Overview
Title
To amend the Higher Education Act of 1965 to modify the application and review process for changes of control, and for other purposes.
ELI5 AI
The Change of Ownership and Conversion Improvement Act is a law that tries to make it easier and quicker for colleges to change who is in charge or who owns them, but they have to pay some fees to do it. These changes are to help keep everything fair and stop any money mischief when schools switch from being businesses to charities.
Summary AI
The Change of Ownership and Conversion Improvement Act, introduced in the House of Representatives as H. R. 2271, amends the Higher Education Act of 1965 to streamline the application and review process for changes in the control or ownership of higher education institutions. It aims to make this process more efficient by implementing administrative fees for applications, ensuring quicker Department of Education reviews, and addressing staffing issues. The bill also establishes monitoring guidelines for institutions transitioning from proprietary to nonprofit status to prevent financial misconduct and improper private benefit. Additionally, the Department of Education is required to report and maintain transparency on these processes and ensure the public has access to relevant documents.
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AnalysisAI
General Summary of the Bill
House Resolution 2271 seeks to amend the Higher Education Act of 1965 to change how higher education institutions undergo changes in ownership or convert from for-profit to nonprofit status. The proposed legislation introduces a structured application and review process that includes a pre-approval review, administrative fees, and monitoring requirements for converting institutions. Additionally, the bill outlines specific timelines for reviews and ensures transparency in the notification of decisions. The objective is to facilitate smoother transitions for educational institutions undergoing ownership or operational status changes while safeguarding the investment of federal student aid funds.
Significant Issues
This legislation raises several notable concerns:
Financial Burden on Smaller Institutions: The imposition of fees based on an institution’s revenue could create financial challenges, especially for smaller institutions with limited financial means. This could limit their ability to compete or pursue beneficial mergers and acquisitions.
Clarity of Definitions and Procedures: Terms like “good cause” and “materially complete” lack clear definitions, potentially leading to inconsistent enforcement and processing times, which could cause disputes and operational inefficiencies.
Fairness and Accessibility: The expedited review process contingent on fee payment might result in a scenario where only financially able institutions can fast-track their applications, raising concerns about equitable access to these administrative processes.
Long-term Feasibility: The cap on administrative fees might not account for economic changes over time, potentially affecting the long-term sustainability of the funding and processing structure proposed.
Reporting and Accountability Concerns: The lengthy timeline for the Government Accountability Office to report on the implementation of this Act could delay necessary adjustments and improvements to the legislative framework.
Impact on the Public and Specific Stakeholders
Broadly, this bill impacts students, educational institutions, and the federal oversight agencies. Students might benefit if mergers and changes promote innovation and compel educational quality improvements. However, if financial constraints impede smaller institutions, students at those institutions might face reduced options.
For higher education institutions, particularly smaller and proprietary ones, the bill presents potential financial and operational challenges. They need to navigate new fees and regulatory requirements, potentially affecting their planning and decision-making processes.
Federal agencies, notably the Department of Education and the Internal Revenue Service, would shoulder increased responsibilities in monitoring and evaluation. Proper coordination between these entities is key to the efficient implementation of the legislation.
Conclusion
H. R. 2271 aims to streamline the processes for altering the status and ownership of higher education institutions. While its intentions focus on protecting both federal investments in student aid and the institutions themselves, several issues could impact its fair and efficient execution. Key concerns regarding financial burdens, ambiguous language, and lengthy implementation timelines require close scrutiny to ensure that the bill’s objectives can be achieved without disproportionally disadvantaging any stakeholders.
Financial Assessment
The bill, titled the Change of Ownership and Conversion Improvement Act, proposes several financial mechanisms aimed at modifying the ownership change process for higher education institutions in the United States. The financial implications of this bill are multi-faceted and relate directly to its operational and fairness considerations.
Administrative Fees
One of the central financial aspects of the bill is the introduction of administrative fees that institutions must pay when applying for changes in ownership or when preparing for such changes. Specifically, institutions are required to pay an administrative fee equal to 0.15% of their annual revenue derived from certain federal funds, with the fee for conversion applications set at 0.30%. The collected fees are intended to facilitate the processing of applications and ensure adequate staffing at the Department of Education.
However, this fee structure, as outlined in the bill, raises several issues, particularly regarding fairness and accessibility. The proposal to tie fees to institutional revenue may disproportionately impact smaller institutions with limited financial resources. These institutions could face challenges if the fee creates a significant financial burden, potentially discouraging them from pursuing beneficial mergers or acquisitions. This concern aligns with identified issues such as the administration fee imposing unequal burdens on smaller entities, potentially limiting their capacities to engage in these types of transactions.
Fee Caps
The bill sets a cap on the administrative fees, stating that they cannot exceed $120,000 for any transaction-related application and $60,000 for monitoring related to a conversion. While these caps are designed to prevent excessive charges, they may not account for future economic changes or inflation, potentially affecting the bill's long-term feasibility. This is a point of contention because as economic conditions evolve, the set caps might become inadequate, not reflective of the necessary cost coverage for processing applications and monitoring institutions.
Fee Distribution and Use
The bill also details how the fees are to be utilized. For conversion applications, 50% of the fees are remitted to the Internal Revenue Service (IRS) to support their role in verifying nonprofit status and compliance under the Internal Revenue Code. This financial allocation highlights an interaction between the Department of Education and the IRS, but it does not clearly define the coordination process, which could lead to jurisdictional challenges and complexities.
The structure aims to ensure the expedited processing of applications, suggesting that fee-paying institutions may experience faster reviews. This "pay-to-play" scenario could raise concerns of fairness, as it might disadvantage those unable to afford the fees, leading to delays or exclusions from the expedited process.
Monitoring Fees
For institutions undergoing conversion, there is also an annual fee during a five-year monitoring period, set at 0.15% of their annual revenue from the specified federal sources. Half of this fee supports Department of Education expenses related to ongoing monitoring, while the other half is remitted to the IRS. This dual allocation intends to bolster comprehensive oversight but highlights potential issues regarding transparency and accountability, as the management of these fee-based processes lacks clear guidelines for public scrutiny and consistent application, adding to concerns about fairness and regulatory oversight.
Overall, the financial elements embedded within this bill have significant implications for the application and monitoring processes for changes in institutional ownership in higher education. The issues raised highlight the need for a balance between efficient processing and equitable treatment of institutions across different sizes and financial capabilities.
Issues
The proposal to charge a fee for ownership change applications, as outlined in Section 2, could disproportionately impact smaller higher education institutions with limited financial capacity, thereby affecting fairness and accessibility.
The administration fee tied to institutional revenue in Section 3 might impose unequal financial burdens on smaller institutions, potentially limiting their capacity to engage in mergers or acquisitions.
The lack of clarity in terms like 'good cause' and 'materially complete' in Sections 2 and 3 could lead to arbitrary decision-making and inconsistent application processing times, which may induce disputes and operational inefficiencies.
The accelerated review process for fee-paying institutions described in Section 2 might raise concerns about fairness and could establish a 'pay-to-play' scenario, disadvantaging those unable to afford the fees.
The Bill's structure for administrative fee caps of $120,000 for transactions and $60,000 for monitoring in Section 3 might not consider future economic changes or inflation, which could affect its long-term implementation.
The vague terms in Section 3 such as 'extraordinary slow rate of speed' and the significant discretion granted to the Secretary to extend deadlines without clear criteria could undermine regulatory oversight and delay decisions.
The Bill does not outline precise measures for transparency in fee assessments and reviews in Section 3, raising concerns regarding the fairness and consistency of the fee-setting process.
The timeline for the Comptroller General to submit a review report as detailed in Section 4 is extensive and might delay essential improvements or accountability actions necessary for effective implementation.
The interaction between the Department of Education and the Internal Revenue Service for fee distribution is not clearly defined in Section 2, potentially leading to jurisdictional issues or coordination challenges.
The lack of specified consequences for failing to implement the Government Accountability Office's recommendations from Section 4 could undermine the accountability and effectiveness of the oversight process.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section provides the short title for the Act, which is officially named the “Change of Ownership and Conversion Improvement Act.”
2. Findings Read Opens in new tab
Summary AI
Congress finds that many colleges in the U.S. often merge or change ownership to promote innovation and competition, which can benefit students. However, the process is slow due to limited staff and funding, so Congress suggests charging a fee to speed up reviews, monitoring for risks, and ensuring both the Department of Education and the IRS have adequate resources to oversee these changes.
3. Modifying the approval process for changes of control Read Opens in new tab
Summary AI
The bill alters the process for how colleges and universities can change their ownership or convert from for-profit to nonprofit status. It introduces steps like a pre-approval review, sets out fees for processing these applications, and requires institutions to comply with various regulations during and after these changes. It mandates a monitoring period for institutions that convert, outlines reporting requirements, and restricts promotion as nonprofit until all approvals are secured.
Money References
- “(D) In no case may any fee remitted under subparagraph (A) or (B) exceed $120,000 for any transaction (or pretransaction) application, nor may the Secretary require an institution that has paid a fee under subparagraph (B) to pay an additional fee under subparagraph (A).
- “(C) An institution may not be subject to an annual fee under subparagraph (B) for monitoring related to a conversion that exceeds $60,000.
4. Government Accountability Office Read Opens in new tab
Summary AI
The Government Accountability Office is tasked with submitting a report within five years after this law is enacted. This report will go to key congressional committees and will provide suggestions for improving how colleges apply for changes in ownership and how newly nonprofit colleges are monitored after they convert from for-profit status.