H.R. 3284 — To require audits of institutions with respect to disclosures of foreign gifts, and for other purposes.

This section establishes a requirement for the Secretary of Education to audit no fewer than 30 higher education institutions every two years, beginning not later than 60 days after enactment, to assess compliance with foreign gift and contract disclosure requirements under Section 117 of the Higher Education Act of 1965 (i.e., reports of gifts or contracts valued at $250,000 or more from foreign sources). In selecting institutions, the Secretary must prioritize (1) those in the top 1% of endowments by size; (2) those with a history of substantial gifts or contracts from foreign sources; (3) those previously noncompliant; (4) those publicly reporting contributions from a foreign entity of concern; and (5) those with formal agreements with federal agencies. Each audit must determine compliance for the two prior reporting years and, if applicable, identify underreported or overreported gifts or contracts—including the amount discrepancy, foreign source, country of origin, and receipt or contract dates—and the Secretary must submit a report on results to specified congressional leaders and committees (and any requesting Member) and make it publicly available on the Department of Education website within 30 days of audit completion.

This section establishes two new excise taxes in subchapter H of IRC chapter 42 applicable to certain higher education institutions for taxable years beginning more than 60 days after enactment. (1) Section 4969 imposes a tax equal to 300% of income received from a foreign country of concern (as defined in section 10612(a) of the Research and Development, Competition, and Innovation Act) on applicable institutions—i.e., eligible educational institutions (as defined in IRC §25A(f)(2)) with at least 500 tuition-paying students in the prior taxable year, more than 50% of whom are located in the United States (per IRC §4968(b)(2) rules). (As background, applicable institutions are generally large U.S. colleges and universities subject to the existing IRC §4968 endowment asset tax; related organizations are included per IRC §4968(d) rules.) (2) Section 4970 imposes a tax equal to 110% of unreported foreign funding—i.e., the value of gifts, contracts, or ownership/control changes required to be reported under section 117 of the Higher Education Act of 1965 (HEA) but determined unreported by HEA §117(g) audit—on institutions subject to HEA §117, due 180 days after audit notification and in addition to any section 4969 tax if from a foreign country of concern.