U.S. erred in denying Grand Canyon nonprofit standing

The U.S. Training Division used the incorrect authorized customary in denying Grand Canyon College’s bid for nonprofit standing in 2019, a federal appeals court docket dominated Friday.

The unanimous determination by a three-judge panel of the U.S. Courtroom of Appeals for the Ninth Circuit overturned a decrease court docket’s 2022 ruling that the Training Division acted lawfully in rejecting the Arizona Christian college’s software to be thought of a non-public nonprofit establishment beneath Title IV of the Greater Training Act.

Grand Canyon had transformed to a for-profit establishment in 2004 amid monetary troubles, and it grew considerably and thrived financially as a for-profit with an enormous on-line presence. However within the wake of years of heightened regulation by the Obama administration, it sought to return to its nonprofit roots, and the Inside Income Service and the college’s accreditor signed off on its reversion.

However the Training Division concluded in 2019 that the college’s earnings would profit the for-profit firm that previously owned Grand Canyon. That 2019 determination by the Trump administration, which was usually way more supportive of for-profit larger schooling, additionally prohibited the college from advertising and marketing itself to the general public as a nonprofit.

Grand Canyon sued the Training Division in 2021 and subsequently undertook an aggressive public marketing campaign lambasting the Biden administration for what it stated was an orchestrated marketing campaign in opposition to it.

A decrease court docket decide dominated in November 2022 that the Training Division had “authority to find out whether or not an establishment qualifies as a nonprofit beneath Title IV,” and that Grand Canyon had not proven that the company’s officers acted in an “arbitrary and capricious” method.

However the three judges on the Ninth Circuit panel—two of whom had been appointed by President Trump and one by President Biden—reached a distinct conclusion. They decided that as a substitute of counting on the Greater Training Act’s necessities for assessing nonprofit establishments, because it ought to have, the Training Division used extra restrictive Inside Income Service rules about the advantages that may accrue to personal people or shareholders.

“The division … failed to use [the Higher Education Act’s]
non-public inurement requirement,” the Ninth Circuit panel stated in its determination. “As an alternative, the division utilized the IRS’s ‘operational check,’ beneath which it examined, not whether or not ‘internet earnings’ inured to personal
profit, however whether or not ‘the first actions of the group and its stream of income’ primarily profit non-public events. As a result of the division failed to use the proper authorized requirements, its choices have to be put aside.”

In a press release late Friday, Grand Canyon cheered the appeals court docket’s ruling.

“In the present day’s determination is a long-awaited correction to the division’s illegal software of a normal that improperly denied GCU of its nonprofit standing, and we’re looking forward to a fast affirmation of the college as a nonprofit establishment,” Grand Canyon officers stated in a information launch.

Training Division officers couldn’t be reached for remark Friday.