Student research grant procedures received advance approval

Plain-English summary

A private foundation proposed educational research grants for college and university students studying a redacted specialty and related scientific contexts. Applicants needed faculty support, institutional ethical approval, a research proposal, a budget, and a dissemination plan, and trained reviewers would score applications using stated criteria. Awards would reimburse approved expenses, require six-month progress reports and a final product, and be suspended or recovered if funds were diverted. The IRS approved the objective selection, supervision, reporting, and recordkeeping procedures under section 4945(g)(3), so compliant grants would not be taxable expenditures.

Ruling snapshot

• Question: Did the foundation’s student research grant procedures satisfy the advance-approval requirements?
• Outcome: approved, assuming the program is conducted as proposed
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), and 4945(g)(3); Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

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

Number: 201937020 Employer Identification Number:

Release Date: 9/13/2019
Contact person - ID number:

Contact telephone number:
Date: June 19, 2019

LEGEND UIL: 4945.04-04
B = Specialty
C= Science

D= Organization
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 that you will operate an educational grant program.

Your purpose is to support students who study the epidemiology, phenomenology, and
the environmental, cultural and clinical contexts of B and to develop a collaboration of
students, scientists, and community members who are passionate about C.

The purpose of your program is to provide educational research grants to students
enrolled in institutions of higher education in the United State in an academic degree
program in order to enhance their academic research skills as well as assist them in
completing a research study.


Furthermore, the grants are designed to directly support the student’s research project in
order to produce an academic presentation or report and will fund such items as travel
expenses to conduct the research study, incentives to pay participants in the research
study, office supplies, and needed materials and the dissemination of the research
project A portion of the grant must also be used to offset travel costs to present their
findings at a meeting or conference.

You will advertise your program through academic listservs, social media , email
distributions, and through announcements at other non-profit educational organizations.
In addition, you especially will encourage those students who identify as a member of a
diverse sexual, ethnic, racial, gender, religious, or sexual orientation group to apply as
well as encourage applicants whose research studies are designed to address the
understanding of ways in which the experience of diversity provides insight into your
mission.

To be eligible to apply, the student must:

1. Be enrolled in a college/university in the United States;

2. Be involved in the study of epidemiology, phenomenology, or the environmental,
cultural or clinical contexts of B;

3. Have a member of their academic faculty as a supportive mentor;

4. Have approval of their institution or a faculty committee who is overseeing the project;

Under your grant program, all applicants must provide an application package consisting
of numerous items including a resume, a study proposal, a budget, and their planned
dissemination of findings. All applicants must also submit an approval document from the
D which shows that their educational institution has also reviewed and approved the
research project on ethical grounds and that the research project follows state and
federal laws. Furthermore, even with the approval of the professor and the D at the
applicant’s university, your application reviewers are also trained extensively in research
and academic ethics and will independently determine whether the project is ethically and
legally sound prior to awarding a grant. Moreover, various other documents are required
which is dependent on whether the applicant is in the proposal stage of the study, the
active data collection stage, the data analysis manuscript writing stage, or whether the
applicant is seeking funding for a completed study within one year of the application
deadline.

Once an application has been submitted, the president of your board will review the
application to determine completeness. Each complete application will then be reviewed
by no fewer than two individuals with experience in research methodology as well as
reviewed by one or more scientists in training. Each reviewer will then rate and score the
application using a standard form. Ratings are based on the quality and innovation of the
study design, the merit of the applicant and their academic mentors, the research study's
relevance to your mission, and the likelihood of successful completion of the study.
Ratings will be submitted to your president or their designee. Once ratings are compiled,

Letter 4779 (10-2012)
Catalog Number 58222Y

the Board of Directors will meet to discuss the merits of the highly rated applications and
vote on which should be selected for an award and determine the amount of the award.

Furthermore, you plan to award approximately x dollars per year in total grants, which
may vary in future years depending on budgetary conditions. The maximum individual
grant amount is y dollars. Therefore, the number of awards you give will depend on the
applications that you receive, and the amounts requested by the applicants. In addition,
the grant amounts may vary in the future depending on your budgetary conditions.

Once recipients are identified, you require that they agree in writing to the following:

• All funds will be used in accordance with the approved budget and any changes to
the budget must be approved by your president;

• Progress reports must be submitted every six months after the award notification
until the project is completed (and future reimbursement of funds is conditional
upon timely submission of progress reports);

• The recipient must provide a summary of the findings to you upon completion of
the project;

• The recipient must present their findings through either a research conference or
scientific meeting, peer reviewed publication, or editorial publication as well as list
you as a funding source;

• The recipient must agree to uphold the ethical obligations of the institution where
they are enrolled and from where the project has been approved.

Concerning monitoring the grants, you award them on a reimbursement basis, meaning
that no funds are given to the recipient without evidence of the approved expenditure.
Once a budget is approved for a grant recipient, the student can submit a receipt for an
item in their budget your representative. Upon receipt, the item will be compared with the
approved budget and a check will be drafted and sent to the grant recipient.

Regarding supervising the grant, you will obtain a progress report via electronic survey
every six months until the project is completed. Once completed, the recipient will
complete a final progress report and submit the final product to you. You will monitor
responses to ongoing progress reports and address any progress issues as they arise.
Furthermore, satisfactory completion of progress reports and any other communications
with you are required for continued reimbursement for approved expenses. If any term of
the award is violated, then you will withhold future reimbursement of funds. Moreover,
you maintain contact information of the faculty mentor with whom the student works and
will be able to contact them to resolve any problems with violations of the award
agreement.

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

Letter 4779 (10-2012)
Catalog Number 58222Y

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 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.

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

- 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.

Letter 4779 (10-2012)
Catalog Number 58222Y


• 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.

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