Foundation received more time to build its scholarship headquarters

Plain-English summary

A private foundation previously received approval to set aside funds for an academy that would serve as headquarters and a workshop site for its scholarship program. The COVID-19 pandemic changed the secondary-education environment, forced its mandatory student workshops online, and made the original construction timetable impractical. The foundation continued awarding four-year scholarships, expanded its pool of eligible students, and planned new awards while refining the scholarship and workshop programs. It requested additional time to plan and build a new home office and workshop facility. The IRS found good cause under section 4942(g)(2)(B)(i) and approved the requested extension of the set-aside payout period.

Ruling snapshot

• Question: Did pandemic disruption and program changes provide good cause to extend the approved set-aside payout period for the headquarters and workshop project?
• Outcome: approved
• Key authorities: IRC § 4942(g)(2)(B)(i); Treas. Reg. § 53.4942(a)-3(b)(7)(i)(e)

Full text (IRS public release)

Department of the Treasury Date:

Internal Revenue Service 09/19/2022
Tax Exempt and Government Entities Employer ID number:

IRS P.O. Box 2508

Number: 202250015
Release Date: 12/16/2022

LEGEND UIL: 4942.03-07
T = Scholarships Awarded

U = Ending Date of First Set Aside

V = Effective Date of First Set Aside

W = Date of Request

X = Name of Academy

Y = Name of Scholarship

Z = Date of Impending Awards

Dear [redacted]:

We received your W request for a [redacted]-month extension to pay out a set-aside approval on
building a headquarters and workshop. Based on the information furnished, we approved your request.

Our ruling dated V approved a $[redacted] set-aside for the year ending U for the purpose of
constructing an academy to help similar to Y. You stated the set-aside would be expended within [redacted] months.

Description of your set-aside request
The onset of the COVID -19 pandemic in 2020, has changed the way students and families think about, expect,
and plan for secondary education. As a result of the pandemic, you have been struggling to determine feasibility

and practicability of building the X in the current educational environment.

Throughout, you have continued to broaden the pool of students across the country who qualify for Y. You
have awarded T four-year Y to date.

Prior to COVID in addition to scholarships granted, you held mandatory workshops for recipients in various
educational areas. The mandatory workshops are a core feature of the scholarship recipients in various
educational areas. Since COVID these workshops have been held online as opposed to on-site. The mandatory
workshops are a core feature of the scholarships, since they teach important life skills that are not typically
covered in a traditional or even liberal art school curriculum. These workshops, which include
workshops on [redacted]; [redacted]; [redacted], and how to get off to a great start in
college and the workshops on learning how to [redacted], how to [redacted] and how to
[redacted], are best taught firsthand on site.

You have continually refined the scholarship and workshop processes and intend to award new four-year
scholarships in Z. You have taken steps to make this happen. All ACT eligible students and all high school

Letter 4798 (Rev. 12-2021)
Catalog Number 58294S

counselors at over [redacted] eligible public high schools have been contacted.

You believe you can help more students in financial need by expanding the Y and the workshops and award
more scholarships. With the new headquarters building, you will have the ability to continue the substantial
growth of the program in an efficient and professional manner. With a new workshop facility, you will have the
ability to provide important firsthand on-site workshop experiences, a better and desirable goal for X.

Due to COVID and its lingering effects, and your substantial growth of assets, it is found to be impractical to
build the X, therefore you are requesting a [redacted] year extension to the set aside approved on V in which to plan
and construct a new home office.

Basis for our determination
Internal Revenue Code (IRC) Section 4942(g)(2)(B)(i) provides requirements for approval of a set-aside for a

specific project that will be paid out in five years. A foundation must establish that the project can be accomplished
better by using the set-aside instead of by making an immediate payment. A set-aside may have its period to pay
extended if it satisfies the requirements of IRC Section 4942(g)(2)(B)(i) and good cause is shown.

Treasury Regulation Section 53.4942(a)-3(b)(7)(i)(e) states that you must provide a statement showing good
cause as to why the set-aside payment period should be extended, specifying the requested extension of time.

Additional information
This determination may only be used by the organization that requested it. IRC Section 6110(k)(3) provides that

it may not be used or cited as a precedent.
Visit www.irs.gov/set-asides for more information.

We'll make this determination letter available for public inspection after deleting certain identifying information,
as required by IRC Section 6110. Read the enclosed Letter 437, Notice of Intention to Disclose, and review the
attached letter that shows our proposed deletions. If you disagree with our proposed deletions, follow the
instructions in the Letter 437 on how to notify us. If you agree with our deletions, you don't need to take any
further action.

Keep a copy of this letter for your records.
If you have questions, you can call the contact person shown above.

Sincerely,

Stephen A Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:
Redacted Letter 4798
Letter 437

Letter 4798 (Rev. 12-2021)
Catalog Number 58294S