Accounting
Harvard intensifies funding fight with Trump administration
Harvard University sued several U.S. agencies and top officials for freezing billions of dollars in federal funding, significantly ratcheting up a high-stakes showdown with the Trump administration.
The government unlawfully suspended Harvard’s funding after it refused to comply with “unconstitutional demands” to overhaul governance, discipline and hiring policies, as well as diversity programs, lawyers for the university argued in a
“Over the course of the past week, the federal government has taken several actions following Harvard’s refusal to comply with its illegal demands,” the university’s president Alan Garber said. “We filed a lawsuit to halt the funding freeze because it is unlawful and beyond the government’s authority.”
In a statement on the university’s website, Garber cited the government’s pause in federal funding, threats to block an additional $1.1 billion in grants, a crackdown on foreign students, and the possible revocation of Harvard’s tax-exempt status.
The White House is pushing for sweeping changes at the most elite U.S. universities, and has frozen or is reviewing federal funding to Princeton, Cornell, Northwestern and Columbia universities. At Harvard, the government halted $2.2 billion of multiyear grants on April 14, claiming the school failed to enforce civil rights laws to protect Jewish students.
Harvard’s lawsuit claims that the funding freeze violates its First Amendment guarantee of free speech and the Administrative Procedures Act. It asks a judge to bar the U.S. from freezing the funding and declare the government’s actions unconstitutional.
“The government has not — and cannot — identify any rational connection between antisemitism concerns and the medical, scientific, technological, and other research it has frozen that aims to save American lives, foster American success, preserve American security, and maintain America’s position as a global leader in innovation,” the lawsuit claims.
The White House and the Education Department didn’t immediately respond to a request for comment.
Education Secretary Linda McMahon on Tuesday morning emphasized that the government’s actions were designed to protect students’ civil rights rather than infringe on universities’ free speech. She said she hopes Harvard comes back to the table, signaling there may be a path to deescalating the situation.
“We remain open to talking to Harvard, but they responded by filing a lawsuit,” McMahon said in an interview on CNBC.
Trump escalated his fight with Harvard after the school refused to bow to his administration’s demands. Since threatening its funding, Trump suggested the Internal Revenue Service should tax the university as a “political entity,” a move that would significantly hit the school’s finances and make it harder to raise money from wealthy donors.
Government demands
The showdown began last month when the government threatened about $9 billion in federal funding to Harvard. Days later, the administration demanded that Harvard remake its governance, transform admissions and faculty hiring, stop admitting international students hostile to US values and enforce viewpoint diversity.
The government also called for scrapping any hiring preferences based on race or national origin, adopting a broad ban on masks and adding oversight for “biased programs that fuel antisemitism.”
Harvard rejected those demands on April 14, saying it “will not surrender its independence or relinquish its constitutional rights” and that a private university “cannot allow itself to be taken over” by the U.S. government.
McMahon said on CNBC that the demand letter to Harvard was a “point of negotiation” and that she had hoped the university would “come back to the table.”
As part of its legal team, Harvard has hired two conservative lawyers with connections to the Trump administration — William Burck and Robert Hur. Harvard also tapped a lobbying firm, Ballard Partners, where Trump’s chief of staff used to be a partner. The school also named John Manning, a
“The government has only ratcheted up cuts to funding, investigations and threats that will hurt students from every state in the country and around the world, as well as research that improves the lives of millions of Americans,” the complaint claims.
The school has a $53 billion endowment but that money is restricted in how it can be spent, meaning the university relies on federal funding. Without that support, the school said in its complaint, it will be forced to either reduce or halt ongoing research projects and terminate employment contracts with researchers, staff and administrators, or make other cuts to departments or programs.
Campuses across the U.S. were roiled by protests after Hamas, which the U.S. considers a terrorist organization, murdered 1,200 Israelis and took more than 200 hostages in October 2023. Israel’s retaliation against Hamas in Gaza has killed more than 48,000 Palestinians, according to the Hamas-run health ministry.
Other university leaders, including Princeton’s, have expressed support for Harvard’s stance, but they also face pressure from the White House. The administration has already canceled $400 million in federal money to Columbia University and frozen dozens of research contracts at Princeton, Cornell and Northwestern universities.
“All told, the tradeoff put to Harvard and other universities is clear: allow the government to micromanage your academic institution or jeopardize the institution’s ability to pursue medical breakthroughs, scientific discoveries and innovative solutions,” Harvard argued in its lawsuit.
Presidents of some of the most prestigious universities and small colleges signed a joint letter opposing “undue government intrusion in the lives of those who learn, live, and work on our campuses,” according to a
“As leaders of America’s colleges, universities and scholarly societies, we speak with one voice against the unprecedented government overreach and political interference now endangering American higher education,” according to the letter, signed by leaders of schools including Princeton, Amherst College and the Massachusetts Institute of Technology.
Harvard named several cabinet secretaries as defendants in the lawsuit, including Robert F. Kennedy Jr., whose agency, Health and Human Services, funds the most research, as well as other agencies including the Department of Defense and the National Aeronautics and Space Administration.
The case is President and Fellows of Harvard College v. U.S. Department of Health and Human Services et al, 25-cv-11048, U.S. District Court, District of Massachusetts (Boston).
The House Ways and Means Committee held a hearing Tuesday to mark up the so-called “one, big beautiful bill” extending the expiring provisions of the Tax Cuts and Jobs Act while adding other tax breaks for tip income, overtime pay and Social Security income and eliminating tax credits from the Inflation Reduction Act for renewable energy as well as the Direct File and Free File programs.
“Today, this Committee will move forward on President Trump’s promise of delivering historic tax relief to working families, farmers and small businesses,” said committee chair Jason Smith, R-Missouri, in his opening statement. “The One Big Beautiful Bill is the key to making America great again. This moment has been years in the making. While Democrats were defending IRS audits on the middle class and tax carveouts for the wealthy, Republicans on this Committee got on the road, to hear from real Americans about how the 2017 tax cuts benefited them. This bill wasn’t drafted by special interests or K Street lobbyists. It was drafted by the American people in communities across the country.”
Democrats blasted the bill. “In 2017, Republicans passed a tax law that was supposed to pay for itself, raise wages, and help working families,” said ranking member Richard Neal, D-Massachusetts. “None of that happened. Instead, it exploded the deficit, worsened inequality, and left everyday Americans behind. Now they want to double down on the same failed playbook. One that rigs the system for billionaires and big corporations while everyone else pays the price.”
Among the provisions, the bill would make the expiring rate and bracket changes of the TCJA permanent and increase the inflation adjustment for all brackets excluding the 37% threshold, according to a
Other changes and limitations to itemized deductions would be made permanent, including the limitation on personal casualty losses and wagering losses and termination of miscellaneous itemized deductions, Pease limitation on itemized deductions, and certain moving expenses.
The bill is likely to go through some changes when it goes to the Senate. “Politically, we’ve been talking about the process for the last couple months,” said Mark Baran, managing director at CBIZ’s national tax office. “Congress is finally able to pass a concurrent resolution to unlock the budget reconciliation process.”
“The House and the Senate have completely different instructions on what they’re going to cut and how they’re going to score,” he added. “Some of that’s very controversial, and that needs to be worked out. But now we’re getting into the actual crafting of provisions and legislation.”
According to a
The bill would also allow businesses to include amortization and depreciation when figuring the business interest limitation through Dec. 31, 2029, while making permanent the excess business loss limitation.
In addition, the bill would retroactively terminate the Employee Retention Tax Credit for taxpayers who filed refund claims after Jan. 31, 2024.
In keeping with Trump campaign promises, the bill would eliminate taxes on tips for employees in certain defined industries where tipping has been a traditional form of compensation. There would be a new $4,000 deduction for seniors that phases out starting at $75,000 of income. The bill would also eliminate taxes on overtime pay.
The bill would give individuals an above-the-line deduction for interest on loans used to purchase American-made cars, but that would be capped at $10,000 with income phaseouts starting at $100,000 (single) and $200,000 (married filing jointly).
The bill would also increase taxes on certain private college investment income up to a maximum of 21% on universities with a student-adjusted endowment above $2 million.
It would also roll back some of the renewable energy provisions from the Inflation Reduction, including a phaseout and restrictions on clean energy facilities starting in 2029, while also limiting or eliminating clean housing energy and vehicle credits. The bill would sunset major IRA clean electricity tax credits, including the clean electricity production tax credit (45Y), clean electricity investment tax credit (48E), and nuclear electricity production tax credit (45U) begin phasing out after 2028 and finish phasing out by the end of 2031; repeal hydrogen production credit (45V) for facilities beginning construction after 2025, according to the Tax Foundation. It would also phase out advanced manufacturing production credit (45X) for wind energy components after 2027, for all other eligible components after 2031. Across several IRA clean energy credits, the bill would repeal transferability after the end of 2027 and further limit credits based on involvement of foreign entities of concern. On the other hand, it would expand the clean fuel production credit (45K), and tighten rules on the 126(m) limitation for executive compensation.
The bill would terminate the current Direct File program at the Internal Revenue Service and establish a public-private partnership between the IRS and private sector tax preparation services to offer free tax filing, replacing both the existing Direct File and Free File programs.
The Federal Accounting Standards Advisory Board is asking for input on emerging accounting issues and questions related to reporting entity reorganizations and abolishments as the federal government endures wide-ranging layoffs and reductions in force, including the elimination of entire agencies by the Elon Musk-led Department of Government Efficiency.
“Federal agencies and their functions, from time to time, have been reorganized and abolished,” said FASAB in its
Reorganization refers to a transfer, consolidation, coordination, authorization or abolition of one (or more) agency or agencies or a part of their functions. Abolition is a type of reorganization and refers to the whole or part of an agency that does not have, upon the effective date of the reorganization, any functions.
The Trump administration has recently moved to all but eliminate parts of the federal government such as the U.S. Agency for International Development and the Consumer Financial Protection Bureau, and earlier this month, Republicans on the House Financial Services Committee
FASAB issues federal financial accounting standards and provides timely guidance. Practitioner responses to the request for information will support its efforts to identify, research and respond to emerging accounting and reporting issues related to reorganization and abolishment activities, such as transfers of assets and liabilities among federal reporting entities. The input will be used to help inform any potential staff recommendations and alternatives for FASAB to consider regarding short- and long-term actions and updates to federal accounting standards and guidance in this area.
The questions include:
- Have any recent or ongoing reorganization activities or events affected the scope of functions, assets, liabilities, net position, revenues, and expenses assigned to your reporting entity (or, for auditors, your auditees)? If so, please describe.
- What accounting issues have you (or your auditees) encountered (or do you anticipate) in connection with recent or potential reorganization activities and events?
- Please describe the sources of standards and guidance that you (or your auditees) are applying to recent, ongoing, or pending reorganization activities and events.
- Have you experienced any difficulties or identified gaps in the accounting and disclosure standards for reorganization activities and events? What potential improvements would you recommend, if any?
FASAB is asking for responses by July 15, 2025, but acknowledged that late or follow-up submissions may be necessary given the provisional nature of the request. Responses should be emailed to [email protected] with “RERA RFI response” on the subject line.
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