Mission-aligned scholarship and skill grants approved

Plain-English summary

A private foundation proposed two mission-aligned grant programs. One would provide college or vocational scholarships to graduating high-school students whose planned studies fit the foundation's mission. The other would support travel, study, research, or similar activities outside the normal school year to improve a recipient's literary, artistic, musical, scientific, faith-related, or comparable skill. Both programs would use GPA, financial need, and personal commitment as selection factors, require at least one independent selection-committee member, exclude committee members and relatives, and permit renewal only with transcripts, a 3.0 GPA, and community-oriented career effort. Grants would be paid in two stages under written agreements and monitored through receipts, site visits, and progress reports. The IRS approved both programs under § 4945(g)(1) and (3).

Ruling snapshot

• Question: Do the foundation's procedures for mission-aligned scholarships and travel, study, research, or skill-development grants satisfy IRC § 4945(g)(1) and (3)?
• Outcome: Approved for both programs, subject to the described selection, reporting, monitoring, recordkeeping, and conflict restrictions
• Key authorities: IRC §§ 74(b), 117, 170(b)(1)(A)(ii), 170(c)(2)(B), 4945(d)(3), and 4945(g)(1), (3); Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 03/31/2025

Tax Exempt and Government Entities Taxpayer ID number:

P.O. Box 2508

Cincinnati, OH 45201 Person to contact:
Name:
ID number:
Telephone:

Release Number: 202526016
Release Date: 6/27/2025

LEGEND UIL: 4945.04-04
N = Number

M = Number

x dollars = Dollar

y dollars = Dollar

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 provide 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 program that provides two types of grants to qualified individuals: (1)
scholarship grants under IRC Section 4945(g)(1) for study at a college to pursue a major that suits your mission
statement, and (2) grants for travel, study, research and similar activities to improve a particular skill under IRC
Section 4945(g)(3). The purpose of the grants is to improve or enhance the recipient’s literary, artistic, musical,
scientific, faith pursuing, or other similar skill set and capacity that ultimately benefits society and the general
public. The grants awarded will both range between x dollars and y dollars per recipient. You estimate that

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

between M eligible applicants will apply for the grants annually. You publicize your grant programs through the
following channels and venues: (1) your website, (2) local church, community center or library, and (3) social
media accounts.

Section 4945(g)(1) Program

You award N scholarship grant annually to individuals for courses at schools or accepted for credit at schools
recognized under IRC Sections 509(a)(1) and 170(b)(1)(A)(ii).

Eligible applicants are students graduating high school to attend college or vocational school who:

• Provide a personal statement showing their career interest in developing skillsets and knowledge that fit
into your mission statement, and

• Produce annual progress reports of their study or field work, if applicable

Section 4945(g)(3) Program

You award N grant for travel, study, research and similar activities to improve a particular skill annually to be
used toward study and research activities that are outside of the normal school year.

Eligible applicants:
• Completed their college school year with a satisfying GPA
• Provide a letter of recommendation from a professor or advisor, and

• Generate a study proposal to demonstrate the willingness and ability to pursue a field that suits well
with your mission statement.

For Both Programs
Recipients for both grants are selected based upon:
• Prior year GPA
• Financial need request with appropriate evidence, and

• A personal statement showing the sincerity and seriousness of completing the collegiate or vocational
study and starting a feasible career.

Your grant selection committee will include your board members and include at least one external advisor or
independent committee member who possesses an adequate skill set and experience and who provides impartial
perspective throughout the selection process. No members of the selection committee or their relatives will be
eligible to apply for your grants.

Recipients that wish to renew their grant must:
• Provide an official school transcript with relevant course studies that are conducive to their career path,
• Achieve a minimum cumulative GPA of 3.0
• Exhibit a reasonable effort to pursue a career that benefits the broader community.

Your grant disbursement procedures are as follows:
a) Grant Agreement: You and each grant recipient sign such an agreement that outlines the terms and
conditions of the scholarship or grant, including the purpose, amount, payment schedule, reporting

Letter 4792 (Rev. 1-2022)
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requirements, and how the funds should be used. The grant agreement specifies that any diversion
of funds from their intended purpose will result in the cancellation or termination of the
scholarship or grant.

b) Two-Stage Disbursement: You distribute 50% of the grant upon signing the grant agreement and
the remaining 50% after the recipient has submitted progress reports approved by the academic
advisor or professor (such as a midterm exam result or research project outline report) within six
months of the first disbursement.

c) Electronic fund transfer: The funds are usually transferred electronically to the recipient’s bank
account or issued as a check to the recipient. You may ask for banking details or provide specific
instructions for receiving the funds.

d) On-going monitoring: To ensure that the funds are used by the recipient to further your mission
and goals, you perform due diligence such as

1) Request and review the expense receipts related to tuition, fees, living expenses, and
allowance for travel, research and equipment,

2) Perform on site visits to see firsthand how the funds are being utilized, or

3) Review and assess the mid-stage progress report.

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.

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

• 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.

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.

Please keep a copy of this letter in your records.

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

If you have questions, you can contact the person shown at the top of this letter.

Enclosures:
Letter 437

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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