Grants to Individuals

Department of the Treasury
Internal Revenue Service
IRS
Tax Exempt and Government Entitles
P.O. Box 2508
Cincinnati, OH 45201
Release Number: 202335016
Release Date: 9/1/2023
LEGEND
B=Program
C=Age
D=GPA y dollars= z dollars=
Dear
Date:
06/05/2023
Taxpayer ID number:
Person to contact:
UIL: 4945.04-04
You asked for advance approval of your employer-related scholarship procedures under Internal Revenue Code Section (IRC) 4945(g)(l). You requested approval of your scholarship program to fund the education of certain qualifying students.
This approval is required because !RC Section 4945 provides for the imposition of taxes on each taxable expenditure of a private foundation. !RC Section 4945(d)(3) provides that the term "taxable expenditure" includes any amount paid or incurred by a private foundation as a grant to an individual for travel, study, or similar purposes by the individual, unless the grant satisfies the advance approval requirement of !RC Section 4945(g).
Our determination
We approved your procedures for awarding employer-related scholarships. Based on the information you submitted, and assuming you will conduct your program as proposed, we detennined that your procedures for awarding employer-related scholarships meet the requirements ofIRC Section 4945(g)(l). As a result, expenditures you make under these procedures won't be taxable.
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 !RC Section 117(b)).
Description of your request
Your letter indicates you will operate the B for your current employee's children. B will be offered annually and mayb,e renewed. B will be awarded to full-time students in the amount of y per scholarship with a grand total amount of z awarded per year. The award will be given directly to the school and applied to tuition, fees, required books, and supplies.
B will be publicized on the company's website, intranet site, third party administrator's website and via monthly communication meetings held with employees.
Letter 4792 (Rev.1-2022) catalog Nlmber 58263T
The criteria to apply for the scholarship are
• Plan to continue their education either in an accredited non-profit two-year or four-year college, university or vocational-technical school,
• The student must be under the age of C and a natural child, legally adopted child, or a stepchild of a current employee and have a federal income tax status as a dependent of such employee,
• Financial Need
• Community and school activities
• A recommendation from a teacher or work supervisor
• A minimum grade point average during the prior year of school of at least D or evidence of satisfactory performance in a vocational/ technical program
• Submission of an essay describing a leadership activity
If a student wants a renewal scholarship, they must meet the following criteria
• Submit an application annually during the term of their attendance at an accredited non-profit two-year or four-year college, university or vocational/technical program,
• A minimum grade point average during the prior year of school of at least D or evidence of satisfactory performance in a vocational/ technical program,
• Be in good standing,
• Financial Need,
• No particular program of study is required for eligibility,
• Employment by the parent is not a condition for receipt of a renewal.
The following individuals will not be eligible to receive or renew scholarships: any child or relative of an owner, director, or officer.
A third-party administrator will administer the program, make all award decisions and notify the recipients.
Awards will be granted without regard to race, color, creed, relation, sexual orientation, gender, disability, or national origin. The third-party administrator will oversee the grant making, reporting and payment process. If a student is not in good standing or not enrolled the funds will be withdrawn.
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 are used for their intended purposes, and
• Withhold further payments to grantees until you obtain grantees' assurances that future 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 to 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.
Letter4792 (Rev. 1-2022)
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 IRC Section 117(a).
• The grant is to be used for study at an educational organization described in IRC Section l 70(b )(1 )(A)(ii).
Revenue Procedure (Rev. Proc.) 76-47, provides guidelines to determine whether grants a private foundation makes under an employer-related program to employees or children of employees are scholarship or fellowship grants subject to the provisions ofIRC Section 117(a). If the program satisfies the seven conditions in sections 4.01 through 4.07 of Rev. Proc. 76-47 and meets the percentage tests described in Section 4.08 of Rev. Proc. 76-47, we will assume the grants are subject to the provisions of IRC Section 117(a).
You represented that your grant program will meet the requirements of either the 25% or 10% percentage test in
Rev. Proc. 76-47. These tests require that:
• The number of grants awarded to employees' children in any year won't exceed 25% of the number of employees' children who were eligible for grants, were applicants for grants, and were considered by the selection committee for grants, or
• The number of grants awarded to employees' children in any year won't exceed 10% of the number of employees' children who were eligible for grants (whether or not they submitted an application), or
• The number of grants awarded to employees in any year won't exceed 10% of the number of employees who were eligible for grants, were applicants for grants, and were considered by the selection committee for grants.
You further represented that you will include only children who meet the eligibility standards described in
Rev. Proc. 85-51, when applying the 10% test to employees' children.
In determining how many employee children are eligible for a scholarship under the 10% test, a private foundation may include only those children who submit a written statement or who meet the foundation's eligibility requirements. They must also satisfy certain enrollment conditions.
You represented that your procedures for awarding grants under this program will meet the requirements of
Rev. Proc. 76-47. In particular:
• An independent selection committee whose members are separate from you, your creator, and the employer will select individual grant recipients.
• You will not use grants to recruit employees nor will you end a grant if the employee leaves the employer.
• You will not limit the recipient to a course of study that would particularly benefit you or the employer.
Other conditions that apply to this determination
•· J:his 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 described in your original request.
• The effective date of our approval is , which is the date your request was submitted.
Letter 4792 (Rev. 1-2022)
• This determination is in effect if your procedures comply with Sections 4.01 through 4.07 of Revenue Procedure 76-47 and either of the percentage tests of Section 4.08. If you establish another program covering the same individuals, that program must also meet the percentage test.
• This determination 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
TE/GE Stop 3 lA Team 105
P.O. Box 12192
Covington, KY 41012-0192
• You can't award grants to your creators, officers, directors, trustees, foundation managers, or members of selection committees or their relatives.
• All funds distributed to individuals must be made on a charitable basis and further the purposes of your organization. You cannot award grants for a purpose that is inconsistent with IRC Section 170( c )(2)(B).
• 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 determination letter available for public inspection after deleting personally identifiable information, as required by IRC Section 6110. We've enclosed Letter 437, Notice oflntention 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
Letter 4792 (Rev. 1-2022)