The Trump administration’s recent proposal to revoke the tax-exempt status of private nonprofit colleges over their diversity efforts could bring steep financial consequences for institutions, according to a report out this week from Moody’s Ratings. Analysts with the ratings agency said widespread loss of tax status was “unlikely,” on the assumption that most institutions would probably try to comply with the proposed rules. However, even compliance could raise their legal costs and other expenses. If colleges did lose status, the main revenue hit would be on fundraising as donors would no longer be able to make tax-exempt gifts, the analysts said. Additionally, losing the ability to issue tax-exempt bonds would be “substantially negative” for institutions, they added.
