Ministry scholarship procedures approved

Plain-English summary

A private foundation proposed one-time scholarships for full-time students pursuing advanced religious studies at accredited theological seminaries, colleges, or universities. Applicants had to meet academic and service criteria and intend to enter full-time ministry in the United States. An outside company and a company-employee committee would select recipients in two phases, while children of company employees and relatives of insiders or committee members were excluded. Payments would go directly to educational institutions, and the foundation committed to monitoring recipients, investigating misuse, recovering diverted funds, and keeping adequate records. The IRS approved the procedures under section 4945(g)(1), so compliant expenditures would not be taxable expenditures.

Ruling snapshot

• Question: Do the foundation's proposed scholarship procedures satisfy the advance-approval requirements?
• Outcome: approved
• Key authorities: IRC §§ 117(a)-(b), 170(b)(1)(A)(ii), 170(c)(2)(B), and 4945(g)(1)

Full text (IRS public release)

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

Release Number: 201750022
Release Date: 12/15/2017 Employer Identification Number:
Date: SEPTEMBER 19, 2017

Contact person - ID number:

Contact telephone number:

LEGEND UIL: 4945.04-04
B = Scholarship Program

C = Company

D = Company

w = Number

x dollars = Dollar Amount

y = Number

z = Number

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 provide in Code section 117(b)).

Description of your request

You will award scholarships under your B program. You will award scholarships for
advanced degree (post-secondary) religious studies program at an accredited theological
seminary, college or university. You have contracted with C to be involved in the
administration, recipient selections, and pay out of funds for your program. Scholarships
are one-time non-renewable awards. Assistance is to include, but is not limited to,
amounts paid for qualified tuition and related expenses.

Letter 4792 (10-2012)
Catalog Number 58263T


Your program will be publicized through a news release, flyers, and letters to academic
institutions and industry professionals. Additionally, D's website will publicize your
program, along with making the application available.

To be eligible applicants must complete an on-line application and possess the following
criteria:

a. Be enrolled full-time in an advanced degree (post-secondary) religious studies
program at an accredited theological seminary, college or university

b. Demonstrate personal impact throughout education, work experiences, and
volunteerism

c. Have a minimum grade point average of w on a 4.0 scale or its equivalent

d. Be committed to entering the practice of full-time ministry in the United States
following completion of studies, including leading a denominational congregation,
or worship group, or serving in religious leadership at a house of worship

Scholarship recipients will be selected using a two-phase approach to ultimately select y
recipients annually each receiving x dollars. Children of D employees will not be eligible
to receive scholarships. Additionally, relatives of members of the selection committee, or
of your officers, directors, or substantial contributors are not eligible for your awards.

Phase 1 will be performed by C who will select a total of z applicants; an even amount
selected from each of five geographic regions that you determine. Applicants will be
selected based on the following:

(1) Past scholastic performance in undergraduate/graduate programs as represented
by their GPA
(2) Personal impact through work experiences and volunteerism

Phase 2 will be performed by your selection committee who will identify y finalists, even
divided between each of the five regions based on the following:

(1) Letter of recommendation submitted from a teacher, counselor or advisor which
validates student’s academic and extracurricular achievement

(2) Essay on how the students will you use advanced study, including meaningful
experiences, personal vision for ministry/leadership, and serving the greater good
and improving the human condition

The selection committee for Phase 1 will consist of C employees. The selection
committee for Phase 2 will consist of D employees, including representatives from
Marketing, Human Resources, Division Management, and the Chief Sales Officer. The
selection committee will be responsible for keeping records pertaining to its decisions
regarding the provision of assistance. If assistance is denied, the selection committee is
to document the reasons for such denial, and will provide such denial in writing to the
applicant eligible recipient. If assistance is provided to eligible recipients, the selection

Letter 4792 (10-2012)
Catalog Number 58263T


committee is to maintain adequate records and case histories to justify such grants as
being in furtherance of charitable purposes.

Upon selection, C will process scholarship payments on behalf of B. Payments shall be
made directly to the institution the qualified applicant attends. Recipients’ obligations
include:

(1) Notifying C of any changes in address, school enrollment or other relevant
information and send a complete official transcript when requested

(2) Provide D with a picture as well as a copy of the written essay for publication in
their company newsletter

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.

You represent that you will maintain the following: (1) all records relating to individual
grants including information obtained to evaluate grantees, (2) identify 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.

Specifically, if you receive any information indicating that the terms of the scholarship
have been violated or if the scholarship recipient fails to maintain satisfactory progress
towards the degree, the scholarship will be terminated immediately. You shall take all
reasonable and appropriate steps either to recover the scholarship funds or to ensure the
restoration of the diverted scholarship funds. At the completion of a scholarship, you will
require that the scholarship recipient provide a transcript of academic performance.

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 of 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).

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

Letter 4792 (10-2012)
Catalog Number 58263T

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.

We've sent a copy of this letter to your representative as indicated in your power of
attorney.

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