Medical travel and international research grant procedures are approved

Plain-English summary

A private foundation proposed two educational grant programs in a redacted medical specialty. The first would help outstanding residents travel to a professional organization's annual meeting after submitting an accepted paper or poster. The second would fund one-year laboratory research fellowships for practitioners or students from specified foreign countries, with the goal that recipients return home to academic careers and advance the specialty there. Selection committees would evaluate applicants on merit and commitment, exclude insiders and relatives, require reports, investigate diverted funds, retain grant records, and follow applicable sanctions rules. The IRS approved both programs under section 4945(g)(3), so grants made through the described procedures would not be taxable expenditures.

Ruling snapshot

• Question: Did the foundation's medical meeting-travel and international research-fellowship procedures satisfy the advance-approval requirements for educational grants?
• Outcome: Approved under section 4945(g)(3).
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), 170(c)(2)(B), and 4945(g)(3); Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

[Redaction note: the IRS release substitutes letters and generic amounts for the program names, medical specialty, organizations, nationality, grant counts, and dollar amounts, and blanks the foundation's identity, employer identification number, contact information, and addressee.]

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

Release Date: 201808021

Release Date: 2/23/2018 Employer Identification Number:
Date: November 28, 2017
Contact person - ID number:

                                                           Contact telephone number:

LEGEND UIL: 4945.04-04

B = Name
C = Name
D = Specialty
E = Name
F = Name
G = Name
H = Nationality
J = Specialists
K = Number

x dollars = Amount
y dollars = Amount

Dear :

You asked for advance approval of your educational grant procedures under Internal
Revenue Code Section 4945(g)(3). This approval is required because you are a private
foundation that is exempt from federal income tax.

Our determination

We approved your procedures for awarding educational grants. Based on the information
you submitted, and assuming you will conduct your program as proposed, we determined
that your procedures for awarding educational grants meet the requirements of Code
Section 4945(g)(3). As a result, expenditures you make under these procedures won't be
taxable.

Description of your request

Your letter indicates you will operate two grant making programs called B and C. The
purpose of B is to enhance the education of D residents in department training programs.
Under B, you will pay travel costs for D residents to attend meetings conducted by E. The

2

purpose of C is to promote research in D and the advancement of D. Under C, you will
award fellowships to persons practicing or studying D.

Program B

Under B, you plan to award in the range of K grants to help outstanding D residents cover
travel expenses to attend the annual meeting of E. Each grant will be equal or less than x
dollars. You will solicit candidates for B by sending emails to all D departments' chair
persons, resident chairs and resident coordinators who have D residents within the
geographical area of E.

You will ask them to select one D resident from each training program. This selection is
put in writing and submitted to E to confirm this resident has submitted a paper, the title,
and registration to the meeting. The selection committee is composed of E. Members of
the selection committee will award grants based on merit, and are required to abstain
from consideration of any applicant related in any way to the member of the selection
committee. The recipient must submit an accepted paper or poster at the respective
educational meeting, and attend the meeting. If the recipient fails to do so, the funding is
forfeited.

Program C

Under C you will work with F and G to award grants to persons practicing or studying D
from H countries to perform research for one year in a laboratory at F in order to promote
research in D and the advancement of D medicine. The intent of the award is to prepare
the recipients to practice an academic career in their home country with the goal of
advancing the specialty of D in their home countries.

Your board will annually determine the number of grants awarded based on the earnings
over the prior year. Generally, between one and three fellowships in the approximate
amount of y dollars will be awarded.

To be eligible, the applicants must be practicing J professionally, or studying D in a
recognized educational institute or hospital setting.

You and G will promote C primarily through G’s website as well as solicit grant
applications for C through G’s website. Applications must include a proposed research
project in D, a detailed CV, and professional references.

The applications will be evaluated by a joint committee from F and G who will select the
recipients on an objective basis. A strong commitment that the candidates have
illustrated to return to their home country and practice an academic career is weighed
heavily in the selection process.

You will contact the recipients in writing to notify them of the terms of the award including
they will be supervised by F, and subject to all the rules and requirements of F.
Recipients are required to submit a full report of their experiences from the period of their

Letter 4779 (10-2012)
Catalog Number 58222Y

3

fellowship, and to provide an annual report of their progress, difficulties and how the
fellowship helped in the recipient’s career for a period of several years.

Procedures and Controls for both B and C

Relatives of members of the selection committee, your officers, directors, or substantial
contributors are not eligible for your programs. Furthermore, your officers, directors and
substantial contributors are not eligible for grants under either of your programs.
Relatives of members of the selection committee, and of your officers, directors, or
substantial contributors are also not eligible for awards made either of your programs.

You represent that you will review grantee reports annually, investigate diversions of
funds from their intended purposes, and take all reasonable and appropriate steps to
recover diverted funds to ensure funds are used for their intended purposes. You will
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 diversions from occurring.

You will maintain all records relating to individual grants, including information obtained
to evaluate grantees, identify whether a grantee is a disqualified person, establish the
amount and purpose of each grant, and establish that you undertook the supervision
and investigation of all grants.

For both B and C if you conduct activities in foreign countries, you will check the
OFAC List of Specially Designated Nationals and Blocked Persons for names of
individuals and entities with whom you are dealing to determine if they are included on
the list. You will comply with all statutes, executive orders, and regulations that restrict
or prohibit persons from engaging in transactions and dealings with designated
countries, entities, or individuals, or otherwise engaging in activities in violation of
economic sanctions administered by OFAC. You will acquire from OFAC the
appropriate license and registration where necessary.

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 Section 117(a) and is to be used for
  study at an educational organization described in Section 170(b)(1)(A)(ii); or

• A prize or award subject to the provisions of Section 74(b), if the recipient of
  the prize or award is selected from the general public; or

Letter 4779 (10-2012)
Catalog Number 58222Y

4

• To achieve a specific objective; produce a report or similar product; or
  improve or enhance a literary, artistic, musical, scientific, teaching, or other
  similar skill or talent of the recipient.

To receive approval of its educational grant procedures, Treasury Regulations Section
53.4945-4(c)(1) requires that a private foundation show:

• The grant procedure includes an objective and nondiscriminatory selection
process.

• The grant procedure results in the recipients performing the activities the grants
were intended to finance.

• The foundation plans to obtain reports to determine whether the recipients have
performed the activities that the grants were intended to finance.

Other conditions that apply to this determination

• This determination covers only 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 precedent.

• You cannot rely on the conclusions in this letter if the facts you provided have
changed substantially. You must report any significant changes in 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 make 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 must
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.

Letter 4779 (10-2012)
Catalog Number 58222Y

5

Please keep a copy of this letter in your records.

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

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4779 (10-2012)
Catalog Number 58222Y