The Ninth U.S. Circuit Court of Appeals has ruled that the Department of Education used the wrong standard to deny nonprofit status to Grand Canyon University (GCU). On Nov. 8, a three-judge panel unanimously overturned a 2022 lower-court ruling against GCU, America’s largest Christian university. The case now returns to the Education Department, which initially denied GCU’s nonprofit-status bid in 2019.
After the legal victory, GCU President Brian Mueller said the Education Department lacked the authority to deny the university’s nonprofit status. That power, he told Fox News Digital, belongs to the Internal Revenue Service (IRS).
“There’s an objective set of criteria that [the IRS uses] to do that, and they did it,” said Mueller. “The Education Department has never not honored what the IRS has determined. This is the first time that they’ve ever done it. People try to make something political out of everything.”
Grand Canyon University Has Faced Years of Litigation
When GCU received news of the ruling, spokesman Bob Romantic said, “Today’s decision is a long-awaited correction to the [Education] Department’s unlawful application of a standard that improperly denied GCU of its nonprofit status, and we are hopeful for a quick affirmation of the university as a nonprofit institution.”
He added, “When GCU’s Board of Trustees decided to return the university to its historical status as a nonprofit institution in 2018, it did not envision years of hard-fought litigation against federal agencies.”
Back in 2004, GCU converted to a for-profit institution while facing financial problems. Amid rapid growth and increased regulation, the university decided to again seek nonprofit status six years ago. But the Education Department maintained that GCU’s earnings would benefit its former owner.
In last week’s decision, the Ninth Circuit ruled that the Education Department mistakenly applied restrictive IRS regulations regarding benefits for private individuals or shareholders. Instead, judges said, the department should have used requirements under Title IV of the Higher Education Act.
In October 2023, GCU sued the Education Department, claiming the agency was targeting the school in “arbitrary and capricious” ways. Nonprofit status is important, according to President Mueller, because it gives GCU access to research, grants, and federal funds for Hispanic students.
GCU Is Appealing a Fine From Another Case
Last November, the Education Department fined GCU $37.7 million for allegedly misleading doctoral students about tuition costs. It also accused the university of engaging in “abusive telemarketing.” GCU, which categorically refutes the charges, has appealed the fine.
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