For-Profit Law School Seeks Shift to Nonprofit

Recently under the microscope, Florida Coastal School of Law becomes latest for-profit institution to seek nonprofit status.

February 6, 2019
 
Florida Coastal School of Law

Florida Coastal School of Law, a Jacksonville-based for-profit institution, says it will seek to reclassify as a nonprofit entity, joining a number of other for-profit institutions that have recently announced plans to change tax status as a solution to legal, regulatory or marketing hurdles.

The law school has faced growing scrutiny in recent years from legal education observers and its accreditor over its admissions standards and bar-passage rates. The American Bar Association found Florida Coastal out of compliance with accreditation standards last year. Other law schools operated by its parent company, InfiLaw, meanwhile, have closed or faced sanctions in recent years.

But Florida Coastal leaders say they’ve overhauled their academic curriculum and have made significant strides in student outcomes, boosting bar passage rates by 15 percentage points last year to over 62 percent.

“We’ve improved our entry credentials. We’ve improved our bar-passage results,” said Scott DeVito, Florida Coastal’s dean. “So that’s part of why this is now the time to do it.”

Law school officials say the change would allow professors to apply for federal research grants and would facilitate the expansion of an endowment. Converting to nonprofit status would also have the added benefit of reducing federal regulatory requirements and removing a for-profit label that has become toxic for many students.

Florida Coastal officials said that at the end of the process, the law school would be an independent entity. But they didn’t rule out some kind of role for InfiLaw, its parent company.

“We’re not exactly certain what InfiLaw’s final role, if any, will be. But they will not be the owner,” said Jennifer Reiber, Florida Coastal’s dean of academic affairs.

Other institutions, like Grand Canyon University, that have converted to nonprofit status have signed management agreements with their former parent companies after splitting off. Kyle McEntee, the executive director and co-founder of Law School Transparency, said he questioned what kind of arrangement the new nonprofit entity would have with InfiLaw.

“Will InfiLaw be managing or does it hope to manage the law school?” he said.

Florida Coastal officials also plan to form a partnership with a nonprofit university if the conversion goes through. They said talks are ongoing with one potential partner but declined to offer further details.

To make the switch, the law school will need approval from multiple regulatory bodies, including the U.S. Department of Education, the Florida Commission for Independent Education and its accreditor, the ABA.

The next step is for ABA to send a fact finder to Florida Coastal to review the application and file a report.

Barry Currier, managing director of the ABA's section of legal education and admissions to the bar, said a change in tax status is rare but not unheard-of for law schools. Western State University College of Law last year and Thomas Jefferson School of Law in 2001 both converted from for-profit to nonprofit status. The review process typically takes six to 12 months before a decision is reached, Currier said.

“Florida Coastal School of Law is on the list of ABA-approved law schools, and it remains subject to published notices that it is operating out of compliance on specific standards,” he said. “The school has been directed to take specific remedial action to demonstrate that it has come back into compliance with those standards. The school’s accreditation remains in place while the review processes are continuing.”

The law school will have to show it is in compliance with its accreditor’s standards before its application to change tax status is approved. But its leaders are confident it will do so after a major rebound in recent bar exam results.

Less than a decade ago, Florida Coastal regularly posted pass rates of 75 percent on the bar exam, which is the biggest obstacle for graduates to go on to practice law. But over the past five years, the law school’s bar-passage rates cratered. After lowering entrance standards in 2016, it fell below 50 percent for summer bar exams the next year. Bar-passage rates had declined overall in Florida at the time, but Florida Coastal was also one of only two law schools to fail the Education Department’s 2017 gainful-employment ratings.

Last year, however, Florida Coastal cleared a 62.5 percent bar passage rate -- a result, law school officials said, of an overhauled curriculum that gave students more early preparation for the range of subjects they faced on the state’s bar exam.

“We believe we’re seeing a lot of success as a result of those curriculum and program changes,” Reiber said.

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