Agricultural career scholarships approved

Plain-English summary

A private foundation proposed annual scholarships for graduating students from one county who have been accepted to study for careers in agriculture. Applicants must provide contact information, proof of college acceptance, and an essay about their planned agricultural studies and the importance of local farming. The foundation's executive director and board will select recipients based on alignment with its mission, writing quality, aspirations, and completion of the application requirements. Awards will be one-time grants paid directly to the recipient's college or university. The IRS approved the scholarship procedures under section 4945(g)(1).

Ruling snapshot

• Question: Do the foundation's agricultural scholarship procedures satisfy the advance-approval requirements of section 4945(g)(1)?
• Outcome: Approved
• Key authorities: IRC §§ 117, 170, and 4945

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: 202523021 Telephone:
Release Date: 6/6/2025

LEGEND UIL: 4945.04-04
b dollars = Dollar

C = Number

D = County

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 an annual agricultural scholarship program providing b dollars to C or
more graduating D high school students with documented acceptance to a college or university where they will
pursue a career in agriculture. The scholarship will further your mission of preserving the rural traditions,
history, culture, and economic viability of D by helping to support the next generation of agricultural workers in
your region.

Applications will be posted on your website and available by open call and require an application form with:

• Contact information,

• Proof of college acceptance, and

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

• A 500 word essay detailing why they have chosen to pursue a career in agriculture, the area of
  agriculture they plan to study, and its importance to local farming.

Applications will be reviewed, evaluated, and selected by your executive director and board of directors based
on the applicants connection with your mission, writing quality, aspirational quality, and meeting of application
criteria. You will remain in contact with student grantees and grantees will be required to provide an update on
their progress C years after acceptance.

You will award one time scholarships based on the quality of the eligible applicants' grant application/essay
submission and are not eligible for renewal. You will pay awarded scholarships directly to the applicants'
accepted college or university. Upon acceptance of the awarded grant, scholarship awardees must sign a letter
stating that they will update you on their studies and the impact of the scholarship on education C year after
receipt of the scholarship, although this is not a formal condition of the grant. If the student doesn't attend the
academic institution listed in their application, you request the school return the grant funds to you.

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.

• 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.

• 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

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

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

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