Nursing scholarship procedures approved

Plain-English summary

A private foundation proposed scholarships for state residents pursuing full-time nursing degrees at colleges or universities in the state. Applicants had to be entering their sophomore, junior, or senior year, maintain at least a 3.0 cumulative GPA, remain in good standing, and show financial need. An independent selection committee would use objective criteria, follow conflict-of-interest rules, and exclude insiders and their relatives. Awards would be paid to educational institutions, with enrollment and academic standing verified, and the foundation would monitor use and recover funds used improperly. The IRS approved the procedures under section 4945(g)(1), so grants made under them would not be taxable expenditures and could be tax-free to recipients when used for qualified tuition and related expenses under section 117(b).

Ruling snapshot

• Question: Did the private foundation's nursing scholarship procedures satisfy the advance-approval rules?
• Outcome: approved
• Key authorities: IRC §§ 117, 170(b)(1)(A)(ii), 4945(g)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
P.O. Box 2508
Cincinnati, OH 45201

Number: 201749021 Employer Identification Number:

Release Date: 12/8/2017
Contact person - ID number:

Contact telephone number:
Date: September 13, 2017

LEGEND UIL: 4945.04-04
X = Scholarship Program

Y = State

Z = Name

b = Number
c dollars = Amount

Dear

You asked for advance approval of your scholarship grant procedures under
Internal Revenue Code section 4945(g). This approval is required because you are
a private foundation that is exempt from federal income tax. You requested
approval of your scholarship program to fund the education of certain qualifying
students.

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 procedures for awarding scholarships meet the requirements
of Code section 4945(g)(1). As a result, expenditures you make under these
procedures won't be taxable.

Also, 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 Code section 117(b)).

Description of your request
Your letter indicates you will operate a scholarship program called X.

Your goal includes improving the health and well-being of the residents of Y.

The purpose of X is to provide scholarships to students who pursue a nursing career by
attending a post high school education program at a Y based university or college

Letter 4792 (10-2012)
Catalog Number 58263T


described in Section 170(b)(1)(A)(ii). Recipients may only use the scholarships for tuition
and fees required for the enrollment or attendance at a qualifying educational institution
and may not use any part of it as payment for teaching, research, or other services.

You will advertise X by contacting Y college or university administrators as well as
managers of other relevant community institutions. For the current year, you plan to
award b scholarships for c dollars but you will determine the number and amount for each
of the scholarships annually.

To be eligible to apply for a scholarship, individuals must be:

• Residents of Y entering their sophomore, junior or senior year who are attending a
Y university or college,
• Pursuing a degree in the nursing field as a full-time student,
• Maintaining a cumulative GPA of 3.0 or higher and in good academic standing,
• Able to demonstrate financial need.

To apply for the scholarship, students can obtain your application from either their
school’s external scholarships webpage or Z’s web page. Applicants are required to
submit completed applications and required supporting documents such as financial
information and transcripts by a specified due date. Incomplete applications will not be
considered.

You, or your designated staff will appoint the selection committee who will evaluate and
select recipients on an objective and nondiscriminatory basis. Selection committee
members are required to adhere to your conflict of interest and confidentiality policies. No
board member, scholarship committee member, employee or donor board member of Z,
or their relatives are eligible for the award. Members on the selection committee are
required to disclose any personal knowledge of and relationship with any potential
scholarship recipient under consideration and to refrain from participation in the award
process in a circumstance where he or she would derive, directly or indirectly, a private
benefit if any potential recipient or recipients are selected over others.

The selection committee will select recipients based on academic achievements, financial
need and service to the community. The selection criteria may include but not be limited
to the following:

• Prior academic performance,
• Performance on tests designed to measure the ability and aptitude for educational
work,

• Recommendations from instructors or any others who have knowledge of the
applicants’ capabilities,

• Biographical information such as career, academic and other relevant
experiences,

• Financial need,
• Motivation, character, ability or potential,

• Place of residence,

Letter 4792 (10-2012)
Catalog Number 58263T


• Past or future attendance at a school,
• Past or proposed course of study,
• Evidence of artistic, scientific or other special talent.

Scholarships will be paid directly to the educational institutions after the educational
institutions agree in writing to use the awards to defray the recipients’ expenses or to pay
the funds to the recipients. The educational institution must also verify that the recipient is
enrolled at such educational institution and his or her standing at such educational
institution is consistent with the purposes and conditions of the award.

You will obtain a copy of a transcript to verify the grade point average of each recipient. If
you determine that any part of the award has been used for improper purposes, you will
take all reasonable and appropriate steps to recover the scholarship funds and/or ensure
restoration of the funds to the proper purposes of the award.

The scholarships are not renewable but recipients may reapply each year if they continue
to meet the eligibility requirements. In addition, applicants who applied in a prior year for
a scholarship but were not selected as recipients may reapply again the following year if
they meet the eligibility requirements under which the award was established.

You represent that you will maintain the following: (1) all records relating to individual
grants including information obtained to evaluate grantees, (2) identify whether a grantee
is a disqualified person, (3) establish the amount and purpose of each grant, and (4)
establish that you undertook the supervision and investigation of grants described above.

You represent that you will complete the following: (1) arrange to receive and review
grantee reports annually and upon completion of the purpose for which the grant was
awarded, (2) investigate diversion of funds from their intended purposes, and (3) take all
reasonable and appropriate steps to recover the diverted funds, ensure other grant funds
held by a grantee are used for their intended purposes, and (4) 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.

Basis for our determination

The law imposes certain excise taxes on the taxable expenditures of private foundations
(Code section 4945). 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 Code 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 Code section
117(a).

Letter 4792 (10-2012)
Catalog Number 58263T


• The grant is to be used for study at an educational organization described in Code
section 170(b)(1)(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 described in your original request.

• 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 Cincinnati Office of Exempt Organizations at:

Internal Revenue Service

Exempt Organizations Determinations
P.O. Box 2508

Cincinnati, OH 45201

• You cannot 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 Code 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.

Please keep a copy of this letter in your records.

If you have questions, please contact the person listed at the top of this letter.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4792 (10-2012)
Catalog Number 58263T