Scientific-research travel and collaboration grant procedures approved

Plain-English summary

A private foundation sought advance approval for grants supporting individuals involved in a scientific research initiative. The grants would fund study, research, writing, lecturing, publication, and attendance or speaking at workshops, conferences, and symposia related to the redacted condition. Qualified scientists and researchers would be selected based on experience, reputation, research objectives, and funding needs, with insiders and disqualified persons excluded. Recipients would agree to use funds for approved purposes, provide reports, and face investigation, withheld payments, or recovery efforts if funds were diverted. The IRS approved the procedures under section 4945(g)(3), so expenditures made under the described program would not be taxable expenditures.

Ruling snapshot

• Question: Did the foundation's procedures for scientific-research grants to individuals satisfy the advance-approval rules?
• Outcome: Approved, provided the program operates as described.
• Key authorities: IRC §§ 74, 117, 170, and 4945; Treas. Reg. § 53.4945-4.

Full text (IRS public release)

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

Release Number: 201952010
Release Date: 12/27/2019 Employer Identification Number:
Date: September 30, 2019

Contact person - ID number:

Contact telephone number:

LEGEND UIL: 4945.04-04

B = Condition

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. The grants will
be awarded to enable the recipient to engage in study, research, writing, lecturing,
attending, and/or speaking at a symposium, or publishing materials in either print or
electronic media.

You will provide grants to individuals related to your scientific research initiative regarding
B to provide the opportunity to attend workshops, symposia, conferences, or similar
activities to enhance their work and/or to allow collaboration between peers, thereby
accelerating research into the causes, treatments and prevention of B. As such, the
individual grants will be made to further your focus of supporting research related to B.

Grants will be publicized through your network of scientific researchers as well as through
university and research centers. Generally, grants will be based upon an individual being
exceptionally qualified to carry out the purposes of the grant, such as a qualified research
scientist being selected to attend and/or speak at a particular conference or symposium.

You will select qualified scientists and researchers based on their experience and
reputation. You do not anticipate using an application process.

To be eligible for a grant, a recipient must be a qualified researcher whose supported
activity will achieve a specific objective, or improve or enhance a scientific skill or talent,
in each instance to further your focus of research into the causes, treatment, and
prevention of B.

Your board will make grants based on applications received, perceived needs, and, as
applicable, your desire to encourage attendance at research symposia. Your directors

and scientific advisory committee will determine who should be in the pool of potential

recipients. The board will then review applicants and make its determination. In certain
programs, you will solicit nominations from other researchers with relevant experience.
The board will review such nominations to determine whether to make a grant.

Grants are not renewable. Amounts of grants will be based on funding needs, the scope
of the activity to be funded, the availability of funds in the annual budget, and the
determination of your board.

Grants will be paid directly to or on behalf of the grant recipient. Each grant recipient
must agree in writing to use the grant funds to defray the expenses associated with the
approved project. With respect to the monitoring of grants, unless you make a payment
on behalf of a recipient (such as purchasing a plane ticket to a research symposium), you
will require a written report from each grantee at least once a year, unless the
project/activity length calls for a shorter interval. This report must include a summary of
the use of the funds awarded and how such funds fulfilled grant purposes. You will also
require a final report in the event the project is longer than one year.

In those instances where the reports or other information submitted (including the failure
to submit reports) indicate that all or any part of a grant is not being used for intended
purposes, you will investigate and will withhold further payments to the extent possible
until you receive more detailed or delinquent reports.

You will not award any grants to your substantial contributors, officers, or directors, or to
members of the family of such person, or to any disqualified person with respect to you,
or for a purpose that is inconsistent with the purposes set forth in Section 170(c)(2)(B) of
the Code. Each member of the board or committee of the board responsible for
determining grant recipients will disclose any personal knowledge of and relationship with
any potential grantee under consideration and 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 grantee or grantees are selected over others.

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

Letter 4779 (10-2012)
Catalog Number 58222Y

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 diversions from occurring.

You represent that you will maintain all records related to the following: (1) individual
grants including information to evaluate grantees, (2) grantees which are identified as a
disqualified person, (3) how the amount and purpose of each grant was established, and
(4) how you established 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/loans 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/loan 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