General education scholarships approved

Plain-English summary

A private foundation proposed at least a specified number of annual scholarships for deserving students to pursue general education, vocational training, or professional study. High school seniors, graduates, undergraduates, and graduate students planning full-time study at accredited institutions could apply. An outside organization would administer and promote the program, rank applicants based on financial need, academic achievement, essays, activities, and a teacher recommendation, and send finalists to a selection committee. Relatives of committee members, foundation leaders, and substantial contributors were ineligible, and payments would go directly to schools. The IRS approved the objective selection, payment, recordkeeping, and monitoring procedures under section 4945(g)(1).

Ruling snapshot

• Question: Do the foundation's procedures for general education and vocational scholarships satisfy the advance-approval rules?
• Outcome: Approved, provided the program operates as described
• Key authorities: IRC §§ 117, 170(b)(1)(A)(ii), 4945(g)(1)

Full text (IRS public release)

Department of the Treasury Date: 05/09/2024
Internal Revenue Service
Tax Exempt and Government Entities

IRS Taxpayer ID number:

Person to contact:
Name:
Release Number: 202431018 ID number:
Release Date: 8/2/2024 Telephone:
LEGEND UIL: 4945.04.04

R= Number of Grants
S = Name

T = Business Name

V = Name

W = Program Name

X = Organization Name

y dollars = Dollar Range
Dear

You asked for advance approval of your scholarship procedures under Internal Revenue Code (IRC) Section
4945(g)(1). You requested approval of your scholarship program to fund the education of certain qualifying
students.

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.

Additionally, 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)).

Description of your request

Your letter indicates you will operate a scholarship program called W. The purpose of W is to provide payments
to worthy and deserving boys and girls for their general education. This was the wish of the last settlor of your
trust, V.

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

You plan to award at least R scholarships per year in the amount of y dollars. Scholarships will be awarded to
students for use at schools or colleges, or for special education in any trade, business, or profession.
Scholarships are not renewable, but students are permitted to re-apply for grants in the following academic
school year if they qualify.

You will engage with X to administer and promote your scholarships program to reach a large number of
applicants. Applicants will fill out their application online through X.

To be eligible for a scholarship, the applicant must be a high school senior, graduate, current college
undergraduate, or graduate level student. Applicants must also plan to enroll in full-time undergraduate or
graduate study at an accredited two- or four-year college, university, or vocational technical school for the
upcoming academic year. Financial need and academic achievement are considered. Applicants will also
prepare essays, describe their extracurricular activities, and provide a letter of recommendation from a teacher.
Preference will be given to students that reside in Z.

X will review the applications to ensure they meet the criteria required and will rank students based on the
factors listed above. X will then submit the list to the selection committee. The selection committee is
composed of S & T. T’s Administrative Review Committee will conduct a final review of the list and approve
the recipients, and award amounts.

Relatives of the selection committee as well as your officers/directors and substantial contributors or their
relatives are not eligible to be considered or receive funds for the scholarship.

T will submit payments to X, which will then make payments directly to the students’ schools. Case histories for
each scholarship recipient will be maintained by X and your selection committee.

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.

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

• 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).

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 [redacted], 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
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.
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