Harvard Student Agencies last week appealed an Internal Revenue Service recommendation that calls for an end to the agency's tax-exempt status retroactive to 1970.

IRS agent F.J. Keegan made the recommendation in a report issued last summer, citing a 1969 IRS ruling "that an organization that conducts manufacturing and selling activities primarily to employ students to enable them to continue their education does not qualify for an exemption."

HSA received its tax-exempt status in 1959, because it qualified as "a charitable and educational" organization under the 1954 tax code.

An HSA executive who asked to remain unnamed said yesterday that if the agent's recommendation is upheld it could mean severe financial problems for the agency.

He said the agency, which is presently operating at a loss, would have difficulty paying the last five year's income taxes.

However, Harold Rosenwald '27, the attorney for HSA, said yesterday that past profits were so small that the taxes due on them would be negligible. The primary concern of management, he said, is that under the new ruling gifts to the HSA would no longer gain the donor a tax deduction.

HSA solicits such donations, and is partially dependent on them, Rosenwald said.

The ruling would also force all donors to HSA who took a tax deduction on their gift in the last five years to recalculate their tax returns, he said.

The outcome of the ruling will in no way affect the non-profit status of the HSA, a spokesman in the Massachusetts Secretary of State said yesterday.

The non-profit status is granted by the state and exempts the HSA from paying property taxes to the City of Cambridge.

Rosenwald said, "The IRS suggests no adequate reasons" why the exemption should be revoked and he promised, "the appeal will be pursued as far as necessary and possible."

IRS spokesmen refused to comment on the dispute