They’re non-profits, like any other - they just happen to be large (and their profitmaking activities, e.g., commercial real estate, are taxed). You can argue, if you like (I’d disagree with you) that universities don’t serve a public purpose and, despite not making profits or having shareholders, shouldn’t be considered non-profits. So long as they are, though, I think you have to treat them like any other non-profit. The Catholic Church is large too, but I don’t believe many people seriously argue that its non-commercial activities should be taxed.