H.R. 2271 — Change of Ownership and Conversion Improvement Act

This section sets forth 18 congressional findings concerning changes in ownership at institutions of higher education (i.e., mergers, consolidations, and acquisitions), including their benefits for students; anticipated increases due to demographic shifts; the need for thorough but expedited Department of Education reviews to ensure financial and administrative capacity; processing delays of up to five years due to staffing shortages as of May 2021; the desirability of application fees to fund additional staff for pre- and post-transaction reviews and monitoring (particularly for proprietary-to-nonprofit conversions at risk of private inurement); and remittance of a portion of such fees to the Internal Revenue Service to address weaknesses in its review processes.

This section revises the Department of Education's approval process for changes in ownership or control—including proposed changes—for institutions of higher education participating in Title IV student aid programs (i.e., eligibility under HEA §102 or §103(13)) as follows: (1) authorizes institutions to submit a materially complete pretransaction review application at least 90 days prior to a change, requires the Secretary to conduct a comprehensive review, and provides that approval of such application results in automatic approval of the subsequent change-of-ownership application if terms do not differ materially and other requirements are met; (2) adds conversions of proprietary institutions to public or nonprofit status as eligible for provisional program participation certification; (3) requires administrative fees of 0.15% of an institution's Title IV revenue from the most recent fiscal year (non-conversion transactions or pretransaction reviews) or 0.30% (proprietary conversions, with 50% remitted to IRS for tax compliance review), capped at $120,000 per transaction and with no additional fee for a subsequent change-of-ownership application; and (4) mandates Secretary approval or denial of materially complete applications within 90 days (deemed approved if not acted on without good cause), limits good cause extensions to one month at a time and 12 months total, authorizes denial for untimely submissions, and requires publication of approval/denial rationales in the Federal Register.

This section requires the Comptroller General of the Government Accountability Office to submit to the House Committee on Education and Workforce and the Senate Committee on Health, Education, Labor, and Pensions, not later than five years after the date of enactment of this Act, a report on the implementation of amendments made by this Act. The report must include recommendations to improve (1) the application process under §498(i) of the Higher Education Act of 1965, as amended by section 3 of this Act, for institutions of higher education seeking a change in ownership resulting in a change in control; or (2) the monitoring process under that section for institutions that have recently converted from proprietary to public or nonprofit status.