H.R. 1048 — Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions Act

This section establishes the short title of the Act as the “Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions Act” or the “DETERRENT Act.”

This section revises section 117 of the Higher Education Act of 1965 (20 U.S.C. 1011f) to require institutions of higher education to file annual foreign gift and contract disclosure reports on July 31 of the year following the calendar year in which they receive covered gifts or enter into covered contracts, rather than filing on January 31 or July 31, whichever is sooner. It lowers the general reporting threshold to $50,000 (from $250,000) for gifts and contracts from foreign sources other than foreign countries of concern or foreign entities of concern, and it adds reporting for gifts or contracts with indeterminate value. It also requires disclosure, without regard to value, of gifts from foreign countries of concern or foreign entities of concern and contracts entered into with such countries or entities after a waiver under section 117A. This section also requires annual reporting for institutions that are substantially controlled by a foreign source, and it treats gifts to, or contracts with, an affiliated entity of an institution as gifts to, or contracts with, the institution itself. As background, section 117 is the federal foreign-gift disclosure law for colleges and universities, intended to identify foreign financial relationships that may affect institutional operations or academic activity. This section expands the contents of required reports by requiring institutions to identify the individual, department, or other entity receiving the gift or carrying out the contract; state any intended purpose and how the institution will use the gift or contract; describe restrictions or conditions on the gift or contract; and report the fair market value and date of receipt or execution. For contracts, it additionally requires the contract’s effective date, termination date if any, and an assurance that the institution will maintain an unredacted copy for at least 5 years after the contract takes effect, until the contract ends, or for any longer period required by State law, and will produce the copy to the Secretary upon request during an investigation under section 117D(a)(1). This section further revises disclosures for foreign governments by requiring the name of the foreign government, the approving department, agency, office, or division, and its physical mailing address, and it expands disclosures for other foreign sources by requiring the legal name of the source, citizenship or incorporation information, physical mailing address, and any affiliation with a foreign terrorist organization under 8 U.S.C. 1189. It also requires complete, unredacted copies of contracts with foreign countries of concern or foreign entities of concern, along with any required translation and waiver documentation.

This section establishes a new Higher Education Act institutional policy on foreign gifts and contracts for certain institutions that receive more than $50 million in Federal research and development funds in any of the previous 5 calendar years or receive funds under title VI. Beginning not later than 90 days after enactment, covered institutions must require covered individuals and covered individuals at affiliated entities to report by July 31 of each year gifts from foreign sources above the minimal value threshold in 5 U.S.C. § 7342(a) or of indeterminate value, and contracts with foreign sources of $5,000 or more, indeterminate-value contracts, and any contracts with a foreign country of concern or foreign entity of concern valued at $0 or more or of indeterminate value. The reports must include specified dates, and for contracts with a foreign country of concern or foreign entity of concern, the full text of the contract and any addenda. The section also requires institutions to maintain a publicly available, searchable, downloadable database of the disclosed information, posted beginning 30 days after receipt of each report and retained for at least 5 years after receipt or contract commencement, contract termination, or any longer period required by State law. The database must be searchable by gift date, contract dates, attributable country, institutional division or affiliated entity, and foreign source name. The section further requires an effective plan to identify and manage potential espionage-related information gathering through gifts and contracts, and it requires institutions to keep records of the name of each disclosing individual and each report for investigations under section 117D(a)(1). It also provides that, except for specified protections, disclosures under the section are not subject to Federal privacy law and may not publicly disclose the name or address of a foreign source that is a natural person or the personally identifiable information of the covered individual making the disclosure.

This section establishes a new Higher Education Act of 1965 reporting requirement for specified institutions to file an annual investment disclosure report with the Secretary of Education by July 31 after any calendar year in which the institution purchases, sells, or holds one or more investments of concern. As background, the provision applies to nonpublic institutions with more than $6 billion in assets not used directly for exempt purposes and more than $250 million in investments of concern at the close of a calendar year. The report must identify: (1) the investments of concern purchased, sold, or held during the year; (2) the aggregate fair market value of investments of concern held at year-end; (3) the combined value of investments of concern sold during the year; and (4) the combined capital gains from those sales. The section treats specified interests in regulated investment companies, exchange traded funds, and other pooled investments that hold investments of concern as investments of concern unless the Secretary certifies that the pooled investment does not hold such an investment. It also directs the Secretary, after consultation with the Secretary of the Treasury and the Securities and Exchange Commission, to establish procedures for reporting pooled investments and for certifying that they do not hold investments of concern. The section further provides that assets held by related organizations, as defined in section 4968(d)(2) of the Internal Revenue Code of 1986, are treated as held by the specified institution, subject to limits that prevent counting the same assets for more than one specified institution and exclude assets not intended or available for the institution’s use or benefit unless the related organization is controlled by the institution or is a section 509(a)(3) supporting organization. It defines the fair market value of debt as the outstanding principal amount and authorizes the Secretary to issue regulations or other guidance to implement the section. The section also requires the Secretary, beginning not later than May 31 of the calendar year following enactment of the DETERRENT Act, to establish and maintain a searchable Department website database that makes all reports publicly available in electronic and downloadable format, allows reports to be individually identified and compared, and is searchable and sortable. The Secretary must add each disclosure report to the database within 30 days after receipt.

This section establishes a new enforcement regime for the Higher Education Act of 1965 by directing the Secretary of Education, acting through the Department’s General Counsel, to investigate possible violations of sections 117, 117A, 117B, 117C, and the new single-point-of-contact requirements in section 117D(c), and to request that the Attorney General bring a civil action to compel compliance when an institution knowingly or willfully fails to comply. It requires institutions compelled to comply through such an action to pay the full costs of investigation and enforcement to the Treasury and subjects them to fines, including for section 117 reporting violations, of at least $50,000 or the value of the gift or contract for first-time violations and at least $100,000 or twice the value for subsequent violations, with percentage-based penalties of 1 percent to 10 percent or 5 percent to 10 percent of the institution’s most recent year of Federal funds for gifts or contracts of no or indeterminable value, and 10 percent or 20 percent of Federal funds for certain other reporting failures. It also imposes fines for violations of sections 117A and 117B, including penalties of 5 percent to 10 percent of Federal funds for first-time violations and 20 percent for subsequent violations.