The Department of Education has issued a concerning and significantly expanded proposal for foreign gift reporting requirements.
Under Section 117 of the Higher Education Act, colleges and universities are currently required to report gifts from foreign sources or contracts with foreign entities if they are above a threshold of $250,000 and arise from the same foreign source over the course of a year. The new proposal appears to eliminate this threshold and greatly expands reporting requirements.
NACUBO and other higher education associations sent ED a letter led by the American Council on Education, which illustrates many concerns with the proposal, including:
- Unclear language that implies schools must now report all foreign gifts and contracts, even if they fall below the threshold.
- Unclear definitions of what constitutes a “contract.”
- The imposition of serious penalties for noncompliance, including jail time, which far exceed the legislative intent of the Higher Education Act.
- A requirement that “true copies” of gift agreements and contracts from foreign sources be provided to ED, which raises privacy concerns for donors and which may be difficult or impossible to obtain for foreign investments.
- Significant risks related to the disclosure of intellectual property agreements and proprietary information as would be required by the new reporting requirements.
- The potential for the new regulations to run afoul of state privacy laws.
- Significant new costs of compliance given the vastly expanded reporting requirements.
This proposal far exceeds both the existing regulatory framework and the documented legislative intent for this provision of the Higher Education Act. In the letter, we acknowledged the concerns that are presumably driving ED’s actions: that foreign gifts or contracts may improperly influence the work or actions of a college or university. However, such expansive reporting requirements will only serve to provide ED with compliance documentation that will be more burdensome to examine, without actually honing in on any potential areas of bad action.
Notably, ED did not issue this proposal through the established rulemaking process. ED instead used a Paperwork Reduction Act notice, which does not require it to engage in any formal negotiated rulemaking or obligate it to read and respond to comments offered by the public. Typically, these types of notices are used only for extensions of existing information collections or agency action, not to impose an expanded regulatory framework.
In the letter, we noted that if ED seeks to expand Section 117 reporting requirements, it should use the prescribed rulemaking process with a full public comment period and negotiated rulemaking.