House Passes Bill That Would Expand Section 117 Reporting Requirements for Higher Education Institutions
- Anne Wilder, XL Law & Consulting
- 4 minutes ago
- 8 min read
On March 27, 2025, the House of Representatives passed H.R.1048, the DETERRENT Act (H.R.1048), which would expand oversight and disclosure requirements applicable to IHEs that receive gifts or contracts from foreign countries or entities.
The bill reduces the reporting threshold from $250,000 to $50,000, requires IHEs to report gifts and contracts of any amount that are received from a foreign country of concern, and requires waivers from the Department of Education for any contracts with countries of concern.
The bill significantly increases penalties for non-compliance, up to and including loss of federal financial aid eligibility for a minimum of two years.
For more background on Section 117 reporting, including recent enforcement actions and similar pending legislation, see https://www.xllawconsulting.com/post/congressional-research-service-releases-report-on-section-117-foreign-gift-reporting
On March 27, 2025, the U.S. House of Representatives passed H.R.1048, the Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions Act (DETERRENT Act), by a vote of 241-169. The bill, if it were to become law, would significantly increase the Section 117 reporting requirements with which institutions of higher education (IHEs) that receive Title IV funds must comply, in addition to adding new requirements for IHEs that meet certain criteria. The American Council on Education and five other higher education associations recently sent a letter to the House outlining their concerns with certain aspects of the legislation which, they write, “would significantly impede critical research activities; duplicate existing interagency efforts; and put in place a problematic expansion of data collection by the Department of Education without ensuring that actual national security or foreign malign influence threats . . . are addressed.” This article covers the primary changes the bill would make to current Section 117 reporting requirements.
Section 117: Foreign Gift Disclosures and Reporting Thresholds
The bill reduces the threshold required for IHEs’ reporting to the U.S. Department of Education (ED) of gifts from or contracts entered into with a foreign source from its current level of $250,000 to $50,000. Reports must be submitted annually, by July 31. As with current reporting requirements, the amount applies to the value of the gift or contract considered alone or in combination with all other gifts from or contracts with the foreign source. If the gift or contract (assuming a waiver has been obtained, as discussed below) is from or with a foreign country or entity of concern, however, it must be reported regardless of value. “Foreign country of concern” is defined as any covered nation or special administrative region defined in 10 U.S.C. 4872 (currently North Korea, China, Russia, and Iran) in addition to any country the Secretary of Education, in consultation with the United States’ foreign affairs agencies, determines is engaged in conduct detrimental to U.S. national security or foreign policy. “Foreign entity of concern” is as defined in 42 U.S.C. 19221(a) and includes a foreign entity that is identified on the list published under section 1286(c)(9)(A) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (10 U.S.C. 4001 note; P.L. 115-232) and a Chinese military company that is identified on the list required by section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (10 U.S.C. 113 note; P.L. 116-283).
Gifts to or contracts with an “affiliated entity” of an IHE, defined as “an entity or organization that operates primarily for the benefit of, or under the auspices of, [the IHE], such as a foundation of the [IHE], or an educational, cultural, or language entity,” must also be reported.
An IHE that is substantially controlled by a foreign source must also file an annual disclosure report with ED.
Finally, this section of the bill requires ED to establish a searchable, public database with all submitted reports. For privacy reasons, the name or address of a foreign source that is a natural person may not be publicly disclosed and is exempt from public disclosure under the Freedom of Information Act; however, those exceptions do not apply to disclosures pertaining to contracts with foreign countries or entities of concern.
Section 117A: Contracts with Foreign Countries and Entities of Concern
The bill creates a new section, 117A, that prohibits IHEs from entering into a contract with a foreign country or entity of concern unless they receive a waiver from ED. With some exceptions (such as tuition payments), “contract” is broadly defined to mean:
any agreement for the acquisition by purchase, lease, or barter of property (including intellectual property) or services by the foreign source;
with the exception of arms-length agreements, any agreement for the acquisition by purchase, lease, or barter of property (including intellectual property) or services from a foreign source; and
any affiliation, agreement, or similar transaction with a foreign source that involves the use or exchange of an institution’s name, likeness, time, services, or resources.
Waiver requests must be submitted no later than 120 days before the IHE enters into the contract, must contain the complete and unredacted text of the contract, and must contain an English translation, if applicable. The waiver is only valid for one year, so IHEs with contracts whose terms exceed one year must therefore submit renewal applications. The bill requires ED to notify the IHE of its decision no later than 60 days before the institution enters into the contract.
IHEs that have preexisting agreements with countries of concern are not grandfathered in; rather, they must submit waiver requests no later than 30 days after the date of the Act’s enactment. It is also important to note that waivers are unavailable to any IHE that has received a fine for subsequent violations of any section of the DETERRENT Act.
Section 117B: Foreign Gifts and Contracts to Faculty and Staff
Another new section of the bill, 117B, requires IHEs that receive more than $50 million in federal research and development funding or any Title VI funding to develop a policy requiring “covered individuals” (e.g., research faculty and staff)—including at affiliated entities of the IHE—to disclose in an annual report (1) any gift received from a foreign source that is of more than minimal (currently $480) value or of indeterminate value; and (2) any contracts valued at $5,000 or more (unless the agreement is with a foreign country or entity of concern, in which case the threshold is $0) or of indeterminate monetary value. Affected IHEs must also create a public, searchable database with the above information. Similar to Section 117 described above, for privacy reasons, the name or address of a foreign source that is a natural person and the name or other personally identifiable information of the person making the disclosure are exempt from public disclosure; however, those exceptions do not apply to disclosures pertaining to contracts with foreign countries or entities of concern.
Section 117C: Investment Disclosure Report
The bill’s new Section 117C applies only to private IHEs with endowments over $6 billion and “investments of concern” with an aggregate fair market value (FMV) in excess of $250 million. “Investments of concern” are defined as stock, debt, and any contract or derivative thereof, with respect to a foreign country or entity of concern. Affected IHEs are required to file an annual disclosure report listing any investments of concern purchased, sold, or held during the year; the aggregate FMV of all investments of concern held as of the end of the year; the combined value of all investments of concern sold; and the combined value of all capital gains from sales of investments of concern. The bill directs ED to establish a public, searchable database containing the information in the investment disclosure reports.
Section 117D: Enforcement and Penalties
Under the current system, ED may direct the Attorney General to bring a civil action against an IHE that has failed to comply with any of Section 117’s requirements. Any IHE that has knowingly or willfully failed to comply with a Section 117 requirement must pay the full costs to the U.S. Government of obtaining compliance, including associated investigation and enforcement costs.
With new section 117D, the bill adds many details to the Section 117 enforcement scheme and increases the potential penalties. It requires ED to investigate possible violations, and any IHE found in violation must pay the costs described above. In addition, the bill imposes significant fines, as follows:
| First Violation | Subsequent Violations |
Section 117 Disclosures of Foreign Gifts | The greater of:
| The greater of:
|
Section 117A Contracts with Certain Foreign Entities and Countries | Between 5-10% of the total amount of federal funds received under the Higher Education Act for the most recent fiscal year | Not less than 20% of the total amount of federal funds received under the Higher Education Act for the most recent fiscal year |
Section 117B Foreign Gifts and Contracts to Faculty and Staff | The greater of:
| The greater of:
|
Section 117C Investment Disclosure Report | Between 50-100% of the sum of the aggregate FMV of all investments of concern held by the IHE as of the close of the final calendar year for which the IHE is compelled to comply and the combined FMV value of all investments of concern sold over the course of the calendar years for which the IHE is compelled to comply | Between 100-200% of the sum of the aggregate FMV of all investments of concern held by the IHE as of the close of the final calendar year for which the IHE is compelled to comply and the combined FMV value of all investments of concern sold over the course of the calendar years for which the IHE is compelled to comply |
An institution will be ineligible for federal student financial aid for at least two institutional fiscal years if it (1) has had a judgment rendered against it in three separate civil actions, each of which has resulted in the institution being compelled to comply with one or more of the bill’s requirements; and (2) is ineligible for a waiver under Section 117A due to having been fined for one or more subsequent violations of the reporting requirements.
Implications for Higher Education Institutions
In the previous legislative session, the House passed a bill by the same name by similar margins (246-170), but the bill went on to die in the Senate. With a current Republican majority in the Senate, there appears to be a greater chance that H.R.1048 could become law.
Now would be a good time for IHEs to review their policies and procedures related to Section 117 reporting to ensure that they are prepared to comply with any new reporting requirements. Because at least some of the bill’s requirements take effect just 30 days after enactment, IHEs could struggle to get into compliance if they do not already have an organized system in place for reporting foreign gifts and contracts. For example, IHEs may want to identify any current contracts they have with countries of concern and for which they would need to submit waiver requests. They may also want to identify any affiliated entities of the institution, including foundations, and consider how they would implement procedures for disclosing gifts to and contracts from such entities.
Given the increase in state reporting requirements in this area, IHEs will also want to ensure that their reporting system is set up to meet both state and federal requirements. We note that the bill deletes the provision in Section 117 that currently permits institutions in states with “substantially similar” reporting requirements for public disclosure of foreign source gifts and contracts to file a copy of the state disclosure report with ED (in lieu of the report otherwise required by Section 117).