IRS approves set-asides for two scholarly symposia

Plain-English summary

A private foundation planned two multi-year symposia that would bring promising young scholars together to discuss work in two redacted academic disciplines. It proposed annual set-asides to accumulate enough funds for each event, which was outside its usual ongoing grant program. The IRS found that these extraordinary, multi-year projects could be better accomplished by set-asides than by immediate payment and approved the program under IRC § 4942(g)(2). Each set-aside must be spent within 60 months after its first set-aside date and must be reflected in the foundation's records and tax calculations as described in the letter.

Ruling snapshot

• Question: May the private foundation treat funds reserved for two multi-year scholarly symposia as qualifying distributions under § 4942(g)(2)?
• Outcome: Approved
• Key authorities: IRC §§ 170(c)(2)(B) and 4942(g)(2); Treas. Reg. § 53.4942(a)-3(b); Rev. Rul. 74-450

Full text (IRS public release)

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

Number: 202103021
Release Date: 1/22/2021
Employer Identification Number:

Date: October 27, 2020
Contact Person - ID Number:

Contact Telephone Number:

LEGEND UIL

B = Program 4942.03-07
C = Year

D = Language

E = Language

F = Year

G = Year

h dollars = Amount
j dollars = Amount

Dear :

Why you are receiving this letter

This is our response to your December 9, 2019 letter requesting approval of a set-
aside under Internal Revenue Code Section 4942(g)(2). You’ve been recognized
as tax-exempt under Section 501(c)(3) of the Code and have been determined to

be a private foundation under Section 509(a).

Our determination

Based on the information furnished, your set-aside program is approved under
Internal Revenue Code Section 4942(g)(2). As required under Section 4942(g)(2),
the set aside amount must be paid within the 60-month period after the date of the

first set-aside.
Description of set-aside request

You are planning a multi-year project to hold two Symposia and you want to start
setting aside some funds for this purpose. You want to hold a B Symposium in C
as well as another in G. Therefore, you are requesting set-aside amounts for the
Symposium held in C, and then another set-aside to begin in F, which will be used

for the G Symposium.

The purpose of the B Symposium is to bring together a group of promising young
scholars for discussions that will explore new horizons in the disciplines of D
in general and E in particular.

In order to focus on the core group of young scholars who will form the next
generation of leadership in these fields, the selected scholars will all hold a PhD
degree and will be under years old at the time of the Symposium. Although
there are a sizeable number of bright young scholars in various sub-fields of D and
E , there are few opportunities for them to gather and share their ideas
freely, to forge a sense of common identity and to formulate a vision for the future.
It is hoped that the envisaged gatherings will provide a platform for these
promising young scholars to argue for their own viewpoints but at the same time to
engage respectfully with differences of opinion, as well as to foster a spirit of
cooperation, mutual support and productive criticism.

For the first Symposium, a set-aside of h dollars will be made immediately.
Another h dollars will be set aside the following year, and another h dollars the
third year. These amounts to be set aside will be paid during the year of
Symposium, which is a specified period that ends not more than 60 months after
the date of the first set-aside.

For the second Symposium to be held in G, a set-aside of j dollars will be made in
F, with another j dollars being set aside each year for the four years leading up to
the event. These amounts to be set aside will be paid during the Symposium,
which is a specified period that ends not more than 60 months after the date of the
first set-aside.

The project can be better accomplished by use of a set-aside. To help save up
sufficient funds for both Symposiums, you would like to start setting aside funds
now. Because the Symposium is an extraordinary undertaking that is not a part of
your usual, on-going grant program, it can be better accomplished by a set-aside
rather than an immediate payment of funds.

Basis for our determination

Internal Revenue Code Section 4942(g)(2)(A) states that an amount set aside for
a specific project, which includes one or more purposes described in Section
170(c)(2)(B), may be treated as a qualifying distribution if it meets the
requirements of Section 4942(g)(2)(B).

Section 4942(g)(2)(B) of the Code states that an amount set aside for a specific
project will meet the requirements of this subparagraph if, at the time of the set-
aside, the foundation establishes that the amount will be paid within five years and
either clause (i) or (ii) are satisfied.

Section 4942(g)(2)(B)(i) of the Code is satisfied if, at the time of the set-aside, the
private foundation establishes that the project can better be accomplished using
the set-aside than by making an immediate payment.

Section 53.4942(a)-3(b)(1) of the Foundations and Similar Excise Taxes
Regulations provides that a private foundation may establish a project as better
accomplished by a set-aside than by immediate payment if the set-aside satisfies
the suitability test described in Section 53.4942(a)-3(b)(2).

Section 53.4942(a)-3(b)(2) of the Foundations and Similar Excise Taxes
Regulations provides that specific projects better accomplished using a set-aside
include, but are not limited to, projects where relatively long-term expenditures
must be made requiring more than one year’s income to assure their continuity.

In Revenue Ruling 74-450, 1974-2 C.B. 388, an operating foundation converted a
portion of newly acquired land into a public park under a four-year construction
contract. The construction contract payments were to be made mainly during the
final two years. This constituted a “specific project.” The foundation’s set-aside of
all its excess earnings for four years was treated as a qualifying distribution under
Internal Revenue Code Section 4942(g)(2).

What you must do

Your approved set-aside(s) will be documented on your records as pledges or
obligations to be paid by the date specified. The amounts set aside will be taken
into account to determine your minimum investment return under Internal Revenue
Code Section 4942(e)(1)(A), and the income attributable to your set aside(s) will
also be taken into account in computing your adjusted net income under Section

4942(f) of the Code.

Additional information

This determination is directed only to the organization that requested it. Internal
Revenue Code Section 6110(k)(3) provides that it may not be used or cited as a
precedent.

Please keep a copy of this letter in your records.

If you have any questions, please contact the person listed in the heading of this
letter.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosure