,i #aaith ,,congress #ast ,session ,h4 ,r4 #bbga ,,in ,,the ,,house ,,of ,,representatives ,march #ba1 #bjbe,mr4 ,owens introduced the following bill2 which was referred to the ,committee on ,education and ,workforce ,a ,,bill ,to amend the ,higher ,education ,act of #aife to modify the application and review process for changes of control1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,change of ,ownership and ,conversion ,improvement ,act4 #b4 ,findings ,congress finds the following3 7#a7 ,institutions of higher education in the ,united ,states frequently merge with1 consolidate1 and acquire other institutions that result in a change in ownership4 7#b7 ,these transactions are generally good for students1 as they promote innovation1 drive competition1 and prevent stagnation4 7#c7 ,changing demographics and evolving higher education enrollment patterns may lead to more mergers and acquisitions in the future4 7#d7 ,proprietary institutions that voluntarily convert to nonprofit status or are acquired by nonprofit and public entities can have a positive impact on students and society4 7#e7 ,the ,department of ,education has an interest in safeguarding ,federal student aid funds and therefore should conduct thorough and comprehensive reviews of all changes in ownership involving institutions of higher education4 7#f7 ,these reviews are necessary to ensure that the acquiring entity has the financial and administrative capacity to manage the target institutions4 7#g7 ,the ,department of ,education should conduct these reviews in a thorough and comprehensive manner but should do so as quickly as possible to promote the execution of these transactions4 7#h7 ,as of ,may #bjba1 the ,department of ,education had very few staff assigned to evaluate pretransaction1 change of control1 and conversion applications on a full-time basis4 7#i7 ,consequently1 these transactions are processed by the ,department of ,education at an extraordinary slow rate of speed1 with some institutions waiting up to #e years before receiving a final determination4 7#aj7 ,one of the primary challenges in processing these applications quickly is the lack of funding to hire enough qualified staff4 7#aa7 ,currently1 general taxpayers are bearing the cost of reviewing these transactions4 7#ab7 ,it is in the interest of institutions and the ,united ,states to charge a fee for applications involving changes in ownership at institutions of higher education that are submitted to the ,department of ,education4 7#ac7 ,in consideration for the fee1 the ,department of ,education will be required to guarantee an expedited review process for all applicants1 absent compelling circumstances where good cause exists for delay4 7#ad7 ,the ,government ,accountability ,office has identified weaknesses in the ,department of ,education's post-transaction monitoring process1 which will likewise require additional staff to be hired to conduct monitoring4 7#ae7 ,institutions that have converted from proprietary status to nonprofit status and have an ongoing financial relationship with the former owners of the institution are at highest risk of entering into financial arrangements that result in improper private inurement4 7#af7 ,these institutions should be closely monitored for a period after these transactions occur and should be required to pay a fee to support the hiring of staff to conduct this monitoring4 7#ag7 ,the ,government ,accountability ,office has likewise found weaknesses in the ,internal ,revenue ,service review process for conversion requests and the post-transaction monitoring process4 7#ah7 ,in order to support a more thorough review of these applications and to conduct monitoring1 the ,department of ,education will remit part of the fee paid by institutions to the ,internal ,revenue ,service for these purposes4 #c4 ,modifying the approval process for changes of control 7a7 ,amendments ,section #dih7;i7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajii;c7i77 is amended-- 7#a7 in the subsection heading1 by inserting and ,proposed ,changes of ,ownership after ,ownership2 7#b7 in paragraph 7#a7-- 7,a7 by striking 7#a7 ,an eligible institution1 and inserting the following3 7#a77;,a7 ,an eligible institution2 7,b7 by striking the requirements of section #ajb 7other than the requirements in subsections 7b77#e7 and 7c77#c77 and inserting the applicable requirements of section #ajb or #ajc7ac72 and 7,c7 by adding at the end the following3 7,b7 7i7 ,prior to a change in ownership resulting in a change of control1 an institution may seek a pretransaction determination about whether the institution will meet the applicable requirements of section #ajb or #ajc7ac7 and this section after such proposed change in ownership by submitting to the ,secretary a materially complete pretransaction review application4 7ii7 ,in reviewing applications submitted under clause 7i71 the ,secretary shall only provide a comprehensive review of each such application1 and may not provide an abbreviated or partial review4 7iii7 ,if an institution submits a materially complete pretransaction review application at least #ij days prior to the transaction and the ,secretary approves the application1 the subsequent change in ownership application shall also be approved and the institution shall be certified as meeting the requirements for such transaction1 provided that the institution-- 7,i7 complies with the applicable terms of this section2 and 7,,ii7 the transaction resulting in a change of control does not differ materially in its terms from the transaction proposed in the pretransaction review application4 2 7#c7 in paragraph 7#b7-- 7,a7 in subparagraph 7,e71 by striking or at the end2 7,b7 in subparagraph 7,f71 by striking the period at the end and inserting 2 or2 and 7,c7 by adding the following at the end3 7,g7 in the case of a proprietary institution of higher education1 a conversion to a public or other nonprofit institution of higher education4 2 and 7#d7 by adding at the end the following3 7#e7 7,a7 ,subject to subparagraph 7,b71 when any institution submits an application for a change in ownership resulting in a change in control under this section or submits a pretransaction review application under paragraph 7#a77;,b7 7other than in the case of a conversion transaction71 the institution shall be required to pay to the ,secretary an administrative fee that shall-- 7i7 be in an amount equal to #j4ae percent of the total institutional revenue derived from this title by such institution for the most fiscal year for which data is available2 and 7ii7 be used exclusively for expenses related to the processing of such application1 and be available to the ,secretary without further appropriation1 exclusively for expenses related to the processing of such approval or application4 7,b7 ,in the case of a proprietary institution submitting an application for conversion1 or a pretransaction review application for conversion1 the institution shall be required to pay to the ,secretary an administrative fee that shall-- 7i7 be in an amount equal to #j4cj percent of the total institutional revenue derived from this title by such institution for the most fiscal year for which data is available2 and 7ii7 be used exclusively for expenses related to the processing of such application1 and of which-- 7,i7 #ej percent shall be available to the ,secretary without further appropriation1 exclusively for expenses related to the processing of such application2 and 7,,ii7 #ej percent shall be remitted by the ,secretary to the ,commissioner of the ,internal ,revenue1 and shall be available1 without further appropriation1 to the ,commissioner of ,internal ,revenue exclusively for purposes of determining whether the institution seeking such conversion or pretransaction review is an institution exempt from tax and is otherwise in compliance with applicable requirements of the ,internal ,revenue ,code of #aihf4 7,c7 ,an institution that pays a fee under subparagraph 7,a7 or 7,b7 for a pretransaction application with respect to a proposed transaction shall not be required to pay another fee under such subparagraph for a change in ownership application with respect to such transaction4 7,d7 ,in no case may any fee remitted under subparagraph 7,a7 or 7,b7 exceed #abj1jjj for any transaction 7or pretransaction7 application1 nor may the ,secretary require an institution that has paid a fee under subparagraph 7,b7 to pay an additional fee under subparagraph 7,a74 7#f7 7,a7 ,the ,secretary shall approve or deny a materially complete application 7including pretransaction reviews and conversion applications7 submitted under this section as soon as practicable and not later than the #ij-;day period beginning on the date of receipt of such an application1 except that in a case in which the ,secretary determines1 on a nondelegable basis1 that good cause exists to not make the determination during such #ij-;day period1 the ,secretary shall notify the institution in writing detailing the reasons for a good cause extension4 7,b7 ,if the ,secretary fails to approve or deny a materially complete application during the period described in subparagraph 7,a7 and does not find good cause for extension1 the materially complete application shall be deemed approved4 7,c7 ,in no case may the ,secretary grant a good cause extension under this section to an institution for more than one month at a time1 or for a total of more than more than #ab months4 7,d7 ,to ensure timely submission of all relevant documentation1 the ,secretary may deny an application if an institution does not make a good faith effort to submit to the ,secretary1 in a timely manner-- 7i7 all relevant documentation2 or 7ii7 a materially complete application4 7,e7 7i7 ,upon approving or denying an application under this paragraph1 the ,secretary shall publish in the ,federal ,register the reasoning for such approval or denial1 including-- 7,i7 a copy of the approval or denial letter sent to the institution2 and 7,,ii7 any analysis regarding how the ,secretary determined under paragraph #g7;,a77iii7 that a director of the institution was an interested or disinterested party to the transaction4 7ii7 ,the ,secretary shall not publish under clause 7i7 any information that is otherwise exempt from disclosure under section #eeb of title #e1 ,united ,states ,code 7relating to the ,freedom of ,information ,act71 including trade secrets and commercial or financial information that is privileged or confidential4 7#g7 7,a7 ,in the case of a proprietary institution that subsequent to the transaction would be owned and operated by an entity 7in this paragraph referred to as the buyer7 seeking to be recognized as a public or other nonprofit institution1 the buyer shall meet the definition of a nonprofit institution under section #ajc7ac7 if-- 7i7 the buyer pays no more than fair market value for any assets of the proprietary institution2 7ii7 the buyer pays no more than fair market value for any service or lease contracts1 including such service and lease contracts provided by the entity selling the proprietary institution2 and 7iii7 to prevent self-dealing in the case where one or more individuals with a substantial ownership or controlling interests in the proprietary institution will also have substantial or controlling interests in the institution seeking to be recognized as a public or other nonprofit institution 7meaning that one or more individuals are on both sides of the transaction71 the change of control transaction1 and any substantial asset acquisition1 service1 or lease agreements with the proprietary institution shall be approved by a disinterested committee of directors of the entity that seeks to be recognized as a public or other nonprofit institution4 7,b7 ,for the purposes of this paragraph1 parties to the transaction are entitled to a rebuttable presumption that the assets1 lease contracts1 and service contracts that are part of the transaction are purchased at fair market value if-- 7i7 the acquiring entity pays no more than fair market value for such assets1 lease contracts1 or service contracts2 and 7ii7 the value of the assets1 lease contracts1 or service contracts are evaluated by at least one independent third-party entity hired by parties on both sides of the transaction4 7#h7 7,a7 ,an institution that has been approved for conversion by the ,secretary shall be subject to a monitoring period for a #e-year period beginning on the day after the date of such approval4 ,in conducting the monitoring of the institution under this paragraph1 the ,secretary-- 7i7 shall only conduct monitoring to ensure that the institution is in compliance with the requirements of section #ajc7ac7 and paragraph 7#g7 of this subsection2 and 7ii7 may require the institution to submit regular reports or conduct audits of such institution relating to such compliance4 7,b7 ,each institution that is subject to the monitoring period under this paragraph shall remit an annual fee to the ,secretary-- 7i7 in an amount equal to #j4ae percent of the total revenue derived from this title by such institution for the most recent fiscal year for which data is available2 and 7ii7 that shall be exclusively for expenses related to monitoring of the institution for the period described in subparagraph 7,a7-- 7,i7 of which #ej percent shall be used by the ,secretary1 without further appropriation1 exclusively for expenses related to monitoring of the institution during such period2 and 7,,ii7 of which #ej percent shall be remitted by the ,secretary to the ,commissioner of ,internal ,revenue1 to be available to such ,commissioner1 without further appropriation1 exclusively for monitoring compliance with the ,internal ,revenue ,code of such institution during such period4 7,c7 ,an institution may not be subject to an annual fee under subparagraph 7,b7 for monitoring related to a conversion that exceeds #fj1jjj4 7,d7 ,if the ,secretary determines that an institution should be subject to the monitoring under this paragraph beyond the #e-year period described in subparagraph 7,a71 the ,secretary shall provide the reasons justifying an extension in writing to the institution 7and in the ,federal ,register7 at least #cj days before the expiration of such period4 7,e7 ,any institution that is subject to monitoring under this paragraph may seek a waiver to be exempt from such monitoring 7including the annual fee under subparagraph 7,b77 on an annual basis for any year during the monitoring period and the ,secretary shall grant such waiver if there is no ongoing contractual or financial relationship between the institution and the former entity or individuals that previously owned the institution4 ,the ,secretary may grant a waiver for more than #a year in the case where the entity that formerly owned the proprietary institution has closed or no longer exists and the ,secretary determines the institution is not at risk of violating the requirements of section #ajc7ac7 or paragraph 7#g7 of this subsection4 7#i7 ,any institution that submits an application for conversion shall not promote or market itself1 in any manner1 as a public or other nonprofit institution of higher education unless-- 7,a7 the ,secretary has provided final approval of the conversion of the institution to a public or other nonprofit institution of higher education under this section2 7,b7 an accrediting agency or association recognized by the ,secretary pursuant to section #dif has approved such public or nonprofit status of the institution2 7,c7 the ,state has given final approval to the institution as a public or nonprofit institution of higher education1 as applicable2 and 7,d7 in the case of an institution seeking nonprofit status1 the ,commissioner of ,internal ,revenue has approved the institution as tax exempt pursuant to the ,internal ,revenue ,code of #aihf4 7#aj7 ,not later than #bgj days after the date of enactment of the ,change of ,ownership and ,conversion ,improvement ,act1 and periodically thereafter1 the ,secretary shall publish 7and update as necessary7 in the ,federal ,register-- 7,a7 descriptions of the documents and materials the ,secretary expects or requires institutions of higher education to submit 7including any standardized forms7 as part of any pretransaction application or change in ownership application under this section1 including a description of what the ,secretary considers to be a materially complete application2 and 7,b7 after at least a #cj-;day notice and comment period1 responses to any public comments received with respect to such descriptions or updates to such descriptions4 7#aa7 ,in a case in which the ,secretary requests a document under this section as part of a pretransaction or change in ownership application that is not described in the ,federal ,register under paragraph 7#aj71 the ,secretary shall-- 7,a7 substantiate1 in writing to the institution1 the reasons why the ,secretary is requesting such documents2 and 7,b7 publish such reasons in the ,federal ,register1 including whether the ,secretary may request other institutions that submit applications under this section to produce similar documentation4 7#ab7 7,a7 ,not later than #ah months after the date of enactment of the ,change of ,ownership and ,conversion ,improvement ,act1 and annually thereafter1 the ,secretary shall submit a report to authorizing committees1 and post such report on a publicly available website regarding implementation of the amendments made to this section by such ,act1 including the following information3 7i7 ,the mean and median length of time taken by the ,secretary to review applications under this section during the preceding #ab-month period4 7ii7 ,the number of applications approved or denied during the preceding #ab-month period4 7iii7 ,for any application not processed during the #ij-;day period beginning on the date of receipt of the application for which the ,secretary found good cause under paragraph 7#f77;,a7 to extend the deadline in which the application shall be processed1 a copy of the letter sent to the institution explaining why the ,secretary believed good cause existed for such extension4 7iv7 ,for any application not processed during such #ij-;day period1 which was deemed to be automatically approved by the requirements of this section under paragraph 7#f77;,b71 the name of each institution involved and an explanation for why the application was not processed in a timely manner4 7v7 ,any legislative suggestions the ,secretary may have to improve the application or monitoring process under this section4 7,b7 ,if the ,secretary fails to submit a report under this paragraph by not later than #ij days after the deadline for such submission under subparagraph 7,a71 the ,secretary may not1 for the #ab-month period following such failure1 spend the fees remitted by institutions under this section or remit such fees to the ,commissioner unless ,congress provides for such use by further appropriation4 7#ac7 ,for the purposes of this subsection1 the term conversion means any transaction under which-- 7,a7 a proprietary institution is reorganized and seeks recognition as a public or other nonprofit institution2 or 7,b7 the control of a proprietary institution is transferred as a result of a sale1 donation1 or other method to an entity that seeks certification under this section as a public or other nonprofit institution4 4 7b7 ,application ,the amendments made by this section shall be apply with respect to applications submitted for change of control or conversion submitted on or after ,january #a1 #bjbf4 #d4 ,government ,accountability ,office ,not later than #e years after the date of enactment of this ,act1 the ,comptroller ,general shall submit to the ,committee on ,education and ,workforce of the ,house of ,representatives and the ,committee on ,health1 ,education1 ,labor1 and ,pensions of the ,senate1 a report on the implementation of the amendments made by this ,act1 including recommendations to improve-- 7#a7 the application process under section #dih7;i7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajii;c7i771 as amended by section #c1 for institutions of higher education seeking a change in ownership resulting in a change in control2 or 7#b7 the monitoring process under such section for institutions of higher education that have recently converted from being recognized as a proprietary institution to a public or other nonprofit institution4