I 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘For-Profit College 

5 Conversion Accountability Act’’. 


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1 SEC. 2. INTEGRITY OF NONPROFIT INSTITUTIONS OF HIGH2 ER EDUCATION. 

3 Part B of title I of the Higher Education Act of 1965 

4 (20 U.S.C. 1011 et seq.) is amended by adding at the end 

5 the following: 

6 ‘‘SEC. 124. INTEGRITY OF NONPROFIT INSTITUTIONS OF 

7 HIGHER EDUCATION. 

8 ‘‘(a) DETERMINATION.—The Secretary may approve 

9 the conversion of an institution of higher education to a 

10 nonprofit institution of higher education only if the Sec11 retary determines that such institution of higher education 

12 meets the requirements under subsection (b). 

13 ‘‘(b) APPLICATION.—To be eligible to convert and 

14 participate as a nonprofit institution of higher education 

15 under this Act, an institution of higher education shall 

16 submit an application to the Secretary that demonstrates 

17 each of the following: 

18 ‘‘(1) That the institution of higher education 

19 that submits such application is controlled, owned, 

20 and operated by one or more nonprofit corporations 

21 or associations, no part of the net earnings of which 

22 inures, or may lawfully inure, to the benefit of any 

23 private shareholder or individual. 

24 ‘‘(2) That any assets or services acquired by the 

25 institution of higher education that submits such ap26 plication from former owners of such institution of 


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1 higher education were not acquired for more than 

2 the value of such assets or services. 

3 ‘‘(3) That no member of the governing board of 

4 the institution of higher education that submits such 

5 application (other than ex officio members serving at 

6 the pleasure of the remainder of the governing board 

7 and receiving a fixed salary), or any person with the 

8 power to appoint or remove members of such gov9 erning board or any immediate family member of 

10 such a member of the board or such a person with 

11 power of appointment, receives any substantial di12 rect or indirect economic benefit (including a lease, 

13 promissory note, or other contract) from such insti14 tution of higher education. 

15 ‘‘(4) That the institution of higher education 

16 that submits such application is an organization de17 scribed in section 501(c)(3) of the Internal Revenue 

18 Code of 1986 and is exempt from taxation under 

19 section 501(a) of such Code. 

20 ‘‘(5) Subject to subsection (c), that none of the 

21 core functions of the institution of higher education 

22 that submits such application are under the control 

23 of, or subject to significant direction from, an entity 

24 that is not a public institution of higher education 

25 or other nonprofit entity. 


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1 ‘‘(c) PRESUMPTION OF SIGNIFICANT DIRECTION.— 

2 For purposes of paragraph (5) of subsection (b), in the 

3 case of an institution of higher education that submits an 

4 application under such subsection, there shall be a conclu5 sive presumption that an entity (other than such institu6 tion of higher education) exercises significant direction 

7 over such institution if one or more of the employees or 

8 owners of the entity serves as an officer, member of the 

9 board, or person holding similar authority for such institu10 tion. 

11 ‘‘(d) TRANSITION PERIOD.— 

12 ‘‘(1) IN GENERAL.—In the case of a proprietary 

13 institution of higher education approved for conver14 sion under subsection (a), for a period of at least 5 

15 years that begins on the date such institution is ap16 proved for such conversion, the institution shall be— 

17 ‘‘(A) subject to any provision of this Act 

18 and any regulation that apply to proprietary in19 stitutions of higher education; and 

20 ‘‘(B) considered a proprietary institution of 

21 higher education for purposes of this Act. 

22 ‘‘(2) DEFINITION.—The term ‘proprietary insti23 tution of higher education’ has the meaning given 

24 the term in section 102(b). 


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1 ‘‘(e) VALUE.—The term ‘value’, with respect to an 

2 acquisition under subsection (b)(2)— 

3 ‘‘(1) includes the value of any ongoing relation4 ship (including any contract, agreement, lease or 

5 other arrangement); 

6 ‘‘(2) subject to paragraph (3), may be dem7 onstrated through— 

8 ‘‘(A) a third-party appraisal based on com9 parable assets acquired by, or goods or services 

10 procured by, nonprofit corporations in similar 

11 market conditions; 

12 ‘‘(B) an independent financing of the ac13 quisition based upon the assets acquired; or 

14 ‘‘(C) a full and open competition in the ac15 quisition of services or assets, as such term is 

16 defined in section 2.101(b) of title 48, Code of 

17 Federal Regulations, as in effect on the date of 

18 enactment of the For-Profit College Conversion 

19 Accountability Act; and 

20 ‘‘(3) shall be subject to such other demonstra21 tion process determined appropriate by the Secretary 

22 in a case in which the Secretary does not accept a 

23 demonstration process described in paragraph (2). 

24 ‘‘(f) PUBLICATION.— 


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1 ‘‘(1) APPLICATION.—Before the Secretary may 

2 approve the conversion of an institution of higher 

3 education under subsection (a), the application of 

4 such institution submitted to the Secretary under 

5 subsection (b) shall be published in the Federal Reg6 ister with an appropriate notice and comment pe7 riod. 

8 ‘‘(2) DETERMINATION.—The Secretary shall 

9 publish each determination under this section, and 

10 the reasons for such determination, under the Fed11 eral Register. 

12 ‘‘(g) PUBLIC REPRESENTATION AND MARKETING OF

13 NONPROFIT STATUS.—An institution of higher education 

14 shall not promote or market itself, in any manner, as a 

15 nonprofit institution of higher education unless— 

16 ‘‘(1) in the case of an institution of higher edu17 cation that seeks to convert to a nonprofit institu18 tion of higher education under this section— 

19 ‘‘(A) the Secretary has given final approval 

20 of the conversion of the institution to a non21 profit institution of higher education under this 

22 section; 

23 ‘‘(B) an accrediting agency or association 

24 recognized by the Secretary pursuant to section 


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1 496 has approved the nonprofit status of the 

2 institution; and 

3 ‘‘(C) the State has given final approval to 

4 the institution as a nonprofit institution of 

5 higher education, as applicable; and 

6 ‘‘(2) the Commissioner of Internal Revenue has 

7 approved the institution as tax exempt for purposes 

8 of the Internal Revenue Code of 1986. 

9 ‘‘(h) OFFICE TO MONITOR NONPROFIT INTEGRITY.— 

10 Not later than 1 year after the date of enactment of the 

11 For-Profit College Conversion Accountability Act, the Sec12 retary shall establish an office within the Department with 

13 the expertise necessary to carry out this section. 

14 ‘‘SEC. 125. REVIEW OF GOVERNANCE. 

15 ‘‘The Secretary shall review the governance of an in16 stitution of higher education when such institution has en17 gaged in transactions or arrangements determined by the 

18 Secretary as potential indicators of private inurement, in 

19 order to promote the highest standards of nonprofit integ20 rity.’’. 

Æ 


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