Audits of institutions with respect to disclosures of foreign gifts

Section 117 of the Higher Education Act of 1965 (20 U.S.C. 1011f) is amended—(1)by redesignating subsections (g) and (h) as subsections (h) and (i), respectively; and(2)by inserting after subsection (f) the following:

(g)

Audit

(1)

In general

Beginning not later than 60 days after the date of enactment of this subsection, and every 2 years thereafter, the Secretary shall conduct an audit of no fewer than 30 institutions to assess compliance with the reporting requirements under this section.(2)

Determination of institutions to audit

In determining which institutions to audit under this subsection, the Secretary shall prioritize audits for institutions that meet 1 or more of the following criteria:(A)Institutions that are in the top 1 percent when the endowments of all institutions are ranked from largest to smallest.(B)Institutions with a previous history of receiving a substantial gift from, or entering into a substantial contract with, a foreign source.(C)Institutions that have previously been noncompliant with the requirements of this section.(D)Institutions that publicly report receiving contributions from a foreign entity of concern (as defined in section 10612(a) of the Research and Development, Competition, and Innovation Act (42 U.S.C. 19221(a))). (E)Institutions that have a formal agreement, including a memorandum of understanding, with a Federal agency.(3)

Contents of audit

As part of each audit conducted under this subsection, the Secretary shall determine—(A)if the institution was in compliance with requirements of this section for the 2 reporting years prior to the year in which the audit is conducted; and(B)in the case of noncompliance, the gifts from, or contracts with, foreign sources whose amounts the institution under reported or over reported in the prior 2 reporting years, along with the following information for each of these gifts or contracts: (i)The amount under reported or over reported.(ii)The foreign source.(iii)The country of origin.(iv)The receipt date or contract start and end dates.(4)

Report

Not later than 30 days after the date on which the audit under this subsection is completed, the Secretary shall—(A)submit to Congress a report on the results of the audit; and(B)make the report described in subparagraph (A)—(i)available to the Speaker of the House, the majority and minority leaders of the House of Representatives, the majority and minority leaders of the Senate, the Chair and Ranking Member of the committee and each subcommittee of jurisdiction in the House of Representatives and the Senate, and any other Member of Congress who requests the report; and(ii)publicly available on the Department of Education website.

Excise taxes on certain contributions by foreign entities

(a)

In general

Subchapter H of chapter 42 of the Internal Revenue Code of 1986 is amended by adding at the end the following new sections:

4969.

Excise tax on contributions to colleges and universities by foreign countries of concern

(a)

Tax imposed

There is hereby imposed on each applicable institution for the taxable year a tax equal to 300 percent of the income of such institution received from any foreign country of concern during the taxable year.(b)

Applicable institution

For purposes of this section, the term applicable institution means an eligible educational institution (as defined in section 25A(f)(2))—(1)which had at least 500 tuition-paying students during the preceding taxable year, and(2)more than 50 percent of the tuition-paying students of which are located in the United States,

determined according to the rules of section 4968(b)(2).

(c)

Foreign country of concern

For purposes of this section, the term foreign country of concern has the meaning given such term by section 10612(a) of the Research and Development, Competition, and Innovation Act.(d)

Related organizations

Rules similar to the rules of section 4968(d) shall apply in determining income of an applicable institution for purposes of this section.

4970.

Excise tax on failure to report contributions by foreign entities

(a)

Tax imposed

There is hereby imposed on each institution for the taxable year a tax equal to 110 percent of the unreported foreign funding received by such institution during the taxable year.(b)

Unreported foreign funding

For purposes of this section, the term unreported foreign funding means an amount equal to the value of any gift or contract, or any amount received pursuant to a change in ownership or control, required to be reported under section 117 of the Higher Education Act of 1965 which is determined not to have been so reported by an audit under subsection (g) of such section.(c)

Timing of tax

The tax imposed by subsection (a) shall be due not later than 180 days after the institution is notified of the results of the audit under section 117(g) of the Higher Education Act of 1965.(d)

Coordination with section 4969

In the case of any unreported foreign funding which is received from a foreign country of concern (as defined in section 4969(c)), the tax imposed by subsection (a) shall be in addition to any tax imposed by section 4969 on such funding.(e)

Institution; other terms

For purposes of this section, the term institution, and any other term used in this section which is used in section 117 of the Higher Education Act of 1965, has the same meaning as when used in such section.

(b)

Clerical amendments

(1)The table of sections for subchapter H of chapter 42 of the Internal Revenue Code of 1986 is amended by adding at the end the following new items:

Sec. 4969. Excise tax on contributions to colleges and universities by foreign countries of concern.

Sec. 4970. Excise tax on failure to report contributions by foreign entities.

(2)The heading of subchapter H of chapter 42 of such Code (and the item relating to such subchapter in the table of subchapters for such chapter) are each amended by striking

Tax Based on Investment Income of

and inserting

Taxes on

.(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date which is 60 days after the date of the enactment of this Act.