Victor Thuronyi (IMF), Harvard, Yale, and Others May Have Another Litigation Opportunity, 187 Tax Notes Fed. 1241 (May 19, 2025):

In this article, Thuronyi examines the constitutionality of a proposed exception to the excise tax on university endowments and the difficulties in determining whether an institution is truly “religious.” …

Consider … the exception to the excise tax on university endowments contained in the chair’s mark for the House Ways and Means Committee:

A qualified religious institution is an institution (i) established after July 4, 1776; (ii) that was established by, or in association with, and has continuously maintained an affiliation with an organization described in section 170(b)(1)(A)(i) (churches and conventions or associations of churches); and (iii) which maintains a published institutional mission that is approved by the governing body of the institution and that includes, refers to, or is predicated upon religious tenets, beliefs, or teachings.

The Internal Revenue Code contains a number of special rules relating to churches. Arguably, some of these rules violate the establishment clause, although a counterargument is that some of them also avoid entanglement with religion (such as rules limiting audits of churches). The above proposed rule is not focused on churches, however. It draws a distinction between “religious” and “nonreligious” institutions of higher learning. In practice, there is little operational distinction between the two. While many universities were founded by religions, nowadays the relationship between any given university and its religious origins is hard to parse. The proposed rule draws a distinction that does not exist in the real world. Perhaps there is a continuum in terms of how closely a university is linked to its religious origins, but this would be difficult to sort out in practice. …

Privileging some taxpayers over others because they are more religious seems to be a quintessential violation of the establishment clause. The language of the proposed amendment cries out “establishment.” Under the amendment, it is not sufficient for a university to be religious in nature; it must have “continuously maintained” its religious orientation since its founding. In other words, only “established” religious universities count.

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