Tuesday, October 4, 2022

U.S. Dept. of Education Proposed Regulations on For-Profit to Nonprofit Conversions

DownloadOver the summer the U.S. Department of Education issued proposed regulations addressing, among other topics, conversions of for-profit educational institutions to nonprofit status. Here is a summary of that part of the regulations:

Clarifying procedures for institutions undergoing changes in ownership, including those converting from for-profit to nonprofit status. A growing number of institutions now undergo often-complex changes in ownership transactions, leading the U.S. Government Accountability Office to raise warnings that many of these conversions involved continued "insider involvement," presenting risks to students and taxpayers. The Department sought to clarify the requirements and processes institutions must follow in order to expand protections for students and taxpayers. The proposed regulations would clarify the definition of a nonprofit institution to prevent improper financial benefits to a former owner or other affiliate of a college. Additionally, institutions undergoing a change in ownership would be required to notify both the Department and the institution's students at least 90 days prior to the change to ensure advance notice is provided. Institutions undergoing a change in ownership may also be required to provide additional financial protection or to comply with additional conditions to protect against the risk of the transaction.

The Department said it expects to finalize the regulations later this year so they could take effect by July 2023.

Coverage: Higher Ed Dive ("Education Department plan to squash sham nonprofit conversions draws mixed response").

Lloyd Mayer

https://lawprofessors.typepad.com/nonprofit/2022/10/us-dept-of-education-proposed-regulations-on-for-profit-to-nonprofit-conversions.html

Federal – Executive, In the News | Permalink

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