IRS approves a foundation's research-grant program to document endangered oral literature and ecological knowledge

Plain-English summary

A private foundation runs a research-grant program that funds anthropologists, linguists, and local researchers to document and preserve endangered oral literature and traditional ecological knowledge. It asked the IRS to approve its grant procedures under IRC § 4945(g)(3), the branch of the rule for grants meant to achieve a specific objective or produce a report (as opposed to plain tuition scholarships). Private foundations owe an excise tax on grants to individuals for study unless the IRS pre-approves the selection process, so this advance approval matters. Grants run up to a set cap, are awarded quarterly on the project's importance and urgency, and exclude the foundation's insiders and their families. The IRS approved the procedures, so the grants are not taxable expenditures. This is the standard § 4945(g)(3) clearance a foundation needs before funding individual research projects.

Ruling snapshot

• Question: Do the foundation's research/educational-grant procedures qualify for advance approval under IRC § 4945(g)(3)?
• Outcome: Approved
• Key authorities: IRC §§ 4945(g)(3), 4945(d)(3), 117, 74; Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

Department of the Treasury                          Date: 04/14/2022
Internal Revenue Service
Tax Exempt and Government Entities

IRS P.O. Box 2508
Cincinnati, OH 45201

                                                    Taxpayer ID number:

                                                    Person to contact:
                                                    Name:
                                                    ID number:
                                                    Telephone:

Release Number: 202227014
Release Date: 7/8/2022

UIL: 4945.04-04

LEGEND
x dollars = Amount
y dollars = Amount
z dollars = Amount
B = Name 1
C = Name 2
W = Name 3

Dear

You asked for advance approval of your educational grant procedures under Internal Revenue Code (IRC)
Section 4945(g)(3).

This approval is required because IRC Section 4945 provides for the imposition of taxes on each taxable
expenditure of a private foundation. IRC Section 4945(d)(3) provides that the term "taxable expenditure"
includes any amount paid or incurred by a private foundation as a grant to an individual for travel, study, or
similar purposes by the individual, unless the grant satisfies the advance approval requirement of IRC Section
4945(g).

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 IRC 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 have operated a research grants program. You initiated this program to document
threatened and traditional ecological knowledge around the world. You provide the grants to
enable anthropologists, linguists, and other scholars, as well as individuals and teams of local researchers in
societies, to collect and preserve these unique traditions. Grantees are encouraged to foster the
development of local teams of collectors to continue the work of traditional literature, language, and
ecological knowledge. of the are also encouraged.

You allocate approximately x dollars annually to this grant program and each grantee could receive no more
than y dollars. If an applicant who proposes to develop a long-term commitment to a community and with plans
to collaborate with the community's members to preserve and protect their literature and traditional
ecological knowledge, the grantee could receive up to z dollars. The amount of each grant is based on the
applicant's need after evaluating the proposal and budget. The number and amount of grants could be adjusted
based on the reports you receive from the current grantees and the application you receive from the prospective
grantees.

Your program and application process are publicized on your website, social media, and listed in W, a
searchable reference of anthropologists and anthropological organizations. You also notify selected colleges and
universities anthropology departments about the program. Applicants should apply by submitting a proposal
with a budget to your email address. Applications are accepted on continuous basis and grants are awarded
quarterly.

Anyone who engages in documentation of oral literature and traditional ecological knowledge may apply.
Specific academic credentials are not required but taken into consideration. Selection is based on the importance
of collecting oral literature among the society in which the applicant will be working, the methods to be used,
the goals to be achieved, and the urgency of the project

Grants are currently selected by your board, but future grants may be selected by a selection committee. A
selection committee will make up of your board members and scholars with relevant expertise selected by your
board. Your selection committee, directors, and their family members (including extended family members)
are ineligible to receive the grants. The children, grandchildren, and great-grandchildren of are also
ineligible to receive grants. Your grants are awarded without discrimination on the basis of sex, race, color, or
national or ethnic origin.

Each grantee is provided a letter with the terms and conditions of the grant. It includes the amount of the grant,
requirements for interim and final reports, and expectations regarding the work archive. The grantees are
required to provide current progress and use of grant funds reports at least annually. A final report is due within
sixty days of the end of the grant period. For a multi-year grant, evidence of progress and annual reports are
both required before the next year's funding is paid.

Your president is responsible for monitoring the progress of the grantees, reviewing their reports, and
determining whether grant purposes are being fulfilled and assessing whether there are issues that require
further scrutiny and investigation. In carrying out these responsibilities, your president gets assistance from your
staff or delegates some responsibilities to other board members.

If there are indications of misuse of funds, you will initiate an investigation and withhold further payments until
it can determine no funds have been used for improper purposes. Payments will also be withheld for delinquent
reports. If it is determined there was misuse of funds, you take all reasonable and appropriate steps to recover
the funds and to ensure the dedication of other grant funds held by the grantee to the intended purposes. These
steps may include legal action if it deems appropriate. In addition, the grantees are required to provide
assurance no future diversions of funds and extra precaution to prevent future happening. If it is discovered the
grantee previously diverted grant funds, no additional funding will be provided until all diverted funds have
been recovered.

You maintain case histories showing (i) the name and address of each applicant, (ii) the proposal, budget, and
any other materials submitted by the applicant, and (iii) the decision whether to award a grant to the applicant,
the criteria used to make the decision and the amount awarded.

Basis for our determination

IRC Section 4945 imposes excise taxes on the taxable expenditures of private foundations. 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 the following requirements of IRC Section 4945(g) is not a taxable expenditure.

* The foundation awards the grants 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 IRC Section 117(a) and is to be used for study at an educational
    organization described in IRC Section 170(b)(1)(A)(ii); or
    - A prize or award subject to the provisions of IRC 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 Regulation 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 only covers 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.
* The effective date of our approval is May 3, 20  , which is the date your request was submitted.
* This determination applies only to you. It may not be cited as a precedent.
* You cannot rely on the conclusions in this letter if the facts you provided have changed substantially.
You must report any significant changes to your program to the IRS at:
Internal Revenue Service
Exempt Organizations Determinations
* You can't award 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 further the purposes of your
organization. You cannot award grants for a purpose that is inconsistent with IRC 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.
* If you disagree with our proposed deletions, follow the instructions in the Letter 437 on how to notify us.

We'll make this determination letter available for public inspection after deleting personally identifiable
information, as required by IRC Section 6110. We've enclosed Letter 437, Notice of Intention to Disclose -
Rulings, and a copy of the letter that shows our proposed deletions.

If you agree with our deletions, you don't need to take any further action.

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 questions, you can contact the person shown at the top of this letter.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:
Letter 437

cc:

Letter 4792 (Rev. 1-2022)
Catalog Number 58263T