[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2700 Introduced in House (IH)]
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117th CONGRESS
1st Session
H. R. 2700
To amend the Higher Education Act of 1965 to describe the process of
converting a proprietary institution of higher education to a nonprofit
institution of higher education.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 20, 2021
Mrs. McBath (for herself, Ms. Jacobs of California, and Ms. Manning)
introduced the following bill; which was referred to the Committee on
Education and Labor
_______________________________________________________________________
A BILL
To amend the Higher Education Act of 1965 to describe the process of
converting a proprietary institution of higher education to a nonprofit
institution of higher education.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``For-Profit College Conversion
Accountability Act''.
SEC. 2. INTEGRITY OF NONPROFIT INSTITUTIONS OF HIGHER EDUCATION.
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:
``SEC. 124. INTEGRITY OF NONPROFIT INSTITUTIONS OF HIGHER EDUCATION.
``(a) Determination.--The Secretary may approve the conversion of
an institution of higher education to a nonprofit institution of higher
education only if the Secretary determines that such institution of
higher education meets the requirements under subsection (b).
``(b) Application.--To be eligible to convert 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:
``(1) That the institution of higher education that submits
such application is controlled, owned, and operated by one or
more nonprofit corporations or associations, no part of the net
earnings of which inures, or may lawfully inure, to the benefit
of any private shareholder or individual.
``(2) That any assets or services acquired by the
institution of higher education that submits such application
from former owners of such institution of higher education were
not acquired for more than the value of such assets or
services.
``(3) That no member of the governing board of the
institution of higher education that submits such application
(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.
``(4) That the institution of higher education that submits
such application 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.
``(5) Subject to subsection (c), that none of the core
functions of the institution of higher education that submits
such application 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.
``(c) Presumption of Significant Direction.--For purposes of
paragraph (5) of subsection (b), in the case of an institution of
higher education that submits an application under such subsection,
there shall be a conclusive presumption that an entity (other than such
institution of higher education) 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.
``(d) Transition Period.--
``(1) In general.--In the case of a proprietary institution
of higher education approved for conversion under subsection
(a), for a period of at least 5 years that begins on the date
such institution is approved for such conversion, the
institution shall be--
``(A) subject to any provision of this Act and any
regulation that apply to proprietary institutions of
higher education; and
``(B) considered a proprietary institution of
higher education for purposes of this Act.
``(2) Definition.--The term `proprietary institution of
higher education' has the meaning given the term in section
102(b).
``(e) Value.--The term `value', with respect to an acquisition
under subsection (b)(2)--
``(1) includes the value of any ongoing relationship
(including any contract, agreement, lease or other
arrangement);
``(2) subject to paragraph (3), may be demonstrated
through--
``(A) a third-party appraisal based on comparable
assets acquired by, or goods or services procured by,
nonprofit corporations in similar market conditions;
``(B) an independent financing of the acquisition
based upon the assets acquired; or
``(C) 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
enactment of the For-Profit College Conversion
Accountability Act; and
``(3) 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).
``(f) Publication.--
``(1) Application.--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.
``(2) Determination.--The Secretary shall publish each
determination under this section, and the reasons for such
determination, under the Federal Register.
``(g) Public Representation and Marketing of Nonprofit Status.--An
institution of higher education shall not promote or market itself, in
any manner, as a nonprofit institution of higher education unless--
``(1) in the case of an institution of higher education
that seeks to convert to a nonprofit institution of higher
education under this section--
``(A) the Secretary has given final approval of the
conversion of the institution to a nonprofit
institution of higher education under this section;
``(B) an accrediting agency or association
recognized by the Secretary pursuant to section 496 has
approved the nonprofit status of the institution; and
``(C) the State has given final approval to the
institution as a nonprofit institution of higher
education, as applicable; and
``(2) the Commissioner of Internal Revenue has approved the
institution as tax exempt for purposes of the Internal Revenue
Code of 1986.
``(h) Office to Monitor Nonprofit Integrity.--Not later than 1 year
after the date of enactment of the For-Profit College Conversion
Accountability Act, the Secretary shall establish an office within the
Department with the expertise necessary to carry out this section.
``SEC. 125. REVIEW OF GOVERNANCE.
``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.''.
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