Grants to Individuals

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entitles
IRS P.O. Box 2508
Cincinnati, OH 45201
Number: 202244034
Release Date: 11/4/2022
LEGEND
B ~, State
C =Number y dollars = Amount
Dear
Date: O8/'I 0/20:22
Taxpayer ,10 nWT1ber:
Person to ccmtai:t:
Name:
ID number:
Telephc,ni~:
UIL: 494:5.0.:t-04
You asked for advance approval of your scholarship procedures under Internal Revenue Code (IRC) Section 4945(g)(l). You requested approval of your scholarship program to fund the education of certain qualifying students.
This approval is required because IRC Section 4945 provides for the imposition of taxes on each taxable expenditure of a private foundation. IRC Section 4945(d)(3) provides that the term "taxable expenditure" includes any amotmt paid or incurred by a private fo1mdation as a grant to an iudividud for travel, study. or similar purposes by the individual, unless the grant satisfies the advance approval requirement of IRC Section 4945(g).
Our determination
We approved your procedures for awarding scholarships. Based on the information you submitted. and assuming you will conduct your program as proposed, we determined that your proc,edure·s for awarding scholarships meet the requirements ofIRC Section 4945(g)(l). As a result, expenditures you make under these procedures won't be taxable.
Additionally, awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified tuition and related expenses ( subject to the;: limitations provided in IRC Section l l 7(b )).
Description of your request
Your letter indicates you will operate a scholarship program for graduating high schoc•l smiors in the state of B for study at educational organizations described in IRC Section l 70(b )(1 )(A)(ii). You wilt focus your program on schools of color or to those in underserved communities. The purpose of the award is to increase access to education.
You intend to award scholarship grants in the range of y dollars on an annual basis, w11tb up to C grants awarded per year. The scholarships may be for one year (non-renewable) or four years (renewable). Generally. the scholarships are provided on a one-time basis to enable you to provide an annual scbo:!arsh.ip at the school.
LE~lter 4792 (Rev. 1-2022)
Ciiiffllog Number 58263T
You initiate the grant process by sending a letter to a local high school or a state-wide spcrt association. The letter indicates you wish to provide a scholarship to a graduating senior with plans to attend a four-year college or university. The scholarships may be for one year (non-renewable) or four years (renewable). The letter indicates the high school or the state-wide sport association scholarship committee will be responsible for selection of the scholarship recipient and for notifying you of the name of the recipient.
The high schools and the state-wide sport associations arc responsible to publicize the sd.olarships. The scholarships will be publicized on their internet and media available to students.
You provide general selection parameters to each scholarship committee, such as acc:dcmic performance. Other selection parameters may include:
• Student of color
• First-generation college student
• Involvement in athletics
• Leadership
• Extracurricular activities
• Community involvement
• Prior work experience
• Certain type of degrees, for example, a degree in food science or business
Each scholarship committee is not required to use these selection parameters as their cnly criteria or may select a recipient who is other than a first-generation college student or student of color.
The scholarship committee at each high school selects recipient for a scholarship. The college or career counseling office at the high school and is responsible to administer and coordinate th~ application and selection process. The scholarship committee is responsible for notifying you of its selection by providing the student's name, contact infonnation, and the name of the educational institution. The high school scholarship committees arc made up of a variety of school personnel. counselors, teachers, vice principals and other similar personnel.
In situations where you provide an athletic scholarship, the scholarship committee is mad,~ up of coaches from around the state as well as administrators from the athletic association.
Selections arc made in early June and a presentation will be made to the student just as th,~y arc graduating.
Your representative may attend the senior awards assembly to be a part of the scholarship award ceremony.
You require the recipients to do the following:
• Send a email or letter to you within I month of of the award
• Provide proof of acceptance and enrollment in an accredited educational institution
• Provide a final grade transcript from his/her high school to verity high school grnduation
• Communicate if there is a change in his/her status at the school
• Provide grade transcripts each year
• Send an impact letter at the end of each school year
• For renewable scholarships, proof of enrollment for the next academic year
For scholarships that arc renewable, the recipient must stay enrolled, be in good standing at the educational institution, and maintain certain academic performance.
You will write a check directly to the recipient's educational institution. Along with th~ check, you will instruct
Lotter 4792 (Rev. 1-2022)
C2talog Number 58263T the educational institution that the fund is only for a full-time enrollee and fund should be returned if the recipient is not enrolled on a full-time basis.
Relatives of members of the selection committee, or of your officers, directors or substantial contributors arc not eligible for awards.
You represent that you will complete the following:
• Arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded,
• Investigate diversion of funds from their intended purposes,
• Take all reasonable and appropriate steps to recover the diverted funds and ensure other grant funds held by a grantee arc used for their intended purposes, and
• Withhold further payments to grantees until you obtain grantees' assurances that futur~ diversions will not occur and that grantees will take extraordinary precautions to prevent future diversion from occurring.
You also represent that you will:
• Maintain all records relating to individual grants including information obtained tc evaluate grantees.
• Identify a grantee is a disqualified person,
• Establish the amount and purpose of each grant, and
• Establish that you undertook the supervision and investigation of grants described above.
Basis for our determination
IRC Section 4945 imposes excise taxes on the taxable expenditures of private foundations. A taxable expenditure is any amount a private foundation pays as a grant to an individual for travel, study or other similar purposes.
However, a grant that meets all the following requirements of IRC Section 4945(g) is not a taxable expenditure.
• The foundation awards the grant on an objective and nondiscriminatory basis.
• The IRS approves in advance the procedure for awarding the grant.
• The grant is a scholarship or fellowship subject to the provisions of IRC Section I· 7(a).
• The grant is to be used for study at an educational organization described in IRC Section I 70(b )( I )(A)( ii).
Other conditions that apply to this determination
• This determination only covers the grant program described above. This approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those desc1ibcd in your original request.
• This detcm1ination applies only to you. It may not be cited as a precedent.
• You cannot rely on the conclusions in this letter if the facts you provided have changed substantially.
You must report any significant changes to your program to the IRS at:
Internal Revenue Service
Exempt Organizations Determinations
• You can't award grants to your creators, officers, directors, trustees, frmndation managers, or members of selection committees or their relatives.
• All funds distributed to individuals must be made on a charitable basis and furth,:r the purposes of your organization. You cannot award grants for a purpose that is inconsistent with JRC Section l 70(c)(2)(8).
Lotter 4792 (Rev. 1-2022)
C2talog Number 58263T
• You should keep adequate records and case histories so that you can substantiate your grant distributions with the IRS if necessary.
We'll make this deteimination letter available for public inspection after deleting personally identifiable information, as required by IRC Section 61 l 0. We've enclosed Letter 437, Notice of Intention to Disclose -Rulings, and a copy of the letter that shows our proposed deletions.
• If you disagree with our proposed deletions, follow the instructions in the Letter 437 on how to notify us.
• If you agree with our deletions, you don't need to take any further action.
Please keep a copy of this letter in your records.
If you have questions. you can contact the person shown at the top of this letter.
Enclosures:
Letter 437
Sincerely,
Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements
LEitter 4792 (Rev. 1-2022)
Cctalog Number 58263T