IRS approves a foundation's scholarship and study-and-research grant procedures under IRC 4945(g)(1) and (g)(3)

Plain-English summary

A private foundation asked the IRS to pre-approve two grant programs: a
scholarship program under IRC Section 4945(g)(1) and a study-and-research
grant program under IRC Section 4945(g)(3). Foundations need this sign-off
because grants to individuals for study are normally "taxable expenditures"
that trigger an excise tax under Section 4945, unless the award procedures
clear the advance-approval bar in Section 4945(g). The scholarship program
funds tuition and related costs for students in a specific field at accredited
U.S. institutions. The grant program reimburses individuals in that industry
(and students entering the field) for the cost of attending professional
meetings and conferences. The IRS approved both sets of procedures, so grants
made under them will not be taxable expenditures. The letter notes scholarship
awards are also tax-free to recipients to the extent they cover qualified
tuition and related expenses under Section 117(b). Approval depends on the
foundation running the programs as described and keeping the required records
and grantee oversight.

Ruling snapshot

• Question: Do the foundation's scholarship procedures meet IRC Section 4945(g)(1), and do its educational grant procedures meet IRC Section 4945(g)(3)?
• Outcome: Approved (both programs)
• Key authorities: IRC § 4945(d)(3), (g)(1), (g)(3); § 117(a), (b); § 170(b)(1)(A)(ii); § 170(c)(2)(B); § 74(b); Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Date: 09/26/2025

Taxpayer ID number:

Tax Exempt and Government Entities

Person to contact:
Name:
ID number:
Telephone:

Release Number: 202551044
Release Date: 12/19/2025

LEGEND UIL: 4945.04-04

N = Topic
P = Number
Q = Topic
R = Topic
s dollars = Dollars
t dollars = Dollars
v dollars = Dollars

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 provided in IRC Section 117(b)).

We also 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 scholarship program within the meaning of IRC Section 4945(g)(1) and
an educational grant program within the meaning of Section 4945(g)(3).

Scholarship Program under IRC Section 4945(g)(1)

You will provide scholarships to students who are enrolled or plan to enroll in a field of study related to N at
an accredited institution of post-secondary higher education in the United States to help finance tuition and
other educational costs. Your scholarships can only be used for qualified tuition, related expenses within the
meaning of IRC Section 117(b)(2), and room and board. You expect that up to P students will apply for this
program annually. The number of recipients and amounts of the awards will be determined based on your
budget. You expect your scholarships to range from s dollars to t dollars. Your scholarships are not renewable.

Eligible students must demonstrate strong academic achievement, and demonstrate an interest in improving the
art and science of N.

Your selection criteria include:

1. School enrollment,
2. Academic performance, including GPA, and class standing, and
3. An interest in improving the art and science of N, including personal recommendations.
4. Financial need may be considered if there are more qualified applicants than you can support.

You will generally pay the scholarships to the schools directly. The schools will then disburse the funds to the
award recipients who are in good standing. However, in some situations you may disburse scholarships funds
directly to the recipients. When this occurs, you will require the grantee to provide documentation that the funds
were expended for the scholarship's purposes.

Study and Research Grant Program under IRC Section 4945(g)(3)

You will provide grants to individuals employed in the Q industry and/or students who are actively engaged in
the study of R and who plan to enter the field of R upon graduation. The grants are intended to cover
registration costs, travel and incidentals when the individual attends meetings and conferences that expand
their knowledge of R. You expect that up to P students will apply for this program annually. The number of
recipients and amounts of the awards will be determined based on your budget. You expect your grants to
range from v dollars to s dollars. Your grants are not renewable.

Eligible recipients must demonstrate an interest in improving the art and science of N, submit their credentials,
provide a description of the meeting or conference, and provide a description of the potential professional
benefit to the applicant in attending the meeting or conference.

Your Selection criteria include:

1. The credentials of the recipient, including if they are currently employed in the field of N, have subject
   area knowledge, or other achievement,
2. Potential impact of the meeting or conference on the applicant.
3. Financial need may be considered if there are more qualified applicants than you can support.

For your study and research grants, you will provide reimbursement directly to selected recipients once the
individual completes the educational event (meeting, conference, etc.) and provides proper receipts and proof
of attendance.

Both Programs

You will promote both grant programs on your website and through other means, such as other publicly
available websites, email notifications sent to schools and field-specific mailing lists, social media posts,
redistribution of these emails and posts by other organizations, and other communications to students, school
staff, and conference organizers. However, the application for the programs has not yet been developed.

Your Board, assisted by a Scholarship Committee, will make the final selection of all award recipients. The
Scholarship Committee will review applications and make recommendations to the Board. The Scholarship
Committee will be chaired by a member of your Board, but other members of the Scholarship Committee are
not required to be on your Board. Members of the Scholarship Committee are appointed by your Board and
selected based on their expertise and experience related to determining an applicant's eligibility based on the
aforementioned criteria. Relatives of members of the Scholarship Committee or your Board, officers or other
disqualified persons, are not eligible to receive awards.

All disbursements will be documented with a written agreement that will restrict the expenditure of the funds
for specific purposes and will require reporting on the use and expenditure of the funds.

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.
• 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.

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

cc:

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