IRS approves a foundation's scholarship procedures

Plain-English summary

A private foundation asked the IRS to approve its procedures for a scholarship
program serving graduating seniors from a particular school. Eligible students
must meet a grade-point threshold, participate in an activity, and explain how
they will make the world better through acts of kindness. The scholarships are
one-time awards for vocational school, trade school, a two-year college, or a
four-year college, and recipients must provide proof of enrollment before funds
are released. The foundation also committed to monitor the grants, investigate
diversions, recover misused funds, and keep detailed records. The IRS approved
the procedures under section 4945(g)(1), so grants made under them will not be
taxable expenditures. Awards used for qualified tuition and related expenses
may also be excluded from recipients' income under section 117.

Ruling snapshot

• Question: Do the foundation's scholarship procedures qualify for advance approval under section 4945(g)(1)?
• Outcome: Approved
• Key authorities: IRC § 4945(d)(3); IRC § 4945(g)(1); IRC § 117; IRC § 170(b)(1)(A)(ii)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 04/27/2026
Tax Exempt and Government Entities Taxpayer ID number:

Person to contact:

Release Number: 202630027
Release Date: 7/24/26

LEGEND UIL: 4945.04-04
B = School

C = Scholarship

D = Number

E = Date

z dollars = dollar amount

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 grant program called C. C is awarded to outgoing seniors at B who will
be attending a vocational school, trade school, two-year college, or four-year college.

You are awarding C to help outgoing seniors from B to start post high school education to improve their skills
and further their education. The scholarships will be publicized through B.
You intend to award at least D scholarships yearly in the amount of z dollars each. This is a one time

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

scholarship with no renewal provisions.

To be eligible, an individual must be a graduating senior from B, have a GPA of 2.5 or above, be involved in at
least one club or extra curricular activity, and must be able to articulate how they will help make this world a
better place through acts of kindness. These are the requirements that make up the application.

You will select recipients based on their responses to these items.

The selection committee will be made up of your officers, local teachers, counselors, and employees of the
EMT industry.

Funds will be provided upfront to assist with tuition. Recipients are required to provide proof of enrollment to
ensure that funds are used for the intended education purpose.

Scholarships will be maintained at B's Finance office until students show proof of enrollment at a vocational
school, trade school, two-year college, or four-year college.

If the terms of the award are violated, students will be asked to return the scholarship.

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.

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

Insert if the organization made grants prior to receiving advance approval.
• The effective date of our approval is E, 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
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