Scholarship and educational-grant procedures were approved

Plain-English summary

A private foundation proposed scholarships and educational grants for people with financial need, with an emphasis on historically marginalized communities. Scholarship recipients would attend educational institutions, while other grantees could pursue cultural-awareness projects or improve literary, artistic, musical, teaching, and similar skills. The program used stated selection criteria, excluded foundation insiders and related persons, required reports, and included procedures to investigate and recover diverted funds. The IRS approved the scholarship procedures under Section 4945(g)(1) and the educational-grant procedures under Section 4945(g)(3). Payments made under the approved procedures would not be taxable expenditures to the foundation, and scholarship treatment for recipients remained subject to Section 117.

Ruling snapshot

• Question: Did the foundation's procedures qualify for advance approval for scholarships and educational grants to individuals?
• Outcome: approved
• Key authorities: IRC §§ 74(b), 117, 170(b)(1)(A)(ii), and 4945(g)(1) and (3); Treas. Reg. § 53.4945-4(c)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 12/19/2023
Tax Exempt and Government Entities Taxpayer ID number:
P.O. Box 2508
Cincinnati, OH 45201

Person to contact:

Release Number: 202411015
Release Date: 3/15/2024

LEGEND UIL: 4945.04-04
V = Numbers

W = Name

X= Name

Y = Law

z dollars = Amounts

Dear

You asked for advance approval of your scholarship procedures under Internal Revenue Code (IRC) Section

4945(g)(1) and advance approval of your educational grant procedures under 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 scholarships. Based on the information you submitted, and assuming
you will conduct your program as proposed, we determined that your procedures for awarding scholarships
meet the requirements of IRC Section 4945(g)(1). As a result, expenditures you make under these procedures
won't be taxable.

Awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if
they use them for qualified tuition and related expenses (subject to the limitations provided in IRC Section 117(b)).

We also 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 will operate a grant making program under which you will award scholarships under
IRC Section 4945(g)(1) and grants under IRC Section 4945(g)(3). The purpose of your program is to provide
individuals from historically marginalized communities with opportunities to attend, participate in, or create

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

programs that encourage personal educational or professional growth or increased cultural awareness. The focus
of your scholarships and grants will be on assisting individuals primarily in the W area with demonstrable
financial need from historically marginalized communities, including, but not limited to, people of color, those
from under resourced municipalities, women and girls, X, and individuals covered by the Y, though eligibility
will not be limited to individuals from these groups. The primary eligibility criterion for your scholarships and
grants is the demonstration of financial need from a promising individual who would otherwise not have the
means to attend an educational institution, or create programming or achieve other specific objectives.

You plan to publicize scholarship and grant availability by preparing application forms and informational
packets to be circulated to counseling departments and pertinent administrative offices at various W primary,
intermediate, secondary, and postsecondary educational institutions, including colleges, universities, and
vocational and technical training programs, as well as relevant community cultural awareness organizations.

You anticipate that the majority of your distributions will be for scholarships as defined in IRC Section 4945(g)
(1). You plan to award a combined total for both programs in the range of V scholarships and grants each year
in the range of z dollars.

For all awards there will be no limitations or restrictions in the selection procedures based upon race, religion,
national or ethnic origin, or other illegally discriminatory criteria. You may also impose other restrictions from
time to time, such as additional geographic limitations (e.g., limited to recipients from disadvantaged rural and
urban areas). Individuals who are employed by you, employed by organizations controlled by a director of
yours, members of its Board of Directors, or related by blood or marriage to employees or directors of yours or
organizations controlled by a director of yours, will not be eligible for your scholarships and grants.

Details of Scholarships under IRC Section 4945(g)(1)

The purpose of your scholarships is to enable individuals from historically marginalized communities to attend
classes or to pursue their studies at primary, intermediate, secondary, and postsecondary educational
institutions. You intend to leverage scholarships to eliminate whether it is a affordable, as a consideration for
promising young people who do not otherwise have the financial means to attend the primary, intermediate,
secondary, or postsecondary educational institution of their choice.

To be eligible to apply for a scholarship, the individual must:

* Attend a primary, intermediate, secondary, or postsecondary educational institution,
* Demonstrate financial need, and

* Demonstrate prior academic achievement.

The selection committee will consist of your board of directors, or person(s) delegated by your board of
directors. The selection committee will evaluate scholarship applications based on the following criteria:

* Academic performance,

* Performance on tests designed to measure ability and aptitude for scholastic work at the relevant grade level,
* Recommendations from teachers, instructors, professors, school administrators, and others familiar with the
applicant's academic aptitude,

* Financial Need,

* Participation in relevant extracurricular activities,

* Unusual personal or family circumstances,

* A short essay on their educational and personal goals, and

* Conclusions drawn from personal interviews with the applicant concerning the applicant's motivation,

character, ability, and potential.

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

Your practice will be to pay the scholarships directly to the school to which the recipients will be attending,
when possible. If funds are paid directly to the recipients, they will be required to sign an agreement before any
funds are disbursed. The agreement will require the recipients to submit a full and complete report. The report
must include a summary of the use of the funds awarded, and the courses taken and grades received in each
academic period. The report must also be verified by the educational institution.

Scholarships can be renewed based on academic performance and continued financial need. You will verify that
the recipients seeking renewal have timely filed all required scholarship reports and that their original and
subsequent scholarships have not been used for purposes other than those for which they were awarded.

Details of Grants under IRC Section 4945(g)(3)

The purpose of your grants under IRC Section 4945(g)(3) is to enable individuals from historically
marginalized communities to achieve a specific objective, such as the completion of discrete community-benefit
projects that facilitate cultural awareness, or improving or enhancing a literary, artistic, musical, teaching, or
other similar capacity, skill, or talent of the grantee.

To be eligible to apply for a grant, the individual must demonstrate prior academic or professional achievement,
and demonstrate financial need. They also must meet one of the following:

* Attend or enroll in programming directed at improving or enhancing literary, artistic, musical, teaching, or
other similar capacities, skills, or talents, or

* Create programming that achieve other specific objectives that facilitate the accomplishment of your
educational and charitable purposes.

The selection committee will consist of your board of directors, or person(s) delegated by your board of
directors. The selection committee will evaluate grant applications based on the following criteria:

* Prior academic and professional performance and achievement,

* Financial need,

* Recommendations from teachers, instructors, professors, school administrators, supervisors, and others
familiar with an applicant's educational or professional aptitude,

* Unusual personal or family circumstances,

* A short essay on their articulated professional and personal goals,

* Written summary of the project proposal, and

* Conclusions drawn from personal interviews with the applicant concerning the applicant's motivation,

character, ability, and potential.

Your grant recipients will be required to sign an agreement before any funds are distributed. The agreement will
require the recipient to submit a full and complete report on the use of the grant funds, and the progress made by
the recipient towards achieving the purpose for which the grant was made, at least yearly.

You plan to award single year and multi-year grants. If a grantee seeks renewal of a grant you will require
reports as required by Treasury Regulation 53.4945-4(c)(3), a written report detailing the purposes for which
additional funds are requested, and an explanation as to why the initial grant was insufficient. You will also
verify that the recipient seeking renewal has timely filed all required grant reports and that their original and
subsequent grants have not been used for purposes other than those for which they were awarded.

Oversight for all Awards

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

You will maintain the records required by Revenue Ruling 56-304, 1956-2 C.B. 306, regarding distribution of
charitable funds to individuals. You will confirm and keep records evidencing that no recipients are disqualified
persons. You will also record the name and address of each recipient, the amount and purpose of any funds
spent, the manner of recipient selection, how the scholarship or grant was supervised, and how any possible
diversion of funds was investigated and addressed.

You represent that you will complete the following:

* Arrange to receive and review grantee reports annually and upon completion of the purpose for which the
grant was awarded,

* Investigate diversion of funds from their intended purposes,

* Take all reasonable and appropriate steps to recover the diverted funds and ensure other grant funds held by
a grantee are used for their intended purposes, and

* Withhold further payments to grantees until you obtain grantees' assurances that future diversions will not
occur and that grantees will take extraordinary precautions to prevent future diversion from occurring.

You also represent that you will:

* Maintain all records relating to individual grants including information obtained to evaluate grantees,
* Identify a grantee is a disqualified person,
* Establish the amount and purpose of each grant, and

* Establish that you undertook the supervision and investigation of grants described above.

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.

IRC Section 4945(g)(1) Requirements:

* 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 the provisions of IRC Section 117(a).

* The grant is to be used for study at an educational organization described in IRC Section 170(b)(1)(A)(ii).
IRC Section 4945(g)(3) Requirements:

* 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 IRC Section 117(a) and is to be used for study at an educational
organization described in IRC Section 170(b)(1)(A)(ii).
- 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.

- 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.

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

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.

* 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
TE/GE Stop 31A Team 105
P.O. Box 12192
Covington, KY 41012-0192
* 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.

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 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.

We've sent a copy of this letter to your representative as indicated in your power of attorney.

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

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