Community project grant procedures approved

Plain-English summary

A private foundation proposed grants for community projects supporting economic viability, community building, and historic preservation in a town and nearby communities. Individuals, businesses, and community groups may apply with a project description, timeline, budgets, committed funding, and success measures. The foundation will screen for insider relationships, evaluate mission alignment and feasibility, and exclude salaries, rent or mortgage costs, and utilities. Grantees must sign a use agreement, report on spending, progress, success, and community impact, and repay amounts not used for the stated purpose. The IRS approved the educational grant procedures under section 4945(g)(3), effective from the date the request was submitted.

Ruling snapshot

• Question: Do the foundation's community project grant procedures satisfy the advance-approval requirements of section 4945(g)(3)?
• Outcome: Approved
• Key authorities: IRC §§ 74(b), 117, 170, and 4945; Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 03/06/2025
Tax Exempt and Government Entities Taxpayer ID number:
IRS P.O. Box 2508
Cincinnati, OH 45201 Person to contact:
Name:
ID number:
Release Number: 202523020 Telephone:
Release Date: 6/6/2025

LEGEND UIL: 4945.04-04
B= Program

C = County

D = Town

y dollars = Dollar Range

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 grant. Based on the information you submitted,
and assuming you will conduct your program as proposed, we determined that your procedures for awarding
educational grant 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 B. Your mission is to preserve the rural traditions. history, culture and
economic viability of C through historic preservation and community building. Your B will provide grants of y
dollars for community projects that support. enrich. and enable the economic viability. community building.
and historic preservation of D and its surrounding communities. The B allows you to further your charitable
mission and extend your impact by supporting local individuals, businesses, and community groups working on
innovative project towards shared community goals.

Your application requires:

• Contact information,

• A detailed project proposal description detailing how the proposed project connects with your mission,

• A project timeline,

• The requested grant budget,

• The overall project budget,

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

• Additional committed project funding, and

• What needs to happen for the project to be considered a success.

Applications from individuals, businesses, and community groups will be open call and accepted on a rolling
basis. Applications will be evaluated based on:

• The applicant project's connection to your mission,

• The impact on D and its surrounding communities,

• Whether the project's description, budget, goals, and timeline are realistic and attainable, and

• Whether they further your charitable purpose.

Applications are submitted through your website. You will publicize the B on your website and will share
information about the grant and grant awardees via your website, mailing lists, social media, and press releases
to the local newspaper. You will maintain case histories showing recipients of your B including names,
addresses, purpose of awards, amount of each B, manner of selection and relationship (if any) to officers,
trustees, or donors of funds to you. You will not fund salaries, rents/mortgages, or utilities under your B.

In addition to your pre-grant inquiry steps you will undertake prior to any grant award, the application will also
require certification that applicants and owners of grant applicant entities are not relatives or otherwise related
parties of members of the selection committee, or of your officers, directors, or substantial contributors. Your
Executive Director and Board of Directors will review applications and evaluate them based on their connection
to your mission, the potential impact on D and its surrounding communities, and whether the project's
description, budget, goals, and timeline are realistic and attainable.

Your B is a one-time award based on the proposal set forth in the grantee's grant application and is not eligible
for renewal. If awardees need to request additional funding they must submit a new application to be considered
for an additional grant.

Before funds are released, grantees must sign and return a grant letter agreement stating the awarded grant
funds will be used only for the purpose detailed in the grant proposal submitted. If any change is made, you
must be notified and approve of the proposed changes to the grant prior to proceeding.

Grantees also agree to submit a report at the completion of their project, and on at least an annual basis if the
project term is longer than a year, detailing:

• The use and expenditure of the grand funds,

• The progress make in accomplishing the purposes of the grant,

• The success of the project, and

• A summary of the measured impact of the project on the community.

Grantees must submit an itemized final budget listing all expenditures and sources of funding. Action will be
taken by you to compel grantees to repay any portion of the amount granted which is not used for stated grant
purpose.

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

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

• 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.

• 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); 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 March 20, 2024, 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

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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

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