Artist residency grant procedures receive advance approval

Plain-English summary

A private foundation proposed an artist residency program with three six-week sessions each year. Selected artists would receive housing, studio access, meals, a stipend, and supply assistance while pursuing projects aligned with the foundation's social and charitable goals. A rotating selection committee would evaluate broadly publicized applications using stated artistic and mission-related criteria, with insiders and specified relatives excluded. Recipients would submit reports, comply with spending deadlines, and return or redirect misused funds, while the foundation would keep detailed case histories and monitor results. The IRS approved the procedures under Section 4945(g)(3), so grants made under the approved program would not be taxable expenditures. The approval applied only while the program's standards and procedures remained substantially unchanged.

Ruling snapshot

• Question: Did the foundation's artist residency grant procedures satisfy the advance-approval rules for grants to individuals?
• Outcome: Approved.
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), and 4945(g); 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: 202125021
Release Date: 6/25/2021

Employer Identification Number:
Date: March 30, 2021

Contact person - ID number:

Contact telephone number:

LEGEND UIL: 4945.04-04

B = Scholarship Name
C = Number Range
D = Number Range
x dollars = Amount
y dollars = Amount

Dear [redacted]:

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 called B.

Your purpose is to use your assets and influence to improve a wide array of societal ills,
including a lack of environmental sustainability, community inequality, and the need for a
better understanding of, and more resources to address, mental health issues. Artists
have traditionally used images, stories, film, and other forms of creative expression to
raise awareness about social issues or injustices.

The purpose of B is to give artists a space to work with a community of other artists,
thereby promoting public appreciation of the arts. B is intended to be a judgment free
atmosphere that will encourage artists working in a variety of media to challenge each

other and to think boldly in a supportive environment. B will comprise three six-week
sessions per year, each session consisting of a [redacted] to [redacted] person cohort. Living
accommodations, studio space, and monetary support will be provided to artists working
on projects that align with your stated goals and values.

The program will be conducted at a property owned by your president which will be
provided to you at no cost. Studio space will be open daily from [redacted], artists
can choose to work in the studios or at other locations throughout the property. At the
end of each cohort's residency you will host a free open house event for community
members to meet the artists, view the projects, and the artists will be given an opportunity
to talk about their work.

All grant recipients will be provided housing and two meals per day for the duration of the
six-week session. In addition, each artist will receive a x dollars stipend to support the
artist's participation in the cohort, y dollars of which will be provided in the form of a gift
card to purchase supplies prior to the start of the residency. The balance will be provided
as a cash payment upon the artist's arrival at the beginning of the session.

You plan to publicize the availability of grants through multiple channels to ensure there
is sufficient opportunity for broad participation in B. You have plans to approach a
number of art and design schools, university writing programs, and music schools to
advertise B. Your officers, directors, employees and independent contractors, and
members of the Selection Committee will also promote the availability of grants through
their personal and professional networks.

A broad range of artists, aged 18 and over, from different backgrounds, disciplines, and
skill sets will be eligible for B. Such individuals may include writers, poets, painters,
sculptors, potters, performance artists, film makers, dancers, and musicians. Individuals
who have demonstrated talent by participating in art fairs, art shows, poetry or writing
contests, and who have demonstrated sustained interest in a specific artistic discipline
through study, exhibiting, gallery work, or publishing are welcome to apply. You expect
an initial applicant pool between C artists. Once the program becomes established you
expect an average pool of D artists.

Applicants will be required to submit a summary of their proposed project, a list of space
and equipment requirements, and a project budget, which may include cost of living and
other ancillary expenses. Applicants will also be expected to provide a current resume, a
portfolio that includes submissions representative of the applicant's past work and
accomplishments, and one letter of reference. The specific criteria used to select
recipients will include alignment with your goals and overall mission; quality of proposed
project; skills and professional background; overall creativity and inventiveness of the
applicant and the project; and recommendations and references. The Selection
Committee will narrow down the applicant pool to [redacted] finalists, [redacted] will be
selected to participate in the program. Your officers, directors, substantial contributors,
selection committee members and the children of close relatives of such persons are not
eligible for grants.

Letter 4779 (10-2012)
Catalog Number 58222Y

The Selection Committee will be composed of at least two of your staff members and a
rotating pool of volunteer judges. The rotating pool of judges will include art teachers,
writers, curators, artists with expertise in various disciplines, philanthropists and/or social
entrepreneurs who have experience on boards evaluating candidates for grants. A new
Selection Committee will be established for each application cycle. Your president will
appoint the members of the committee. Each member is obligated to disclose any
conflicts of interests with a potential grantee.

Each recipient is expected to live at the site at least five days a week during the
residency. Resident artists are also expected to participate in their cohort community and
provide quarterly updates to you regarding public appearances, exhibits or press
coverage for four years post-residency. A completed final work product is not a
requirement, any work that is produced during the residency is the exclusive property of
the artist. However, you will request permission to exhibit representations of the artists’
work. Finally, each grant recipient will complete an exit interview so you can assess the
effectiveness and impact of B.

You aim to curate a diverse selection of artists in each cohort, representing different
disciplines and experiences. In awarding B grants there will be no discrimination on the
basis of race, age, national origin, religion, sexual orientation, or gender. In addition, you
will comply with all United States statutes, executive orders and regulations that restrict
or prohibit U.S. 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 to ensure that you do not make a grant to an
individual in violation of the Patriot Act of 2001.

You will maintain detailed case histories recording the name and address of the applicant
and the amount or total value of the grant. Additionally, the case histories will record the
criteria relied upon by the Selection Committee to select grant recipients, as well as all
application forms, reports, budgets, or other required documents. The case histories will
record confirmation that the applicant bears no relationship to your officers, directors, and
substantial contributors or members of the Selection Committee.

You expect to maintain these records for a period of at least four years after the time
each grant recipient has fully expended the grant funds, or has otherwise ceased to
participate in B. You will periodically review case histories to evaluate the impact and
overall effectiveness of the B grants.

You have established procedures to ensure appropriate use of the grant funds. Each
recipient is required to provide you with an annual narrative and financial report as well
as a final narrative report. Grants must be fully expended within six months after the
cohort end date. You will withhold further payments to the extent possible during the
investigation of any jeopardized grant. If you discover grant funds have been misused all
reasonable steps will be taken to recover any diverted funds or to ensure that any used
portion is either returned or used for its intended purpose. Grants are not renewable,

Letter 4779 (10-2012)
Catalog Number 58222Y

however, there are no restrictions as to the number of times an individual may apply for
the program.

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.

• 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

Letter 4779 (10-2012)
Catalog Number 58222Y

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