Internship and media fellowship grant procedures approved

Plain-English summary

A private foundation proposed two individual grant programs to develop recipients' professional skills. One program supports unpaid internships and classroom study at section 501(c)(3) educational charities, while the other supports longer internships at news or media organizations through direct stipends or budgeted payments for salaries and benefits. Candidates are chosen through an objective process considering academic, professional, writing, financial-need, and interview information. Recipients cannot be related to selection committee members or disqualified persons, and media interns cannot be related to the media company's officers or directors. The foundation requires progress and financial reports, investigates misuse, withholds unpaid funds, and seeks recovery when necessary. The IRS approved both programs under section 4945(g)(3), so grants made under the approved procedures will not be taxable expenditures.

Ruling snapshot

• Question: Do the foundation's procedures for educational-charity and media internship grants satisfy section 4945(g)(3)?
• Outcome: Approved.
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), 4945(g)(3), and 4946; Treas. Reg. § 53.4945-4(c).

Full text (IRS public release)

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

Release Number: 201517024 Employer Identification Number:
Release Date: 4/24/2015
Date: 1/28/2015 Contact person - ID number:

Contact telephone number:

LEGEND UIL 4945.04-04
B= Name
C= Name

f dollars = Amount
g= Number
h dollars= 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 have previously received approval under section 4945(g)(3) for your Individual Grant
Program which awarded grants to individuals for the payment/reimbursement of
reasonable travel expenses for individuals attending third party educational conferences.
Your letter indicates that you will operate other individual grant programs consisting of B
and C. Under B and C, you will make grants/stipends available to individuals (and pay
reasonable travel expenses) to enable them to improve a literary, artistic, musical,
scientific or other similar capacity, skill or talent within the meaning of Code section
4945(g)(3). B and C further your charitable purposes by helping provide educational
opportunities to improve the grantees’ skills, talents, etc. to better understand how free
societies advance the wellbeing of mankind. You will publicly announce B and C through
broad email announcements, individual communications by email, telephone, or in-
person or other appropriate means that may include internet-based and other media

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announcements. Candidates for both B and C may also be drawn from the multitude of
educational public charities to which you provide grants; candidates may also be drawn
from your broader network of scholars, community leaders and other individuals who
have expressed an interest in B and C.

Grants made under B

The purpose of B is to enable individuals to engage in unpaid internships and fellowships
at 501(c)(3) educational public charities. Under B, you will provide grants/stipends (and
possibly pay for reasonable travel expenses). B will allow college students (or graduates)
who have shown an interest in the non-profit sector to intern with a 501(c)(3) public
educational charity. You plan to provide each recipient in the range of f dollars to help
subsidize costs incurred and to award in the range of g grants each year.

B is expected to run approximately nine weeks in length. During the program, recipients
will travel to and engage in study through internships at a variety of 501(c)(3) public
charities throughout the United States. In the first and last week of the program,
recipients will attend classes with each other which are designed to improve their skills
and talents. During the remaining weeks, recipients will obtain unpaid internships at
501(c)(3) public charities and be exposed to many of the facets of and opportunities in
the non-profit sector, including public policy research and publication, news media and
communications, donor development, business and management, and other skills and
talents. During this same time period, recipients will also participate in a weekly two to
four hours classroom sessions with each other which will be carried out by an educational
public charity classified as a school under Code section 170(b)(1)(A)(ii). The recipients
will learn about free societies and in particular how they advance the well-being of
mankind. Throughout the term of the internship, recipients will receive coaching and
guidance from and work alongside experienced professionals working at the 501(c)(3)
public charities to improve and enhance their skills and talents.

Grants made under C

The purpose of C is to enable individuals to engage in internships and fellowships at
news organizations and/or media organizations. C will allow college students or
graduates who have shown an interest in a career in the media to intern with an
organization working in news and/or media organizations (referred to as “media
organizations”). You are in the process of identifying one or more media organizations
and you expect that they will be taxable organizations but they may also be nonprofit
organizations. None of the media organizations considered for participation will be
considered a disqualified person with respect to you within the meaning of Code section
4946.

The internships will be between six and twelve months in order for recipients to develop
skills that will be valuable and useful. Through this internship program, recipients will be
exposed to many facets of contemporary newsgathering and communications, be
exposed to traditional and new media techniques, learn how to build accuracy and
fairness into their work using advanced research techniques, and work closely with
journalists and other media experts. Recipients will have frequent opportunities to

Letter 4779 (10-2012)
Catalog Number 58222Y

conduct interviews, co-report stories, and prepare documentaries, videos, and other
media. The recipients will receive coaching, training, and guidance from experienced
professional journalists, news media experts, and other leaders in the field. The
recipients may be treated as employees of the media organization. In this situation, you
will require the media organization to submit a proposal and budget covering the
internship-related costs for which you will reimburse the media organization if the budget
is reasonable. You will then make payments directly to the media organization and the
funding will be used to pay the salaries and benefits of the recipients. Significant
deviations from the grant budget will require your prior approval.

If the interns are not treated as employees, you will make a stipend available to the
interns directly. The stipend amount will be set on a case-by-case basis, considering the
normal earnings of the intern, the part of the country that the intern may be required to
reside during his or her internship, and other relevant factors. The stipend is expected to
be in the range of h dollars per month. Presently, you anticipate awarding two or three
internships each year.

During the term of the internship, the intern shall be subject to the media organization’s
policies and procedures. Violation of these policies may result in early termination of the
internship. The media organization shall maintain complete editorial control over the
intern’s work and shall be solely responsible for the content of any work produced by the
intern.

Application and Selection Process for B and C
You will select proposed individual candidates using a nomination and selection process

that is objective, nondiscriminatory, and aimed at achieving your charitable and
educational purposes. Individual candidates will apply directly to you (or possibly an
organization offering an internship through you such as one of the educational public

charities). The selection process will take a number of factors into consideration, which

may include grade point average, current course of study or degree awarded, a

biographical record and supporting material including a report on their academic and

professional experience, a detailed statement of their career plans, letters of reference,

lists of publications or examples of their writings, curriculum vitae, recommendations from

professors, scholars, and others, the ability to contribute to scholarly debate and the body

of knowledge, research publications, personal interviews, financial need, a short essay,

interest in and overall potential for advancing and promoting the particular subject of the

grant program, and other information that reflects the qualifications of the candidate (e.g.,

honors, awards and extracurricular activities).

Each individual candidate’s name and other supporting information will be provided to a
selection committee comprised of your representatives and possibly other individuals
from the nonprofit and/or educational community. The selection committee will review
the materials provided by the candidates and select individuals they feel will be in the
best position to advance your charitable and educational purpose as well as the skills and
talents of the candidate. Recipients cannot be related to a member of the selection
committee or to any disqualified person as defined under Code section 4946. In addition,

Letter 4779 (10-2012)
Catalog Number 58222Y

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a candidate selected for C cannot be related to any officer or director of the media
company.

Reports and Follow-up for B and C:
You will require reports from the individual grantee stating the use of the funds and the

progress made by the individual grantee towards achieving the purpose for which the
grant was made. If the grant expands more than a year, you will require annual reports
describing the grantee’s accomplishments with respect to the grant and the accounting
for the funds received under the grant. You will also obtain reports from the third party
public charity and/or the media organization, as applicable, for the funds received under
the grant. You will also investigate the use of grant funds if the reports indicate that the
funds are being used for a purpose not in furtherance of the grant. You will take actions
described in Code section 53.4945-4(c)(4) for all jeopardized grants including withholding
future grant funds not already paid and will take reasonable steps to recover funds used
for an improper purpose. None of the grants are automatically renewable.

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.

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

Letter 4779 (10-2012)
Catalog Number 58222Y

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• This determination covers only 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 precedent.

• You cannot rely on the conclusions in this letter if the facts you provided have
changed substantially. You may report any significant changes to your program by
completing Form 8940 and sending it 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.

Please keep a copy of this letter in your records.
If you have any questions, please contact the person listed at the top of this letter.

Sincerely,

Director, Exempt Organizations

Letter 4779 (10-2012)
Catalog Number 58222Y