Vocational and college scholarship procedures receive approval

Plain-English summary

A private foundation proposed scholarships for graduates of a specified school attending vocational or technical programs or pursuing four-year degrees. Applicants needed at least a 2.0 grade point average and acceptance by an approved school, and the selection committee would consider grades, financial need, and an activity log. Awards could renew for up to four years for degree students or for the time needed to complete a vocational program, subject to continued study and approval of changes. The foundation would pay schools directly and require unused funds to be returned. The IRS approved the procedures under IRC § 4945(g)(1).

Ruling snapshot

• Question: Did the foundation's vocational and college scholarship procedures satisfy the advance-approval rules for avoiding taxable expenditures?
• Outcome: Approved
• Key authorities: IRC §§ 117(b), 4945(g)(1), and 4946

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

P.O. Box 2508
Cincinnati, OH 45201

Release Number: 201447044 Employer Identification Number:

Release Date: 11/21/2014

Date: August 28, 2014 Contact person - ID number:

Contact telephone number:

LEGEND: UIL:

S= school 4945.04-04
V= county, state

x = dollar amount

y= dollar amount

Dear :

You asked for advance approval of your scholarship grant procedures under
Internal Revenue Code section 4945(g). This approval is required because you are
a private foundation that is exempt from federal income tax. You requested
approval of your scholarship program to fund the education of certain qualifying
students.

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 Code section 4945(g)(1). As a result, expenditures you make under these
procedures won't be taxable.

Also, 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 Code section 117(b)).

Description of your request

You will enhance access to higher education by providing scholarships for worthy
graduates of S located in V. The scholarships are awarded to students attending
vocational/technical school or pursuing a four-year degree at a college or university.

The number of scholarships distributed will vary depending on the amount of funds
available and upon the amount you are required to annually distribute to satisfy Code
Section 4942. However, the amount of each award generally ranges from x to y dollars.
It is estimated that up to 150 individuals are eligible to apply for the scholarship, annually,
and you will aim to award about one-third of the scholarships to those attending

Letter 4792 (10-2012)
Catalog Number 58263T

2

vocational school and the remaining two-thirds of the scholarships for those attending full
universities.

Scholarships are publicized on the S website. To be eligible students from S must have
maintained at least a 2.0 grade point average through seven semesters of high school
and have been accepted to an accredited college, university or trade school. The
college, university or trade school must be approved by the scholarship selection
committee.

Each year you advise the scholarship selection committee of the amount of funds
available to be awarded as scholarships. The members of the selection committee
review the scholarship applications and rank the applicants based on GPA, financial need
and a required activity log. The scholarship selection committee reviews the applicants
and makes a recommendation to you regarding the amount that should be awarded to
each applicant. The monetary value of each scholarship is determined upon mutual
agreement between you and the scholarship committee. All scholarships are awarded on
an objective and non-discriminatory basis. No scholarship is awarded to any disqualified
person as defined in Code Section 4946.

Each scholarship recipient shall remain eligible for renewals as long as the recipient
continues to pursue the course of study he or she originally selected and the trade
school, college or university originally selected. Any proposed change in the course of
study originally chosen, or the location of the trade school, college or university selected
must be properly reported in advance to and approved by the scholarship selection
committee in order for the scholarship recipient to remain eligible for benefits in
accordance with the rules and regulations adopted by the scholarship selection
committee. You require the student to provide an official transcript along with a copy of
their schedule for the upcoming semester. If the student fails to continue their studies,
any remaining unused funds attributable to their scholarship must be returned.

Scholarships granted for degree scholarships shall be awarded for a maximum of four
school years. Scholarships granted for vocational schools shall be awarded for the
number of years necessary to complete the vocational courses specified by the
scholarship recipient in their application.

You pay the scholarship proceeds directly to the school that the recipient attends for the
benefit of the recipient. You provide a letter to each school specifying that the school's
acceptance of the funds constitutes the schools agreement to notify you and refund any
unused portion of the scholarship if a scholarship recipient fails to meet any term or
condition of the scholarship.

If the school will not agree to such terms, they are to return the check and you will obtain
proof of enrollment and a grade transcript from the student. You will do this by sending a
grant letter to the student and having them sign to acknowledge individual expenditure
responsibility before any check is mailed. If the student does not sign the agreement and
provide proof of enrollment and grade transcripts, they will not receive the scholarship.

Letter 4792 (10-2012)
Catalog Number 58263T

4

Please keep a copy of this letter in your records.

If you have questions, please contact the person listed at the top of this letter.

Sincerely,

Director, Exempt Organizations

Letter 4792 (10-2012)
Catalog Number 58263T