The U.S. Department of Education used the wrong legal standard when it denied Grand Canyon University’s application for nonprofit status in 2019, a federal appeals court ruled Friday.

The unanimous decision by a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit overturned a decision 2022 lower court ruling that the Department of Education acted lawfully in denying Arizona Christian University’s application to be considered a private, nonprofit institution under Title IV of the Higher Education Act.

Grand Canyon converted to a for-profit institution in 2004 amid financial difficulties, and it has experienced significant growth and prospered financially as a for-profit institution with a huge online presence. But after years of increased regulation by the Obama administration, it sought to returning to its non-profit roots, and the Internal Revenue Service and the university’s accrediting body approved his reversion.

But the The Ministry of Education concluded in 2019, that the university’s revenue would benefit the for-profit company that previously owned the Grand Canyon. This 2019 decision by the Trump administration, which was generally much more supportive of for-profit higher education, also prohibited the university from presenting itself to the public as a nonprofit.

Grand Canyon sued the Department of Education in 2021 and thereafter undertook an aggressive public campaign lambasting the Biden administration for what she called an orchestrated campaign against her.

A lower court judge ruled in November 2022 that the Department of Education has “the authority to determine whether an institution is considered a nonprofit organization under Title IV” and that Grand Canyon does not had not demonstrated that agency officials had acted in an “arbitrary and capricious” manner.

But the three judges on the Ninth Circuit – two of whom were appointed by President Trump and one by President Biden – reached a different conclusion. They determined that instead of relying on Higher Education Act requirements to evaluate nonprofit institutions, as it should have done, the Department of Education used more restrictive regulations of the Internal Revenue Service regarding benefits that may accrue to individuals or shareholders.

“The ministry…did not implement (the higher education law)
private underwriting requirement,” the Ninth Circuit panel said in its decision. “Instead, the Department applied the IRS’s ‘operational test,’ under which it examined, not whether the ‘net gains’ provided to individuals.
but whether the organization’s “core activities and revenue stream” primarily benefit private parties. Because the ministry did not apply the correct legal standards, its decisions must be overturned. »

In a statement released Friday evening, Grand Canyon welcomed the appeals court’s decision.

“Today’s decision is a much-anticipated correction of the department’s unlawful application of a standard that improperly denied GCU its nonprofit status, and we look forward to prompt confirmation from the university as a nonprofit institution,” Grand Canyon officials said. a press release.

Education Department officials could not be reached for comment Friday.