IRS approves postdoctoral fellowship grant procedures

Plain-English summary

A private foundation proposed a two-year postdoctoral fellowship supporting research in plant pathology or sustainable agriculture. The opportunity would be publicized through scientific journals, online sources, conferences, and seminars. A university would select three top candidates and recommend one, while the foundation could approve that candidate or select one of the other two based on potential contribution to the field. The program excluded disqualified persons and required case histories, annual reports, investigation and recovery of diverted funds, and suspension of further payments when necessary. The IRS approved the objective and nondiscriminatory procedures under § 4945(g)(1). Awards used for qualified tuition and related expenses would not be taxable to recipients, subject to § 117(c).

Ruling snapshot

• Question: Did the proposed postdoctoral fellowship use objective selection and sufficient supervision to satisfy § 4945(g)(1)?
• Outcome: Approved
• Key authorities: IRC §§ 117, 170(b)(1)(A)(ii), 4945(g)(1), and 4946

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
P.O. Box 2508
Cincinnati, OH 45201

Number: 201450031 Employer Identification Number:

Release Date: 12/12/2014
Contact person - ID number:

Contact telephone number:

Date: September 15, 2014

UIL: 4945.04-04

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(c)).

Description of your request

You will provide financial assistance to students having an interest in or participating in
the study of plant pathology and/ or sustainable agriculture at or in commendation with a
university. The number of scholarship that will be awarded each year and the amount of
each scholarship will vary depending on the amount of funds available to be distributed.

The availability of the fellowship will be publicized through one or more prominent
scientific journals, on the internet and through national conferences and seminars.

The grant funds will be used to support a two-year post-doctoral fellowship for support of
post-doctoral research. One two-year fellowship will be awarded every three years. You
will make the grants to the university in each year one and year two of each fellowship

Letter 4792 (10-2012)
Catalog Number 58263T

cycle. The specific timing of each payment shall be determined by mutual agreement
between you and the university. The university may choose to supplement your grant
with funds from other sources.

To be eligible for a fellowship, a candidate must have completed a doctoral program
which would allow him or her to do extended research in plant pathology and sustainable
agriculture. The candidate is required to identify a faculty sponsor, provide a three page
description of the research he or she hopes pursue, provide three letters of
recommendation and provide a curriculum vitae which includes publications in scholarly
journals.

Three top candidates for each fellowship will be selected by the university, and one of the
three candidates will be recommended as the fellowship recipient. The recommendation
will be submitted to you for consideration.

Your will not be required to take into account the financial needs or academic or
professional accomplishments of any grantee. You may approve the recommended
candidate or select one of the other two candidates to receive the fellowship. The
recipient will be selected based on his or her apparent potential to make a significant
contribution in the fields of plant pathology or sustainable agriculture.

All fellowships are awarded on an objective and non-discriminatory basis. No fellowship
may be awarded to any disqualified person as defined in Code Section 4946.

You will maintain case histories showing recipients of your scholarships, or educational
grants, including names, addresses, purposes of awards, amount of each award, manner
of selection, and the relationship (if any) to officers, trustees or donors of funds to you.

You will:

• arrange to receive and review grantee reports annually,

• investigate diversions of funds from their intended purposes,

• take all reasonable and appropriate steps to recover diverted funds,

• ensure other grants funds held by the grantee are used for their intended

purposes, and

• withhold further payments to grantee until you obtain grantees assurances that
future diversions will not occur and the grantees will take extraordinary
precautions to prevent future diversions from occurring.

You will maintain all records relating to individual grants, including information obtained to
evaluate grantees, identify whether grantee is a disqualified person, establish the amount
and purpose of each grant, and establish that you undertook the supervision and
investigation of grants.

Basis for our determination

Letter 4792 (10-2012)
Catalog Number 58263T

The law imposes certain excise taxes on the taxable expenditures of private foundations
(Code section 4945). 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 of the following requirements of Code 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 Code section
117(a).

• The grant is to be used for study at an educational organization described in Code
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 Cincinnati Office of Exempt Organizations at:

Internal Revenue Service

Exempt Organizations Determinations
P.O. Box 2508

Cincinnati, OH 45201

• You cannot 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 Code 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.

Please keep a copy of this letter in your records.

Letter 4792 (10-2012)
Catalog Number 58263T

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