IRS Investigation of Universities' Tax-Exempt Status

A little more than three weeks ago, President Donald Trump tweeted that the Treasury Department should investigate the tax-exempt status of universities as a result of their "Radical Left Indoctrination." Then Friday, TIGTA told Rep. Richard Neal that Treasury Secretary Mnuchin intends to follow through on some sort of investigation of the tax-exempt status of universities.

Two weeks ago, Professor Ellen P. Aprill and I wrote an op-ed for The Hill talking about the rules governing exempt educational organizations and Treasury's ability to investigate universities here.

I'm not going to reiterate our entire analysis here, but Treasury and the IRS face three significant problems in investigating universities. The first is that, even if you assume that universities are politically biased--and even if you assume they teach that bias to students--that doesn't mean they can't be exempt. Tax-exempt educational institutions  can endorse particular viewpoints.

Moreover, Treasury and the IRS run into two legal impediments in following through on this investigation. The first is section 7217, which prohibits the President from requesting that the IRS audit a particular taxpayer. The second is the Consolidated Appropriations Act, 2020 which, like the 2018 Act, prohibits the IRS from targeting groups for regulatory scrutiny on the basis of their ideological beliefs.

Samuel D. Brunson