A federal court of appeals ruled this month that the Department of Education acted unlawfully by applying the incorrect legal standard in determining GCU's non-profit status. The Ninth Circuit remanded the case back to the Department of Education.
"It was a unanimous decision that the Department of Education did not have the authority to take the action they took toward us in terms of denying our non-profit status," GCU President Brian Mueller relays. "That was a very positive and huge step forward."
The ball, he says, is now in the Department of Education's court.
"There is no timeline, unfortunately, and I don't know what other action they could take other than to just grant us our non-profit status," the president adds.
That has already been determined by the IRS and backed up in the state of Arizona, where GCU is located.
GCU was a non-profit institution from 1949 through 2004, when the university was millions of dollars in debt and was about ready to close. But when an investment firm put up money to save it, GCU changed to a for-profit status, brought in the current management team in 2008, and went to the public markets to get an infusion of capital.
The university had an "extremely successful" 10 years of operation under that setup, experiencing "tremendous … explosive growth" from 2008-2018, both on campus and online. Then in 2018, GCU decided to go back as a non-profit institution. That involved what Mueller describes as "a complicated transaction," but one that the IRS approved.
"We've been operating successfully as a non-profit institution now for six years," Mueller notes. "For them to delay any further their recognition of it makes absolutely no sense."
In 2023, the Biden Department of Education, Federal Trade Commission (FTC), and the Department of Veterans Affairs (VA) voiced concerns about the university's tax status. The Education Department has also imposed a $37 million fine on the university, saying it misled students about expenses.
This is a separate issue, and the Ninth Circuit decision does not impact the fine.
Meanwhile, Mueller has denied the allegation, telling AFN that "we are over-and-above truthful with students," which is "part of the reason we have 118,000 students."
GCU is appealing the fine.
