More on Grand Canyon’s Nonprofit Tax Exempt For Profit Status
We have previously reported on Grand Canyon University’s ongoing struggle to nonprofit status. Not from Arizona or the Internal Revenue Service, those two have already recognized nonprofit and tax exempt status, respectively. GCU is still trying get nonprofit status from the Department of Education so that it’s students can easier access federal financial aid. So technically, GCU is neither fish nor fowl. Its a nonprofit tax exempt for profit entity. DOE is worried about something the IRS apparently did not see or think twice about: a management agreement that looks a whole lot like what we call an ancillary joint venture in hospital tax exemption law. The management company is owned and operated by GCU insiders and that is causing private benefit, private inurement, and excess benefit concerns at DOE. No word whether the Service is looking into the matter, but yeah that is a problem. I told them earlier that the insiders should not be in control of or profit from the university’s auxiliary services but well, I guess they aren’t listening to me.
Apparently, the case is not moving and so GCU issued a long public statement. I guess its seeking public support against the DOE:
Government officials associated with the U.S. Department of Education (ED), Federal Trade Commission (FTC) and under the authority of the Department of Veterans Affairs (VA) are coordinating efforts to unjustly target GCU in what appears to be retaliation for the university filing an ongoing lawsuit against ED regarding its nonprofit status. While such accusations may sound extraordinary, the facts in this document make clear that this is occurring at an alarming level for government agencies to be taking against the largest Christian university in the country.
BACKGROUND ON GCU, NONPROFIT STATUS
GCU was a nonprofit institution from its inception in 1949 until 2004, when it partnered with private investors in order to avoid closing and gain access to capital to grow the university. The university returned to its historic 501(c)(3) tax-exempt Arizona nonprofit status in 2018, which has been recognized by the IRS, Higher Learning Commission, State of Arizona, Arizona Private Postsecondary Board and NCAA Athletics. ED, however, has refused to acknowledge GCU’s nonprofit status for purposes of federal student financial aid. After trying to work cooperatively with ED both before and after the nonprofit transaction to find a solution, GCU was forced to file a lawsuit in February 2021 when it became apparent ED was unwilling to work with us in good faith and there was no path forward. That litigation remains active and ongoing today.
By intentionally mis-classifying GCU as a for-profit institution for purposes of federal student aid, ED is now able to target the university as part of a coordinated effort – outlined in this October 2021 statement from the FTC – to “pursue the full range of sanctions” against for-profit institutions that they frequently decry as bad actors due to the disproportionate number of Americans who attended those schools and then defaulted on federal student loans. GCU does not fit this profile because 1) it is legally a nonprofit entity, and 2) its high-quality students consistently have lower loan default rates than the national average at nonprofit universities. Yet, we believe GCU is still being targeted by these agencies in an unprecedented manner for a regionally accredited 501(c)(3) designated nonprofit university. The allegations, spelled out below, refer to practices that are common in higher education, yet we know of no other traditional university that has received this level of scrutiny. Further, GCU provides higher levels of transparency than is legally required and is considered a leader in higher education transparency, making it nonsensical that they would seek to impose penalties against a university that is going above and beyond what is required.
COORDINATED ACTIONS TAKEN VS. GCU AND ITS EDUCATION PARTNER
Since GCU filed its lawsuit, these agencies have swamped the university and its education partner with broad requests for voluminous amounts of information and records about our operations – the scope of which made it clear these requests were part of a broad fishing expedition to find issue with the university. Nevertheless, with nothing to hide, GCU and its education partner invested thousands of staff hours and millions in legal costs to work collaboratively and comply with the requests. After these comprehensive reviews, the only “findings” these agencies have shared with us are seemingly minor in nature yet they attach labels such as “substantial misrepresentations” or “deceptive and misleading” in an effort to taint the university as a bad actor when all available evidence is to the contrary.
darryll k. jones