On February 10, 2020, the US Department of Education (ED) released an updated federal register notice regarding its proposal to expand existing portions of foreign gift reporting requirements for institutions of higher education.
As a result of this updated notice, all institutions should continue following the current regulations under Section 117 of the Higher Education Act (Section 117) for foreign gift reporting for now, and monitor the newly proposed changes.
Below is insight into the current regulations, proposed changes, and potential future impacts for institutions of higher education.
In late 2019, ED issued a proposal for foreign gift and contract reporting requirements, which was originally effective for the January 31, 2020, reporting period.
However, ED postponed the effective date and eventually withdrew the proposal due to delays from the Office of Management and Budget and concerns raised by the American Council on Education and others.
Under Section 117, colleges and universities are required to file a disclosure report with the US Secretary of Education if an institution either:
- Is owned or controlled by a foreign source
- Receives a gift from, or enters into a contract with, a foreign source where the value is $250,000 or more when considered alone or in combination with all other gifts from, or contracts with, that foreign source within a calendar year
This reporting is due to the Secretary on January 31 or July 31 each year, whichever is earlier.
Original ED Proposal
Initially, ED proposed removing the $250,000 threshold and expanding the reporting requirements, which would’ve included providing ED with true copies of gift agreements and contracts from foreign entities.
Removing the threshold would mean that all entities receiving any foreign gifts or contracts would be required to file the disclosure report with the US Secretary of Education.
This proposal raised several concerns for colleges and universities, including:
- Privacy for donors
- The institution’s ability to obtain true copies of gift agreements and contracts from foreign sources, which may be difficult or impossible to obtain
- Costs to the institution given the increased reporting requirements
- Risks related to the disclosure of intellectual property agreements
- Proprietary information as well as a vague definition of the term contract
Revision and Next Steps
In February 2020, ED released an updated notice concerning foreign gift reporting under Section 117. The notice scaled back on some of the changes ED proposed in late 2019, but not all.
The updated notice is open for public comment through March 11, 2020. At this point in time, institutions should continue following the current regulations under Section 117 for foreign gift reporting.
We’re Here to Help
Although ED’s initial proposed changes were scaled back in the current proposal, it’s important for institutions of higher education to consider the impact of the updated notice and continue preparing for possible future revisions.
If you have questions about the updated notice, Section 117, or how your institution should report its foreign gifts, contact your Moss Adams professional.