Christian University Prevails Over Dept. Of Education
The U.S. 9th Circuit Court of Appeals has ruled that the U.S. Department of Education wrongly denied Grand Canyon University (GCU) nonprofit status, marking a significant legal victory for the institution. The court’s 3-0 decision instructed the Department of Education to reconsider GCU’s status under the correct standards outlined in the Higher Education Act (HEA). The department had previously relied on IRS regulations that went beyond the requirements of the HEA, which led to an incorrect denial of nonprofit status.
GCU, a large Christian university founded in 1949, has operated as a nonprofit for most of its history. In 2018, its Board of Trustees voted to reinstate the university’s nonprofit status, which was approved by the state of Arizona, the IRS, and other accrediting bodies. However, the U.S. Department of Education refused to recognize this status in 2019, citing concerns over the university’s past ownership structure. The department questioned whether GCU was truly operating as a nonprofit or if profits were being funneled to a former for-profit owner.
The 9th Circuit’s ruling came as a major correction to the Department of Education’s actions, and GCU expressed hope for a swift resolution. The court mandated that the Department use the traditional private inurement test, which is already used by the IRS to assess whether a nonprofit is paying fair market value for goods and services. GCU emphasized that independent valuation studies had confirmed it was meeting this standard. The ruling aligns with a previous decision by an Arizona district court, which also sided with GCU in a case involving the Federal Trade Commission, dismissing claims that the university was violating nonprofit regulations.
The nonprofit designation is crucial for GCU as it grants access to federal funding and research grants, particularly important due to its large Hispanic student population. Without nonprofit status, GCU has been excluded from these vital resources. Despite these challenges, the university has maintained its commitment to keeping tuition rates frozen for 17 years while expanding enrollment, academic offerings, and infrastructure. However, GCU has faced other legal battles, including a significant $37.7 million fine from the Department of Education over alleged misrepresentation of doctoral program costs, which the university is appealing.
The Department of Education’s treatment of GCU has drawn political scrutiny, with Republican lawmakers and GCU leadership criticizing the government’s actions. GCU President Brian Mueller has vocally opposed the fine and the department’s stance, calling it an example of overreach. He has also objected to comments made by Education Secretary Miguel Cardona, who suggested that GCU was preying on first-generation students, calling such remarks legally and factually incorrect.