Campus construction and equipment set-aside approved

Plain-English summary

A tax-exempt private foundation asked the IRS to approve a set-aside under section 4942(g)(2). The foundation planned to reserve a redacted amount for construction projects and equipment purchases supporting educational programs at several campuses. Planned uses included new learning centers, upgrades to buildings and facilities, and the purchase and maintenance of equipment and vehicles. The foundation said pandemic-related supply-chain problems, material delays, labor shortages, and slow contractor responses required more time to complete the work. The IRS approved the request and instructed the foundation to record the set-aside as a pledge or obligation and pay the reserved amount within 60 months after the first set-aside. The letter also explains how the reserved amounts and related income affect the foundation's minimum investment return and adjusted net income calculations.

Ruling snapshot

• Question: May the private foundation set aside funds for delayed campus construction and equipment projects under IRC § 4942(g)(2)?
• Outcome: Approved
• Key authorities: IRC §§ 501(c)(3), 509(a), 4942(e)(1)(A), 4942(f), and 4942(g)(2)

Full text (IRS public release)

Department of the Treasury Date: 09/13/2023
Internal Revenue Service
Tax Exempt and Government Entities Employer ID number:
P.O. Box 2508
Cincinnati, OH 45201 Person to contact:
Name:
ID number:
Release Number: 202349015 Telephone:
Release Date: 12/8/2023 Fax:
LEGEND UIL: 4942.03-07

B = Place
C = Place
D = State
E = Place
F = State
g dollars = Amount
x = Date

Dear :

Why you are receiving this letter

We received your request for approval of a set-aside under Internal Revenue Code (IRC)
Section 4942(g)(2). Based on the information furnished, your request is approved.

You are recognized as tax-exempt under IRC Section 501(c)(3) and as a private foundation under IRC
Section 509(a).

What you need to do

Document your approved set-aside(s) in your records as pledges or obligations. You must pay the set-aside
amounts within 60 months after the date of the first set-aside, as required under IRC Section 4942(g)(2).

Take into account the amounts set aside when determining your minimum investment return under IRC Section
4942(e)(1)(A) and the income attributable to your set-asides when computing your adjusted net income under
IRC Section 4942(f).

Description of set-aside request

You have requested a set-aside of g dollars for the tax year ending on x.

The purpose of the set-aside is to fund construction projects and equipment purchases to further educational
programming at your B and C campuses in D and E campus in F. Specific purposes include the construction of
new learning centers, upgrades to current buildings and facilities, and the purchase and maintenance of new and
existing equipment and vehicles.

You are requesting the set-aside due to pandemic-related supply chain issues and labor shortages that have
caused delays in delivery of materials and equipment and slow responses from contractors who are having
difficulty finding adequate labor. Accordingly, the set-aside will allow you the time needed to receive your
purchases and properly manage your projects; without it, you will be unlikely to finish your projects before the

Letter 4797 (Rev. 1-2021)
Catalog Number 58293H

Keep a copy of this letter for your records.

If you have questions, you can call the contact the person shown above.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:
Redacted Letter 4797
Letter 437

Letter 4797 (Rev. 1-2021)
Catalog Number 58293H