Artist residency and grant procedures receive approval

Plain-English summary

A private foundation proposed an artist and scholar residency program plus several grant opportunities for artistic and scholarly work. Residencies would bring together participants from varied disciplines and regions, with selectors evaluating talent, promise, social or environmental engagement, and collaborative interest. Other grants would support artists pursuing community impact and students developing curatorial exhibitions. The board retained final approval, disqualified persons and relatives were excluded, and the foundation would require reports, investigate misuse, recover diverted funds, and withhold further payments when necessary. The IRS approved the procedures under section 4945(g)(3), so expenditures made under the described programs would not be taxable expenditures.

Ruling snapshot

• Question: Do the proposed artist residency, fellowship, and related grant procedures satisfy the advance-approval requirements?
• Outcome: Approved, grants made under the procedures will not be taxable expenditures.
• Key authorities: IRC §§ 74(b), 117(a), 170(c)(2)(B), 4945(g)(3), 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

Release Number: 201519037
Release Date: 5/8/2015 Employer Identification Number:

Date: 2/11/2015
Contact person - ID number:

Contact telephone number:

LEGEND

W =
X =
Y =

UIL
4945.04-04

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 W Residency Program (Program) to bring together artists and scholars
of exceptional talent and promise. You will also award grants to enable individuals to
pursue artistic or scholarly work.

You will further Y’s legacy by focus on philanthropic initiatives that were important to Y
during his lifetime. These include utilizing art to change awareness and increase funding
for the environment and scholarly programs.

Your Program will focus on bringing together artists of exceptional talent and promise
from a variety of disciplines, backgrounds and career levels to create art, experiment,
exchange ideas and advance mutual understanding.

Individuals eligible to participate in the Program include artists, arts professionals (such
as curators), students, and scholars in various disciplines relevant to your charitable
programs. The applicants will be judged on accomplishments and/or indications strong
potential for future accomplishment. You will also strive to bring together grantees from
diverse geographic regions, to further your mission of fostering international
understanding and cultural exchange.

Information about the Program is available on your website and will be the subject of
occasional press releases.

You expect to conduct several one-month residencies each year and host about 10
artists to participate in each residency period for around 70 participants each year.

You will provide each participant with round-trip transportation to the Program facility.
Participant will receive meals, housing, studio space and staff resources. In addition, a
stipend will be provided for art materials, shipping of artwork, and other expenses
associated with completing the Program. Artists invited as collaborators will receive
transportation, meals, housing, studio space and staff resources, but will not receive a
stipend.

Determination of eligibility for the Program will include consideration of the following
factors:

• Demonstration of exceptional talent and promise;

• Involvement in the fields of visual arts, performing arts, media arts, design,
literature, art criticism and scholarship, and environmental science;

• History of work that engages with important social or environmental issues; and

• Interest in working in interdisciplinary, collaborative environments and history of
collaborative projects.

Your Board of Directors will appoint “selectors” from among individuals who have a
variety of creative backgrounds and represent several geographic regions in order to
create a diverse mix. Selectors may be proposed to your Board by individual directors,
your staff members and others.

If the Board of Directors approves and the selectors agree to serve, each will be asked to
choose artists based on the selector’s area of expertise. Selector will be expected to
serve for two years. Selectors receive an annual honorarium for their service.

The artists will be asked to complete an online form that will gather information about
each artist. All artist selections will be subject to approval by your Board.

Artists who have been in residence will not be eligible to participate again for at least
three years. This does not include artists who are invited as collaborators.

Letter 4779 (10-2012)
Catalog Number 58222Y

Grant recipients may not be “disqualified persons” with respect to your organization,
within the meaning of Code Section 4946. You will not make grants to persons whose
selection would result in private benefit to any selector or officer or director of your
organization. Furthermore, recipients may not be related to any selector, officer or
director of your organization.

You are also in the process of incubating several grant opportunities to enable individuals
to pursue artistic or scholarly work.

The first grant opportunity will involve the selection of artists whose work has the capacity
to meaningfully impact their communities to effect positive social change. Each award
will be about $[redacted] over two years. Additionally, another group of artists will receive
travel support in order to conduct research or participate in residencies related to their
social practice.

The second grant opportunity is intended to foster a new generation of curators by
providing access to digital resources and collections, including works by Y and to develop
and enhance new curatorial scholarship, perspectives, and dialogues on art and its
influence on society. Applicants must be undergraduate or graduate students who
submit exhibition proposals online through your website.

A jury of five distinguished artists, curators, and scholars will evaluate the submitted
proposals. The winning proposal will be designated as an online exhibition, and the
winner will receive a curatorial fellowship and honorarium enabling him or her to curate
works from your art collection to create an exhibition at his or her academic institution.

You intend to publicize each grant opportunity on your website, and each grant
opportunity will be the subject of occasional press releases.

The number of grants that will be made annually will depend on the number and types of
grant opportunities offered each year. You currently anticipate that you will offer at least
one grant opportunity per year. The number of grantees per grant opportunity will vary
depending on the nature of the grant opportunity and the available funding.

The amount of each grant offered will also depend on the type of grant and the length of
the opportunity. You anticipate that the combination of stipends, travel funding, and
honoraria associated will be provided and may be adjusted over time.

Applications for grant opportunities may be received in several different ways depending
on the type of grant, and the procedures for applying may vary through time. Eligible
individuals may be allowed to apply directly to you or may be nominated by a committee
of experts. Applicants will be asked to provide a resume or portfolio, a description of the
work they plan to do or the issue, idea, or technique they plan to explore as a result of the
grant opportunity. They must also explain of how their work complements the vision of Y
or furthers your mission. Letters of reference from experts in the applicant’s field may
also be requested.

Letter 4779 (10-2012)
Catalog Number 58222Y

Relatives of your officers, directors and substantial contributors, and any other
disqualified persons (within the meaning of Code Section 4946) with respect to your
organization, are not eligible for grant opportunities offered. Additionally, relatives of
nominators or anyone whose selection would result in a private benefit to any of the
aforementioned individuals will not be eligible.

Application review and selection may be a one-step or a two-step process, but all grants
will be subject to final approval by the Board, which may delegate its approval authority to
a committee of the Board, your Executive Director, or the officer or officers directing the
Program.

Grants ordinarily will be awarded for a one- or two-year period, but in appropriate
situations, the initial grant period may be for a shorter or longer period if it appears that it
would be beneficial to extend or shorten the initial grant period.

You will promptly investigate any apparent misuse of grant funds or failure to provide
required reports. While a matter is being investigated, you will withhold further payments
to the individual until you have determined that no part of a grant has been misused and
until missing reports have been submitted.

If you discover that funds have, in fact, been misused, you will take all reasonable and
appropriate steps to secure the repayment of the diverted funds. In addition, if such a
diversion occurs and you are making installment payments on a grant, you will withhold
any further payments until it has received assurances from the grant recipient that future
diversions will not occur and has required the individual to take extraordinary precautions
to prevent future diversions from occurring. All remaining funds will be used for your
charitable purposes.

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:

• Ascholarship 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

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 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 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 representatives 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,

Tamera Ripperda
Director, Exempt Organizations

Letter 4779 (10-2012)
Catalog Number 58222Y