IRS audit affirms GCU’s tax-exempt status as a nonprofit institution

PHOENIX – An IRS audit affirmed Grand Canyon University’s tax-exempt status as a nonprofit institution, the Phoenix-based school announced Tuesday.

It’s the second win in less than a week for the nation’s largest private Christian university. On Friday, the U.S. Department of Education rescinded a $37.7 million fine against GCU for allegedly misleading students about costs. The DOE also cleared the school of wrongdoing.

School officials said it is routine for the IRS to audit an institution that changes its tax status. The IRS already had granted GCU with 501(c)(3) tax-exempt status, and the audit confirmed it.

The university operated as a nonprofit institution from its founding in 1949 until 2004, when it was almost forced to close because of financial difficulties. An investor put up money to keep the school near 35th Avenue and Camelback Road afloat, which led to a period of sustained growth as a for-profit entity.

The school returned to nonprofit status in July 2018.

What did IRS audit of GCU’s nonprofit status entail?

The audit looked at the university’s 2014-19 tax years, covering time both before and after the latest conversion. It included a site visit to conduct interviews.

“We greatly appreciate the comprehensive and thoughtful process in which the IRS re-examined the structures of our operations,” GCU President Brian Mueller said in a press release. “It was a very detailed and cooperative process.”

The state of Arizona, the Higher Learning Commission, the Arizona Private Postsecondary Board of Education and NCAA Athletics previously recognized GCU’s nonprofit status.

However, the Department of Education challenged the university’s status, leading to a yearslong court battle that appears to be winding down.

In November 2024, a federal appeals court ruled that the DOE used the wrong legal standard when rejecting the school’s status change.

The court ordered the department to reassess the case using the correct standard. GCU said Tuesday it is cooperating and expects a decision soon.

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