Summer camp scholarship procedures received advance approval

Plain-English summary

A private foundation proposed scholarships for high school juniors and seniors who completed a short summer camp about issues and careers in aging. Applicants also had to be United States citizens or permanent residents, submit an application and essay, and show college or university enrollment. A selection committee representing the program partners would choose recipients, payments would go directly to the educational institution, and the foundation committed to diversion controls and grant records. The IRS approved the procedures under section 4945(g)(1), so compliant awards would not be taxable expenditures.

Ruling snapshot

• Question: Did the summer camp scholarship procedures satisfy section 4945(g)?
• Outcome: Approved
• Key authorities: IRC §§ 117, 170(b)(1)(A)(ii), and 4945(g)

Full text (IRS public release)

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

Release Number: 201525016
Release Date: 6/19/2015 Employer Identification Number:
Date: March 26, 2015

Contact person - ID number:

Contact telephone number:

LEGEND UIL: 4945.04-04

M= City, State

X= Name of Summer Camp

Y= Name of Entity

Z= Name of University Department
x dollars= Amount

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 provided in Code section 117(c)).

Description of your request
Your letter indicates you will annually conduct a three to five day summer camp learning
experience called X. You will conduct the camp in partnership with Y and Z.

Participation in X will offer high school juniors and seniors an opportunity to expand their
knowledge of issues in aging as well as learn about the rewarding career field of aging.
Students who complete the three to five day summer camp learning experience will have
the option to apply for a one-time scholarship award of x dollars to attend the college or
university of their choice.

Letter 4792 (10-2012)
Catalog Number 58263T

The purpose of the scholarships will be to assist students with educational costs of tuition
and fees.

The X program will be publicized through high school announcements, high school
counselors, teachers, and school administrators, printed brochures, community groups,
websites and social media.

For the inaugural program, the geographical area in which the program will be publicized
is M. The program is intended to then expand to the surrounding areas. Finally, in future
years the program may be expanded nationwide.

The selection criteria for the scholarship award are:

1. Must be a high school junior or senior

2. Must be a citizen or permanent resident of the United States

3. Successful completion of the summer camp

4. Completion of the application for the scholarship

5. Completion of an essay on what the applicant learned from participating in the
   summer camp

6. Submit proof of enrollment in a college or university

Scholarship recipients will be awarded a one-time scholarship that will be made payable
to the college or university in which the recipient is enrolled. You will not pay the
scholarship to a college or university unless the recipient is enrolled.

The selection committee will consist of individuals representing the partnering
organizations, including you, Y, Z, and select sponsors (upon your invitation).

You represented that you will investigate diversions of funds from their intended
purposes, take all reasonable and appropriate steps to recover diverted funds, ensure
other grant funds held by a recipient are used for their intended purposes, and withhold
further payments to recipients until you obtain recipients’ assurances that future
diversions will not occur and that recipients will take extraordinary precautions to prevent
future diversions from occurring.

You represented that you will maintain all records relating to individual grants, including
information obtained to evaluate recipients, identify whether a recipient 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
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.

Letter 4792 (10-2012)
Catalog Number 58263T

• 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.

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.

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