Dive Temporary:
- The U.S. Division of Training utilized the fallacious authorized customary when denying Grand Canyon College’s request to be thought-about a nonprofit, a federal appeals courtroom dominated final week, scoring a significant win for the 123,000-student Christian establishment.
- In 2019, the Training Division mentioned it could proceed treating Grand Canyon College as a for-profit for Title IV federal monetary help functions. The choice kicked off a protracted authorized battle over the college’s standing, with a federal decide siding with the division in 2022.
- However a three-judge panel of the ninth U.S. Circuit Courtroom of Appeals unanimously overturned that call Friday, ruling that the Training Division held the college to a stricter customary than required underneath the Larger Training Act.
Dive Perception:
The ruling marks one other dramatic flip within the struggle over Grand Canyon College’s nonprofit standing. The college hailed the choice in an announcement Friday, with officers saying they’re “hopeful that the Division will act in good religion and render a fast determination recognizing the college’s nonprofit standing.”
With Friday’s determination, the panel overturned the Training Division’s denial and requested the company to evaluate the college’s request once more utilizing the proper authorized customary.
The Training Division didn’t reply to a request for remark Monday afternoon about when it could problem a brand new determination and whether or not it could require Grand Canyon College to observe rules governing for-profit establishments within the meantime.
Grand Canyon College operated as a nonprofit from its founding in 1949 till 2004, when officers bought the establishment to non-public traders to keep away from chapter amid monetary troubles. As a part of the sale, the college transitioned to a for-profit mannequin.
Over a decade later, officers sought to return to nonprofit standing. To take action, the college in 2018 cut up off from its former mother or father firm — Grand Canyon Training, or GCE.
Nevertheless, the 2 didn’t half methods utterly. Grand Canyon College struck a take care of GCE wherein it agreed to pay the corporate 60% of its adjusted gross income in return for a big selection of providers, together with advertising and marketing and scholar assist.
On the time, each the IRS and the state of Arizona had granted the college nonprofit standing, designations that Grand Canyon College continues to carry at the moment.
This cut up between the IRS and Arizona on the one hand, and the Training Division on the opposite, has meant Grand Canyon College has needed to adjust to sure rules governing for-profit schools. A kind of is the 90/10 rule, which mandates that not more than 90% of a for-profit’s income can come from federal monetary help sources.
In 2019, the Training Division acknowledged that Grand Canyon College had met the regulatory necessities to be thought-about a nonprofit by Arizona and had been granted tax-exempt standing by the IRS. Nevertheless it denied the establishment’s request to be handled as a nonprofit for Title IV functions.
In a prolonged rationalization of its determination, the Training Division argued that the first objective of the 2018 transaction was to “drive shareholder worth” for GCE. The division additionally mentioned the college was GCE’s “captive shopper — probably in perpetuity.”
Grand Canyon College requested the Training Division to rethink its determination, however the company reaffirmed the denial in 2021. Grand Canyon College launched its lawsuit towards the Training Division the identical 12 months.
“We hope the choice by the Ninth Circuit places all of this federal authorities overreach behind us and we will get again to working a college,” Brian Mueller — who serves as each the college’s chief and the president and CEO of GCE — mentioned in an emailed assertion Monday.
In a latest earnings name, Mueller mentioned he anticipated friendlier therapy from the federal authorities with former President Donald Trump having simply been elected to a second time period.
“I consider that we’re going to have a voice in what’s going to occur on this subsequent administration when it comes to what the way forward for increased training must be,” Mueller mentioned on a Nov. 6 name with analysts.
The battle over the establishment’s nonprofit standing hasn’t been the one authorized dispute between Grand Canyon College and the Training Division. The company fined the college $37.7 million final 12 months, accusing the establishment of deceptive college students about doctoral program prices. Grand Canyon College has appealed the high-quality.
A listening to over the matter is scheduled for early 2025, Mueller mentioned in an emailed assertion.
Each GCE and Grand Canyon College additionally confronted related allegations from the Federal Commerce Fee by means of a lawsuit filed final 12 months. Though a federal decide just lately dismissed among the lawsuit’s claims, his ruling allowed the FTC to file an amended criticism.
“GCU is hopeful the courtroom will once more dismiss the FTC’s claims,” the college mentioned in an announcement Friday.
