Peace-education scholarship procedures receive approval

Plain-English summary

A private foundation proposed nonrenewable scholarships for financially needy graduate students studying peace education or conflict management. Applicants had to be recent graduates enrolled in qualifying first-year programs and were ranked through a point system covering their goals, references, and prior activities. The foundation paid students directly, required use reports and transcripts, and provided investigation, repayment, and recovery procedures for misuse or withdrawal. Relatives of selection-committee members, foundation leaders, and substantial contributors were ineligible. The IRS approved the procedures under section 4945(g)(1).

Ruling snapshot

• Question: Did the foundation's peace-education scholarship procedures satisfy the advance-approval requirements for grants to individuals?
• Outcome: Approved
• Key authorities: IRC §§ 117, 170, and 4945(g)(1)

Full text (IRS public release)

Internal Revenue Service
P.O. Box 2508
Cincinnati, OH 45201

Department of the Treasury

Release Number: 201511028
Release Date: 3/13/2015
Date: 12/16/2014

Employer Identification Number:

Contact person - ID number:

Contact telephone number:

LEGEND

UIL: 4945-04.04

X =
r dollars =

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 will not 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 in Code section 117(c)).

Description of your request

You will provide one or more scholarships for the payment of tuition at an educational
organization described in Code section 170(b)(1)(A)(ii) and for books and supplies
required for the course of instruction.

The purpose of the scholarship program is to assist students who are in financial need to
pursue a degree in a graduate program relevant to peace education or conflict
management.

You will award scholarships in the amount of r dollars. The scholarship will be used to
pay tuition and books for graduate level classes relevant to peace education and conflict

Letter 4792 (10-2012)
Catalog Number 58263T

2

management. You may expand the program to provide more scholarships and may
increase the amount of the scholarship in future years. The scholarship is awarded for
one year and is not renewable.

You publicize the scholarship on your website.

Your criteria to be eligible for the scholarship are as follows.

• The individual must be enrolled in the first year of a graduate program at one of
the universities who are a member of the X relevant to peace education or conflict
management and described in IRS 170(b)(1)(A)(ii);

• The individual must have graduated within the last two years with an
undergraduate degree;

• The individual must provide evidence of financial need such as seeking a loan for
tuition payment;

• The individual must list the name of the degree or certificate program in which they
are enrolled and list the peace education or conflict management course toward
which the scholarships funds will be applied.

The eligible individuals will be ranked based on total points awarded as set forth below:

• The student must provide a statement of interest in peace education and goals.
The student is awarded between one and five points based on the clarity of focus
and development of professional plans.

• The student must provide a letter of reference. The student is awarded between
one and five points based on the strength of the letter of reference.

• The student must provide a statement of activities to date to reach peace
education goals. The student is awarded between one and five points based on
this statement.

• Each member of the selection committee will perform the analysis above and add
up the points for each student. The total points for a student from each member of
the selection committee will be averaged.

• You award the scholarship to the student with the highest number of points.

The selection committee will be composed of members of your staff and peace education
experts. Upon any resignation of a committee member, the President will appoint a
successor.

You will pay the scholarship directly to the student, who shall pay his/her tuition with the
funds, as well as pay for books or supplies required for the course of instruction. One
month after the commencement of the semester or quarter, the student receiving the
scholarship will be required to submit a report describing the use of the funds. At the end
of the term, the student will be required to submit his/her grade transcripts. If no report is
filed by the student, or if the report indicates that the funds are not being used in
furtherance of the scholarship purpose, one of your members will investigate the grant.
While conducting this investigation, you will take reasonable steps to recover grant funds,

Letter 4792 (10-2012)
Catalog Number 58263T

3

unless it has been determined that the funds were used for their intended exempt
purpose. If the student withdraws from school and any refund is due, the amount of the
scholarship will be repaid to you.

You will maintain case histories showing recipients of your scholarships including names,
addresses, purposes of awards, amount of each grant and manner of selection.

You will not award scholarships to relatives of members of the selection committee, or of
your officers, directors, or substantial contributors.

You will arrange to receive and review grantee reports annually and upon completion of
the purpose for which the grant was awarded. You will investigate any diversions of
funds from their intended purposes, and take all reasonable and appropriate steps to
recover 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 diversions from occurring.

Basis for our determination

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

Letter 4792 (10-2012)
Catalog Number 58263T

4

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.

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