The controversial social-media company gave millions to several universities, who until recently failed to properly disclose the gifts.
The controversial social-media company gave millions to several universities, who until recently failed to properly disclose the gifts.
B yteDance, the parent company of the popular social-media site TikTok, has been vying for influence in the United States even as lawmakers grow concerned with the national-security risks associated with the platform, given its ties to China. Since 2019, ByteDance has spent nearly $18 million on lobbying the American government. But its eight-figure funding campaign to American universities has fallen under the radar. This is because all but one of the recipients of TikTok funds failed to properly report the donations to the Department of Education.
Ten American universities signed gift agreements with TikTok, Inc., starting in late 2020 as part of TikTok’s Health Heroes Relief Fund initiative. All but one recipient university were minority-serving institutions, and they each received $1 million to “ensure the success of future Black, Latinx, and Indigenous health heroes.” The funds were meant to be distributed as scholarships to students pursuing medicine.
Section 117 of the Higher Education Act requires universities to report gifts of $250,000 or more in a calendar year that are “owned or controlled” by a foreign source. TikTok’s gifts fall into this category. ByteDance is headquartered in Beijing. But like many Chinese companies, it is incorporated in the Cayman Islands. ByteDance’s intermediary, TikTok Ltd., which oversees the American subsidiary TikTok, Inc., in California, is also incorporated in the Cayman Islands.
The Department of Education clarifies that universities, when reporting funds, should evaluate how much control foreign parent companies exercise over U.S. entities. This should include consideration of the “practical realities of how the parties interact.” While TikTok has tried to create the appearance of distance between ByteDance and its American subsidiary, several former TikTok employees indicated to CNBC in 2021 that the lines between ByteDance and the American subsidiary were pretty much nonexistent. Given the context of this corporate relationship, recipients should have reported the TikTok funds.
The University of South Dakota (USD) was the only school to report its entire $1 million gift to the Education Department. When asked for comment in August, North Carolina Central University and Florida A&M University told me by email that they would immediately report their gifts, implicitly admitting that they had failed to do so before.
Yet even when universities properly follow federal standards in disclosing their funds, complex corporate structures such as TikTok’s impede the mission of transparency that Section 117 regulations intend to fulfill.
USD’s report in the Education Department’s database records a gift from the Cayman Islands, as this is where ByteDance is incorporated. Universities do not have to report the donor name. It is not apparent from USD’s report that the originator of this gift is actually a multinational corporation based in China. I learned about this gift only through an open-records request to USD as part of a larger National Association of Scholars project on foreign funds. Clearly, more-detailed information, such as the donor name, should be required for disclosure.
Besides issues of disclosure noncompliance, TikTok’s gift fed into the racial politics of medicine and may even violate the recent Supreme Court ruling on affirmative action. USD, the only non-minority-serving institution to receive the gift, was specifically instructed to allocate “at least $500,000” of its gift to scholarships for “enrolled members of federally recognized Indian tribes or part of any other population historically underrepresented” in medical or health sciences.
Since the Supreme Court’s ruling against racial considerations in college admissions, race-conscious scholarship programs are now in a legal gray area. USD spokeswoman Michelle Cwach noted that the Supreme Court does not consider enrolled tribal status as a racial classification for the purpose of civil-rights law, but she avoided clarifying how the university defines the term “historically underrepresented.” The Association of American Medical Colleges clearly links underrepresentation in medicine to racial and ethnic considerations. USD said that they are still administering funds from this scholarship, which should prompt state lawmakers to investigate whether racial or ethnic information is used to make award decisions.
When large donations that trace back to foreign adversaries go unreported, it should raise red flags with federal lawmakers and enforcement agencies. This gift was not exactly hidden — many of the universities released public statements about it on their websites. The fact that the Biden administration failed to look into this matter for more than two years speaks poorly of its enforcement of the law. In addition, gifts reported from tax-haven countries remain opaque. Lawmakers should amend disclosure requirements to include donor names to prevent our adversaries from funneling money undetected through tax havens to American universities.