University’s tax-exempt status at risk following semester marked by campus antisemitism

House Republicans are eyeing the tax-exempt status of universities as a way to ensure administrators will stop campus antisemitism.

At a House Ways and Means Committee hearing on Thursday titled “Crisis on Campus: Antisemitism, Radical Faculty, and the Failure of University Leadership,” Chairman Jason Smith (R-MO) called into question the tax-exempt status of universities that do not properly respond to campus antisemitism and commit possible Title VI civil rights violations.

“House Republicans will continue to press universities to fulfill their tax-exempt purpose by changing course to regain control of campuses,” Smith said in his opening statement.

Challenging the tax-exempt status of universities would go a long way in forcing schools to react properly when illegal activity such as encampments, which have become violent in some cases, pop up on campus, Columbia University business school professor Shai Davidai testified. Earlier this year, starting at Columbia, university administrators across the country allowed pro-Palestinian protesters to remain encamped on campus, allowing students to be harassed and unable to attend class.

“If only the thought of losing that tax exemption would pass through their minds, you would see no more antisemitism,” Davidai said. “You won’t see any misdoing, anything on campus, because these universities … all they care about is money and PR, and if you start playing with that, things will change.”

Davidai explained that Columbia is tax-exempt at the same time it is the “largest private landlord in New York City,” adding that the school received more than $1 billion in federal funding, making it “one of the largest taxpayer-funded private landlords in the country.”

Jonathan Pidluzny, director of the Higher Education Reform Initiative at America First Policy Institute, testified that financial data submitted to the Department of Education from universities show that total endowments for fiscal 2022 were $887 billion, most of which is held privately. In 2022, endowment investment generated another $143 billion, and the tax rate on endowments is 1.4%.

“American taxpayers are funding these institutions lavishly. Elite universities receive billions in federal grants and contracts every year,” Pidluzny said in written testimony. “Taxpayers subsidize the student loans that pay rapidly rising tuition rates. These schools have also amassed enormous endowments that receive supremely favorable tax treatment.”

Pidluzny also noted that the universities with the largest endowments are typically the ones that have had the most problems with campus antisemitism. Eleven of the 12 wealthiest private universities had encampments or had protesters arrested, the exception being Duke University.

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“I think the premise behind the tax exemption is that these are institutions that are organized and operated exclusively for educational purposes. Universities don’t look today what they looked like 50 years ago,” Pidluzny said.

“They have $4, $5, $6 billion budgets. They manage wealth equivalent to a large hedge fund. They sell a lavish college experience: Luxury dorms, gourmet food, subsidized by taxpayers. They operate multimillion- or billion-dollar research labs. They hire teams of lobbyists,” he added. “Some have hundreds of millions in foreign revenue. They run DEI programs that understand their purpose as being to reengineer American society. That’s a political purpose. That is not an educative function. Elite universities are simply no longer driven by truth-seeking or education as their guiding ethos.”