Scholarships for students facing disabilities approved

Plain-English summary

A private foundation proposed scholarships for graduating seniors at one high school who face a health, physical, or learning disability. Applicants must plan to attend a college, vocational, technical, or trade program. Selection will focus on a short essay about the applicant's adversity, needs, and future goals, without considering grades, extracurricular activities, volunteer work, community involvement, or recommendation letters. A school-based committee will make the final selections, and awards will be paid directly to the recipient's school. The IRS approved the scholarship procedures under section 4945(g)(1).

Ruling snapshot

• Question: Do the foundation's scholarship procedures for graduating students facing disabilities satisfy 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 03/11/2025
Tax Exempt and Government Entities Taxpayer ID number:
P.O. Box 2508
Cincinnati, OH 45201 Person to contact:
Name:
ID number:
Release Number: 202523023 Telephone:
Release Date: 6/6/2025

LEGEND UIL: 4945.04-04
B= School

C= Website

D= Scholarship Committee

E = Number

f dollars = Dollar

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 for graduating high school seniors from B. The
purpose of your program is to aid students who would likely to be overlooked or might not qualify for
scholarships based on GPA, extracurricular activities, volunteer work or community involvement.

To be eligible for a scholarship, the student must:

• Be a graduating B senior student planning to attend a college, vocational, technical, or trade program, and

• Face a health, physical, or learning disability.

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

Prospective applicants will submit a short essay describing adversities and challenges they faced in their life and
their goals for the future. Applications will be selected based on the submitted essay detailing their needs,
adversities, and future goals. Your selection process does not consider GPA, extracurricular activities, volunteer
work, community involvement, or letters of recommendation.

Your scholarship program will be publicized on C. Interested students can review the requirements and submit
the application online. Relatives of your employees are not eligible to apply.

Your selection committee will consist of teachers, counselors, and school staff from B. Your representative will
have input regarding selection process, but final decision will be made by the D. Your awards will be one-time
grants and will not be renewable. You intend to award E grants of f dollars per school year.

Your scholarships will be paid directly to a school under an arrangement whereby the school will apply the
grants funds for enrolled students. Your recipients who decide not to enroll in a college, vocational, technical,
or trade program will forfeit their grant.

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:

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

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.

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