Trump might have a strong case in his attack on Harvard’s nonprofit status | Opinion
Despite my distaste for Harvard University’s brand of progressive politics and disappointment in its leaders’ lack of respect for First Amendment values and intellectual diversity, I expected to disagree with the Trump administration’s decision to withdraw $2 billion in funding for the school and threat to remove its nonprofit status. When I started reporting for this column, I thought this was a direct threat to the First Amendment. That’s what the folks at The Wall Street Journal editorial page found. But I am not so sure anymore.
After I talked to several lawyers, I found that the case for Trump’s approach is better than I thought. It all goes back to 1983 and an 8-1 Supreme Court decision called Bob Jones University v. the United States. Back then, the Christian university didn’t allow interracial dating, which it considered a violation of biblical values. The IRS decided that since the United States was firmly opposed to racial discrimination as “public policy,” the school should lose its nonprofit status. The Supremes overwhelmingly agreed.
You might have noticed that 40 years later, the Supreme Court ruled that Harvard unconstitutionally discriminated by race in its admissions. Case closed, right? What’s good for the goose is good for the gander and all that. But if there is one rule about understanding Supreme Court decisions, it is “read the dissent.”
Then-Chief Justice William Rhenquist wrote this one quoting some interesting language from the law establishing nonprofit status with roots in the George Washington Administration:
Nonprofits, the law says, are “organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition … no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.”
Therein is a road map to even more ways Harvard might violate its nonprofit 501(c)3 status every day of the year. “You could make a good argument that the case against Harvard is even stronger than the one against Bob Jones,” Harvard-trained lawyer and a conservative think tank president John Hinderaker told me. “What I know is that the IRS operates in an arbitrary manner.”
So let’s take take a closer look at two of those issues.
‘Hedge fund that owns a college’
“No part of the net earnings of which inures to the benefit of any private shareholder or individual.”
Some have jokingly referred to Harvard as “a hedge fund that owns a college.” Harvard’s endowment, the largest in the world, is over $50 billion dollars. While it is public that the firm uses for-profit money managers to do its business, what they are paid does not appear on their public tax return. Customary management fees run north of 1% of assets managed, meaning the for-profit firms with their noses in the Harvard till might rake in a half billion dollars a year or more in non-profit boodle.
To me that’s hard to square with the rule against earnings “inur(ing) to the benefit of any … individual.” But the greater vulnerability, Hinderaker, who is president of the 501(c)3 nonprofit Center for the American Experiment, says is the fact that Harvard’s nonprofit hedge fund has a half dozen employees making more than a million dollars a year. One guy makes $9 million, according to the company’s tax return called a 990.
“I think there’s an element of corruption here that arguably calls for rethinking the regulation of nonprofits,” Hinderaker says, pointing out that the authors of our non-profit laws never imagined people getting rich working for a nonprofit.
No political participation
“Which does not participate in, or intervene in (including the publishing or distributing of statements) any political campaign on behalf of any candidate for public office.”
Is it a coincidence or is it the result of Harvard’s deliberate policies that in the 2024 presidential election 95% of campaign donations from Harvard employees went to Democrats? Is it mere happenstance that Kamala Harris raked in over $1 million in Harvard money while Trump received less than $16,000? Perhaps it is simple chance that similar numbers appear in every election for 25 years running, no matter who is on the ballot?
For decades, this disparity has been combined with the institutional leaders of Harvard and often Harvard itself taking official progressive stances on issue after issue before elected political leaders. Only last year did the university announce it would end the practice of taking sides in politics.
Some of my liberal friends haven’t been shy about trying to use this particular 501(c)3 sword to silence or control conservative institutions such as the Heritage Foundation, conservative churches, Hillsdale College and Liberty University among others.
In its letter to Harvard University, Hinderaker notes, the Trump administration asserts a “public policy” that educational nonprofits should embody intellectual diversity, something the facts about the school’s political involvement show is far from a reality at Harvard. “The Supreme Court’s term ‘public policy’ is super stretchy, it could cover nearly anything,” Hinderaker says..
“The IRS could take that logic and say that anti-American courses shouldn’t be taught,” he told me. “You’re free to do it, but not with a preferred tax status.”
I don’t like that. Neither did Hinderaker and the other lawyers I spoke to. I remain queasy about what Trump’s practice of targeting his political opponents for retaliation means for free speech and association, once bedrock values of conservatives and liberals alike.
But, boy, when you look at the Supreme Court’s Bob Jones decision, Harvard has put itself in an awkward spot. Donald Trump has more of a case than I would like.
This story was originally published April 19, 2025 at 5:08 AM with the headline "Trump might have a strong case in his attack on Harvard’s nonprofit status | Opinion."
