By Staff Reporter |
The federal government unlawfully denied Grand Canyon University (GCU) its nonprofit status, per a new federal court ruling.
Last week, the Ninth Circuit Court of Appeals ruled in Grand Canyon University v. Miguel Cardona that the U.S. Department of Education (ED) was wrong to refuse the Christian university their nonprofit status.
Circuit Judge Daniel Collins reversed the summary judgment by District Court Judge Susan Bolton favoring ED. Collins remanded GCU’s nonprofit status back to ED for review.
ED had determined that GCU’s organizing documents satisfied the IRS organizational test’s requirements; however, ED denied GCU when it came to the operational test. ED determined that GCU’s primary activities and its stream of revenue both didn’t benefit the university. Collins disagreed.
Collins ruled that ED had invoked the wrong legal standards, going beyond the Higher Education Act (HEA) requirements to impose exceeding IRS regulations. Rather, Collins ruled that HEA standards only require ED to determine whether GCU was owned and operated by a nonprofit corporation and whether GCU satisfied the no-inurement requirement.
“The Department invoked the wrong legal standards by relying on IRS regulations that impose requirements that go well beyond the HEA’s requirements and instead implement a portion of § 501(c)(3) that has no counterpart in the definition of the term ‘nonprofit’ set forth in HEA § 103(13),” ruled Collins.
The inurement requirement allows nonprofits to buy from for-profit companies at fair market value.
GCU has been battling with ED over its nonprofit status since 2019, when ED denied the IRS status granted to GCU. GCU had historically been a nonprofit school, save a stint in the early 2000s when the university went for-profit to avoid bankruptcy.
After GCU sued ED in 2021 over the denial, ED launched a coordinated investigation with the Federal Trade Commission and Department of Veterans Affairs for unfair or deceptive practices.
Last year, ED levied a $38 million fine against GCU.
GCU maintained that ED targeted them over their ideological differences, since they are a Christian university.
Bob Romantic, GCU executive director of the office of communications and public relations, said in a press release that the nonprofit status would allow GCU to thrive more than it has been able to under a for-profit status.
“While the university remains exceedingly proud of what it achieved during its short stint as a for-profit institution, building up GCU from the brink of bankruptcy into the largest Christian university in the country, nonprofit status best allows the university to accomplish its goals around research, grant writing, development, being full members of the NCAA, etc.,” said Romantic. “Today’s decision is a long-awaited correction to the Department’s unlawful application of a standard that improperly denied GCU of its nonprofit status, and we are hopeful for a quick affirmation of the university as a nonprofit institution.”
President-elect Donald Trump pledged to dismantle ED “very early” in his administration in a campaign video last year, citing America’s high spending and poor student outcomes compared to other nations.
“[We’re] sending all education and education work and needs back to the states. We want them to run the education of our children, because they’ll do a much better job of it. You can’t do worse,” said Trump. “We’re going to end education coming out of Washington, D.C., we’re going to close it up, all those buildings all over the place, and yeah people that, in many cases, hate our children. We’re going to send it all back to the states.”
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