Christian University Wins Appeal in Fight for Nonprofit Status

A federal appeals court has ruled that the U.S. Education Department wrongly denied nonprofit status to Grand Canyon University (GCU), one of the nation’s largest Christian institutions of higher learning.
Founded in 1949 as a nonprofit institution, GCU converted to a for-profit model in 2004 while on the brink of bankruptcy. As a for-profit, GCU thrived financially and saw substantial growth in online enrollment. However, in the years of increased regulatory scrutiny of for-profit colleges under the Obama administration, GCU sought to revert to a nonprofit status.
While both the state of Arizona and the IRS approved the change, the Education Department denied GCU’s petition to become a nonprofit, arguing that the university’s earnings would still benefit its former for-profit owner.
That 2019 decision by then-Education Secretary Betsy DeVos also prohibited GCU from marketing itself as a nonprofit.
In the opinion penned by Judge Daniel Collins, the panel determined that instead of relying on the Higher Education Act’s requirements for assessing nonprofit institutions, as it should have, the Education Department used more restrictive IRS regulations that focus on whether the university’s primary activities and revenue streams primarily benefited private interests.
“Because the department failed to apply the correct legal standards, its decisions must be set aside,” Collins wrote.
GCU officials celebrated the ruling, expressing hope that its nonprofit status would soon be recognized officially.
Meanwhile, officials at Grand Canyon Education, the for-profit company that previously owned GCU, said they are optimistic that the upcoming Trump administration would bring a more supportive regulatory environment to the industry.
Mueller specifically pointed to the new gainful employment rules, describing them as “so counterproductive to what we are doing here.”
“I believe that we’re going to have a voice in what’s going to happen in this next administration, in terms of what the future of higher education should be,” he told investors.
“It’s going to be just the opposite in this administration, and we want to be a very active voice in all that, making sure that the creativity that institutions like us bring to the university landscape is something that’s going to be appreciated and encouraged, rather than—in crazy ways—restricted.”