Conservation-scientist fellowship procedures are approved

Plain-English summary

A private foundation proposed a one-year fellowship offering intensive communication, leadership, policy, and management training to conservation scientists in specified regions. Fellows would be selected objectively by the board, disqualified persons were excluded, and awards would cover training and individual expenses up to a stated amount. Recipients had to sign grant terms, submit final reports, and document use of funds; the foundation would investigate noncompliance, withhold further payments, recover misused funds when appropriate, and maintain detailed records. The IRS approved the procedures under section 4945(g)(3), so grants made as proposed would not be taxable expenditures.

Ruling snapshot

• Question: Do the conservation fellowship’s selection, monitoring, reporting, and enforcement procedures satisfy section 4945(g)(3)?
• Outcome: Approved, assuming the program is conducted as proposed.
• Key authorities: IRC §§ 117, 170, 4945(g), and 4946; Treas. Reg. § 53.4945-4(c)(1).

Full text (IRS public release)

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

Number: 201514018 Employer Identification Number:

Release Date: 4/3/2015
Contact person - ID number:

Contact telephone number:
Date: January 6, 2015

LEGEND: UIL:
S = program 4945.04-04
T = region
v = number
y = dollar amount

Dear :

You asked for advance approval of your educational grant procedures under Internal
Revenue Code section 4945(g)(3). This approval is required because you are a private
foundation that is exempt from federal income tax.

Our determination

We approved your procedures for awarding educational grants. Based on the information
you submitted, and assuming you will conduct your program as proposed, we determined
that your procedures for awarding educational grants meet the requirements of Code
section 4945(g)(3). As a result, expenditures you make under these procedures won’t be
taxable.

Description of your request

You will operate an educational grant program called S to provide intensive training for v
scientists working on conservation projects in T. The purpose of the one-year fellowship
is to build a community of scientists who perform research, communicate effectively with
the media, policymakers and the public, and engage in policy and management issues to
contribute to solutions regarding conservation.

You will provide a grant to an organization described in Section 501(c)(3), which is not a
private foundation within the meaning of Section 509(a), to assist in providing training
under the fellowship program.

The training program will begin with an intensive workshop intended to provide fellows
with a foundation of skills to communicate with target audiences, as well as to enable and
encourage individual and collective leadership. During the training workshop, each fellow
is expected to set a goal for engagement in a management or policy issue, and to define
an initial action plan to achieve it. Additional training, travel support, and other resources

over the remainder of the fellowship term will help each fellow refine and implement his or
her action plan.

You currently plan to select v fellows annually, although the number may change in the
future. The amount of each award will depend upon the expenses the fellow expects to
incur, but initially will be no more than y dollars.

A significant portion of funds for most fellows is likely to be awarded in the form of access
to training programs operated by Section 501(c)(3) public charities with which you are
working in support of its charitable purposes, and such amounts will be paid to the
charities providing the training. Amounts awarded in cash to support each fellow’s
expenses will be paid directly to that fellow, subject to requirements accompanying the
grant, as described below.

You will publicize the fellowship through the internet. Any scientist currently working in
the area of conservation science, in certain defined regions located through your website,
may apply for a fellowship. Applicants can be scientist with a PhD or equivalent
experience, who seek personal coaching and skills development and wish to be part of a
supportive network.

Applicants who are disqualified persons within the meaning of Internal Revenue Code
section 4946(a) are not eligible.

An eligible application will be submitted electronically and must include:

a. The applicant’s curriculum vitae
b. A description of the goals he or she expects the fellowship to help achieve
c. Any other information that allows you to ensure that the potential fellow meets the

eligibility requirements and is not a disqualified person

In furtherance of charitable purposes, based on the evaluation of each applicant’s
application and his or her prior work, your Board of Directors will make the final decision
in an objective and nondiscriminatory manner.

You will provide each fellow with an award letter notifying him or her of the grant, which
will incorporate your requirements for use of grant funds. The fellow shall be required to
sign and return the grant agreement, indicating his or her acceptance of the grant, and
acknowledging your requirements before you will disburse any funds.

Each fellow will provide a final report describing progress toward his or her goal and how
the fellowship funds were used.

If any grant recipient fails to provide the documentation required under the grant
procedures within a reasonable amount of time, you will investigate and withhold further
grant funds until such documentation has been submitted.

Letter 4779 (10-2012)
Catalog Number 58222Y

If grant funds have been used for improper purposes, all reasonable and appropriate
steps will be taken to recover improperly expended funds and to ensure that any funds
held by the recipient will be used exclusively for the purposes of the grant award. Such
steps may include legal action unless such action in all probability would not result in
satisfaction of execution of a judgment.

To show that their distributions are made on a true charitable basis in furtherance of the
purposes for which they are organized, you agree to maintain adequate records and case
histories to show:

a. The name and address of each recipient

b. The amount distributed

c. The purpose of the distribution

d. The manner in which the recipient was selected

e. The relationship, if any, between the recipient and (1) your members, officers, or
trustees (2) a grantor or substantial contributor to you or a member of the family of
either, and (3) a corporation controlled by a grantor or substantial contributor

f. Any follow-up information obtained as described above

g. Any measures taken to investigate the misuse of grant funds or to enforce grant
terms

In addition, you have agreed to maintain adequate records and case histories to show:

h. A copy of the award letter notifying each recipient of the grant
i. A copy of each recipient’s signed acknowledgment of your requirements for grant
funds.

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 section 117(a) and is to be used for
study at an educational organization described in section 170(b)(1)(A)(ii); or

– A prize or award subject to the provisions of section 74(b), if the recipient of
the prize or award is selected from the general public; or

– 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.

Letter 4779 (10-2012)
Catalog Number 58222Y

4

To receive approval of its educational grant procedures, Treasury Regulations 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 covers only the grant/loan program described above. This
approval will apply to succeeding grant/loan 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 precedent.

• You cannot rely on the conclusions in this letter if the facts you provided have
changed substantially. You must report any significant changes in 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 make 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 must
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.

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.

Letter 4779 (10-2012)
Catalog Number 58222Y

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

Sincerely,

Director, Exempt Organizations

Enclosure
Notice 437
Redacted letter

Letter 4779 (10-2012)
Catalog Number 58222Y