Colleges and universities that receive funding from the National Science Foundation ("NSF") on or after May 20, 2024 have a new obligation, pursuant to Section 10339B of the CHIPS & Science Act of 2022 (P.L. 117-167) (the "CHIPS Act"),1 to report gifts and contracts at or in excess of $50,000 received from any source in specific "foreign countries of concern," including the People's Republic of China. The new reporting obligation is similar, but not identical, to the existing reporting obligation under Section 117 of the Higher Education Act of 1965, as indicated in this chart.2
NSF recently published long-awaited sub-regulatory guidance relating to the upcoming reporting requirement, including FAQs on implementation of Section 10339B and a demonstration portal with more detail on the report submission process. We provide in this Alert (i) an overview of the reporting obligations under Section 10339B, which are also referred to as the "Foreign Financial Disclosure Report" or "FFDR," (ii) a summary of informative guidance provided by NSF to date with respect to next steps and timing of the FFDRs, and (iii) a chart comparing the Section 10339B and Section 117 reporting obligations and guidance – information that is important to understand, given the areas of overlap. The first reporting deadline pursuant to Section 10339B is July 31, 2024, with a grace period through September 3, 2024, at 5:00 p.m. (based on the submitting organization's local time).3
Overview of Section 10339B of the CHIPS & Science Act
The CHIPS Act was important and sweeping legislation primarily intended to promote the domestic U.S. semiconductor industry. Section 10339B was one of several somewhat unrelated provisions addressing research security and higher education. The operative language of Section 10339B requires the Director of NSF to "request, on an annual basis, from a recipient institution of higher education a disclosure, in the form of a summary document, from the institution . . . and related entities . . . of the current financial support, the value of which is $50,000 or more, including gifts and contracts, received directly or indirectly from a foreign source . . . associated with a foreign country of concern."4 The statute also requires that institutions of higher education ("IHE") "maintain a true copy of the relevant records" for a mandated period5 and make those records available upon request.6
Based on these disclosures, NSF, consistent with the statutory directive, may reduce its award funding amount or suspend or terminate the award if (i) the disclosed financial support indicates a threat to research security, or (ii) the reporting IHE failed to provide requested information or failed to comply with the applicable records retention requirement.7
NSF's Recent FFDR Sub-Regulatory Guidance and Next Steps
The statutory requirements for the FFDRs are addressed and expanded upon in Chapter VII, Section (D)(3) of NSF's Proposal & Award Policies & Procedures Guide ("PAPPG"), in recent FAQs, and a "how-to" guide with step-by-step instructions on the submission process, all of which are folded into and addressed in this chart, outlining and comparing the FFDR and Section 117 reporting obligations for IHEs.
With respect to the timing for submitting the FFDR reports, NSF guidance states that IHEs that are direct recipients of NSF funding on or after May 20, 2024, must, by July 31, 2024, submit FFDRs for all financial support at or in excess of $50,000 received between July 1, 2023 and June 30, 2024 from any source in a foreign country of concern, although NSF is providing a one-time grace period for the initial FFDR submission until September 3, 2024 at 5:00 p.m. (based on the submitting organization's local time). Even if the IHE has not received any reportable financial support, the IHE must still submit a report stating that there is nothing applicable to report. Failure to submit timely reports will delay the processing of additional NSF funding and administrative actions, including, but not limited to, the granting of no-cost extensions. In the case of continuing grants, failure to submit timely reports will delay processing of any funding increments.
As IHEs prepare for these new FFDR submissions, NSF has developed an FFDR demonstration site with the same functionality as the actual reporting site and will make this demonstration site available to existing Authorized Organization Representatives/FFDR Preparers through Friday, June 28, 2024. NSF will also host a webinar regarding the site's functionalities on July 9, 2024, from 2:00 pm to 3:00 pm ET.
This Alert summarizes key elements of and new guidance regarding the FFDR reporting under Section 10339B of the CHIPS Act. For further information, please contact one of the authors or your usual Ropes & Gray advisor.
Footnotes
1. 42 U.S.C.§ 19040.
2. 20 U.S.C. §1011f.
3. See FFDR Requirements, https://www.research.gov/research-web/content/aboutffd#psm.
4. 42 U.S.C.§ 19040 (a).
5. 42 U.S.C.§ 19040 (b).
6. 42 U.S.C.§ 19040 (c).
7. See Id.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.