Tax-Exempt Status, Public Policy & Risk: What Bob Jones and Harvard Teach Us About Compliance

In the evolving relationship between higher education and federal oversight, the intersection of tax-exempt status and public policy is again under national scrutiny.

The 1983 Supreme Court decision in Bob Jones University v. United States remains a defining precedent: institutions that hold 501(c)(3) tax-exempt status must not engage in practices that violate “fundamental public policy.” In that case, the Court upheld the IRS’s revocation of Bob Jones University’s exemption due to its racially discriminatory admissions policies, regardless of the school’s religious rationale.

More than four decades later, a new and more complex test of that precedent has emerged. In early 2025, the federal government signaled that it may revoke Harvard University’s tax-exempt status and freeze federal funding, citing the university’s handling of antisemitism on campus and its alleged noncompliance with evolving federal expectations around diversity and student protest oversight.

A Shift in Federal Strategy

While the legal basis of Bob Jones was anchored in a universally accepted public policy, non-discrimination based on race, the government’s stance toward Harvard represents a more contested and politically charged use of enforcement authority.

At issue is not only university conduct but also the boundaries of institutional autonomy, academic freedom, and constitutional protections.

Unlike in Bob Jones, where explicit racial exclusion was at the center of the case, the allegations surrounding Harvard involve broader cultural and governance concerns: antisemitism, political protest, campus speech, and institutional response.

Harvard has publicly defended its actions, arguing that federal intervention in these areas would threaten its First Amendment rights and interfere with its governance as a private institution.

The Legal Implications for Universities

For colleges, universities, and mission-driven nonprofits, this moment demands careful legal review of how institutional practices align with public policy expectations and how those expectations are evolving.

The use of tax exemption as leverage is not new, but its expansion into ideologically and politically sensitive areas could reshape how institutions govern themselves and interact with federal oversight bodies.

From a compliance standpoint, the core questions are increasingly nuanced:

• What constitutes “fundamental public policy” in an era of cultural polarization?
• To what extent can the federal government define or enforce that policy through IRS regulation or funding conditions?
• How can institutions protect both their tax status and their core constitutional rights, especially when the line between governance and policy enforcement is shifting?

Institutions must now prepare not only for traditional IRS scrutiny but also for the political implications of their governance decisions, especially when those decisions intersect with obvious social or civil rights issues.

Compliance Without Compromise: Gregory J. Vincent Law Can Help

At Gregory J. Vincent Law, we help universities and nonprofit organizations navigate the increasingly complex terrain of tax-exempt compliance, federal oversight, and mission protection. We advise leadership teams on:

• 501(c)(3) eligibility and risk exposure
• Policy development aligned with public obligations and constitutional safeguards
• Investigations and audits triggered by donor, political, or federal agency scrutiny
• Board governance and institutional autonomy
• Crisis response strategies related to federal funding and reputational risk

Led by Dr. Gregory Vincent, an attorney with deep experience in civil rights, higher education law, and nonprofit governance, our firm is uniquely positioned to help institutions meet this moment with integrity, foresight, and legal strength.

As debates over tax status and public policy intensify, institutions must act with clarity, consistency, and a defensible commitment to compliance and principle. We’re here to help you lead both.