This year's National Association of College and University Attorneys (NACUA) 2024 Annual Conference in Columbus, Ohio, explored emerging legal trends and issues impacting higher education institutions in the United States. More than 2,000 college and university counsel, compliance officers and industry leaders convened in June to explore legal hot topics in tax, scientific research and AI, among many others. Our tax partner Franziska Hertel and health care counsel Steve Sencer and Minal Caron presented at four different panels and workshops.
Here are key takeaways from our team:
Hot Topics in Tax
- More organizations could be considered "donor-advised funds" and therefore subject to limitations on activities. Last November, the Department of the Treasury and IRS proposed regulations that would significantly expand the universe of organizations treated as "donor-advised funds" (DAFs). For example, service by donors on advisory committees (e.g., scholarship selection committees) could cause unexpected DAF status. Treatment as DAFs would potentially impose significant limitations on the ability of such organizations to carry out their charitable missions. Stay tuned to find out whether the proposed regulations will be finalized or re-proposed.
- The IRS is cracking down on tax-exempt "name, image, and likeness" (NIL) collectives. NIL collectives facilitate and provide NIL opportunities to student-athletes. The IRS has argued that because many of these collectives primarily benefit the athletes whose name, image and likeness they help monetize, they do not primarily further charitable purposes. Expect significant additional audit activity in this space and revocation of many collectives' tax-exempt status.
- In an election year, charitable organizations need to pay close attention to any election-related activities. 501(c)(3) organizations are prohibited from interfering in any elections. Such organizations should ensure that any election-related activities they engage in are conducted in a non-partisan manner (e.g., inviting all candidates to speak, rather than just one). They should also avoid making statements on wedge issues that could be viewed as an endorsement of one political party or candidate. Failure to comply with the prohibition against campaign intervention could result in loss of tax-exempt status.
Issues in University Research
- Universities that produce scientific research need to stay on top of a complex regulatory landscape. Scientific research is foundational to many universities' missions and strategically important to universities and their surrounding communities. Funded research—and the associated spin-out companies—are important sources of revenue, jobs and reputation. But with reward comes risk, and university lawyers must manage an increasingly complex and fraught thicket of laws and regulations, sometimes under public scrutiny and always with intense internal interest.
- Research misconduct allegations are on the rise. Driven in part by new technology that allows non-experts to examine old datasets and comb through vast collections of publications, the past two years have seen a significant uptick in allegations of research misconduct against university researchers, including high-profile university leaders. Universities have established processes for evaluating research misconduct allegations, typically modeled on federal regulations governing alleged data fraud in federally funded biomedical research. These processes are strained by the increase in number of allegations, and by the increase in allegations of plagiarism and falsification in other disciplines. Counsel representing universities must understand these risks and be able to guide their clients to solutions that are consistent with university policies and applicable standards of academic integrity. These solutions must also withstand scrutiny from the media and other external stakeholders.
- False Claims Act risk now touches universities. Historically, the False Claims Act (FCA) has been of little concern to universities, other than those with health systems. For research universities, that has changed. There have been several FCA settlements based on allegations that faculty failed to disclose research funding from entities in China. A key issue in these cases is the "corporate" knowledge of the university. In light of these developments, university counsel should pay attention to their clients' processes for detecting undue "foreign influence."
Impact of AI on Institutions of Higher Education
- University stakeholders need to be aware of the evolving landscape of laws governing AI. The flurry of interest in generative AI over the past two years has led federal and state agencies to evaluate how existing legal and regulatory frameworks extend to the development and use of AI across many disciplines, including research and education. Some of these frameworks may be well known to universities and their legal officers, such as the need to evaluate IP and data privacy considerations associated with the use and development of AI tools. Others may not be as well known. These include Federal Trade Commission and state law frameworks governing consumer protection, and Food and Drug Administration regulatory considerations.
- Consider forming a larger task force or committee to handle AI-related questions. Given the large and decentralized nature of many institutions of higher education, many universities have developed cross-functional task forces or committees to track AI use cases across the institution and develop recommendations. Some areas where task forces and committees have weighed in include development of policies and procedures regarding AI, decisions on strategic institutional investments in AI-powered software and other products, and strategic workforce planning.
- Engage in collaboration and open dialogue with other universities. To leverage the experiences and learnings of their peers in developing effective governance frameworks and implementing strategic priorities relating to AI, collaboration and open dialogue among universities will be essential.
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