030 (D.C. Cir. 1980), the D.C. Circuit struck down an IRS rule requiring “full and fair exposition” of issues, finding it too vague and prone to abuse. In that case, the IRS had denied exempt status to a feminist and queer newsletter because it didn’t like its tone. That’s exactly the kind of arbitrary government censorship the First Amendment forbids. And if anything, courts have become even more protective of expressive freedom—especially for universities—since then.

So yes, Harvard’s tax-exempt status is in the headlines. But legally? It’s not going anywhere. And frankly, neither is Harvard. What’s at stake here isn’t just one university’s funding or tax designation, it’s the principle that the law, not political retribution, governs how institutions are treated in a constitutional democracy.

Of course, all of this assumes that the rule of law still holds—and that we remain vigilant in guarding against government overreach. Because once the machinery of the state is turned against disfavored speech, institutions, or ideas, it’s not just Harvard or tax status on the line. It’s the integrity of the legal system itself.