For-Profit College Conversion Accountability Act
Bill: H.R.2700 | Sponsor: Rep. McBath, Lucy (D-GA)
Policy area: Education

Summary:
For-Profit College Conversion Accountability Act
This bill establishes certain criteria that an institution of higher education (IHE) must meet to be eligible for conversion from a for-profit IHE to a nonprofit IHE.
An IHE seeking conversion must submit an application to the Department of Education (ED). The application must demonstrate, among other requirements, that the IHE is operated by one or more nonprofit corporations or associations. Before approving the conversion, ED must publish the application in the Federal Register for notice and comment. Upon approval, the IHE must be regulated as a for-profit IHE for a five-year transition period.
ED must also establish an office to carry out the requirements of this 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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