Sec. 5. Integrity of nonprofit institutions of higher education
812 words·~4 min read·
/bill/116/s/2640/is/section-5A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Part B of title I of the Higher Education Act of 1965 ( 20 U.S.C. 1011 et seq.) is amended by adding at the end the following: On determining that an institution of higher education meets the requirements under subsection (b), the Secretary shall approve the conversion of an institution of higher education to a nonprofit institution of higher education. To be eligible to convert under this section and participate as a nonprofit institution of higher education under this Act, an institution of higher education shall submit an application to the Secretary that demonstrates each of the following:
That such institution of higher education is a nonprofit institution of higher education. That the assets or services acquired from former owners of such institution of higher education were not acquired for more than the value of such assets or services. That no member of the governing board of such institution of higher education (other than ex officio members serving at the pleasure of the remainder of the governing board and receiving a fixed salary), or any person with the power to appoint or remove members of such governing board or any immediate family member of such a member of the board or such a person with power of appointment, receives any substantial direct or indirect economic benefit (including a lease, promissory note, or other contract) from such institution of higher education.
That such institution of higher education is an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and is exempt from taxation under section 501(a) of such Code. Subject to subsection (c), that none of the core functions of the institution of higher education are under the control of, or subject to significant direction from, an entity that is not a public institution of higher education or other nonprofit entity. For purposes of subsection (b)(5), in the case of an institution, there shall be a conclusive presumption that an entity (other than such institution) exercises significant direction over such institution if one or more of the employees or owners of the entity serves as an officer, member of the board, or person holding similar authority for such institution.
In the case of an institution of higher education approved for conversion under subsection (a), such institution shall be subject to any rules and regulations that apply to proprietary institutions of higher education, as defined in section 102(b), for a minimum of 5 years. The term value , with respect to an acquisition under subsection (b)(2)— includes the value of any ongoing relationship (including any contract, agreement, lease or other arrangement); subject to paragraph (3), may be demonstrated through— a third-party appraisal based on comparable assets acquired by, or goods or services procured by, nonprofit corporations in similar market conditions; an independent financing of the acquisition based upon the assets acquired; or a full and open competition in the acquisition of services or assets, as such term is defined in section 2.101(b) of title 48, Code of Federal Regulations, as in effect on the date of the enactment of this section; and shall be subject to such other demonstration process determined appropriate by the Secretary in a case in which the Secretary does not accept a demonstration process described in paragraph (2).
Before the Secretary may approve the conversion of an institution of higher education under subsection (a), the application of such institution submitted to the Secretary under subsection
(b)shall be published in the Federal Register with an appropriate notice and comment period. The Secretary shall publish each determination under this section, and the reasons for such determination, under the Federal Register. An institution of higher education shall not promote or market itself, in any manner, as a nonprofit institution of higher education unless— in the case of an institution of higher education that seeks to convert to a nonprofit institution of higher education under this section— the Secretary has given final approval of the conversion of the institution to a nonprofit institution of higher education under this section; an accrediting agency or association recognized by the Secretary pursuant to section 496 has approved the nonprofit status of the institution; and the State has given final approval to the institution as a nonprofit institution of higher education, as applicable; and the Commissioner of Internal Revenue has approved the institution as tax exempt for purposes of the Internal Revenue Code of 1986. Not later than 1 year after the date of enactment of the Students Not Profits Act of 2019 , the Secretary shall establish an office within the Department with the expertise necessary to carry out this section. The Secretary shall review the governance of an institution of higher education when such institution has engaged in transactions or arrangements determined by the Secretary as potential indicators of private inurement, in order to promote the highest standards of nonprofit integrity. .
Connectionstraces to 1
Traces to 1 document
U.S. Code
Citation graph
cites case law
Sec. 5
Integrity of nonprofit institutions of higher education
Cites 1Cited by 0 across 0 sources