IRS approves civic-education grants for teachers

Plain-English summary

A private foundation proposed annual one-time grants to K-12 teachers for classroom units using public deliberation or deliberative teaching about important national issues. Applicants had to demonstrate commitment to students' civic development, submit a detailed unit plan and resource needs, and identify a teaching partner or administrator who would support implementation. A diverse review panel would select recipients objectively and without discrimination. Grantees had to submit progress and final reports, and the foundation would investigate misuse, recover diverted funds, and retain records for seven years. The IRS approved the procedures under section 4945(g)(3), so grants made under the program as described would not be taxable expenditures.

Ruling snapshot

• Question: Do the proposed teacher-grant procedures qualify for advance approval under section 4945(g)(3)?
• Outcome: approved
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), 170(c)(2)(B), 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

Release Number: 202016030
Release Date: 4/17/2020 Employer Identification Number:

Date: January 21, 2020
Contact person - ID number

Contact telephone number:

LEGEND                                      UIL: 4945.04-04
B = Name

C = Individual

w = Numbers

x = Number

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 granting educational grants. Based on the information
you submitted, and assuming you will conduct your program as proposed, we determined
that your procedures for granting 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 a grantmaking program called B.

The purpose of B is to honor the work of C in civic education by awarding grants to K-12
teachers once a year to enable them to implement public deliberation or deliberative
teaching in the classroom in order to promote deliberation about important national
issues. You will generally award w grants annually on a one-time basis for approximately

y dollars.
To be eligible for the grant award, the applicant must:

• Demonstrate a commitment to fostering the civic development of students;
• Provide a detailed unit plan to illustrate their commitment to foster civic
development of students;

• Show how their unit plan will support student learning, including the resources that
will be needed.

Further, the applicant must identify a teaching partner or school administrator who will
support them in carrying out the unit plan in the classroom. The teaching partner may be
another teacher, a university partner, or other community partner positioned to be a
resource or collaborator.

You will promote B through your network as well as on your website. To apply for a grant
under B, applicants must complete a grant application using your form with all required
attachments and submit it by a specific due date. Approximately x individuals will be
eligible to apply for the grant each year.

Once applications are received, a diverse panel of your representatives will review the
applications and select the grant recipients on an objective and nondiscriminatory basis.
Recipients will be notified about one month after the application due date.

Grantees will be required to provide written reports, at least annually, to describe the
progress made in the classroom. Grantees will also be required to submit a final written
report describing the outcome and benefits achieved by the implemented lesson plan.

If you discover the misuse of the grant, you will withhold any remaining grant funds until
corrections are made. When necessary, you will investigate diversions of funds from their
intended purposes and take all reasonable and appropriate steps to recover diverted

funds.
You will retain pertinent records for seven years, including but not limited to:

(1) All information secured to evaluate the qualifications of potential grantees;
(2) Identification of grantees and applicants;

(3) Specification of the amount and purpose of each grant; and

(4) Any follow-up information obtained.

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 grants the grant on an objective and nondiscriminatory basis.
• The IRS approves in advance the procedure for granting 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

Letter 4779 (10-2012)
Catalog Number 58222Y

- A prize or grant subject to the provisions of Section 74(b), if the recipient of
the prize or grant 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.

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 grant 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.

Letter 4779 (10-2012)
Catalog Number 58222Y

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