Religious-tolerance internship grant procedures approved

Plain-English summary

A private foundation proposed grants for college and graduate students taking unpaid or low-paying internships with nonprofits working to reduce religious intolerance and hate crimes. Applicants had to be enrolled in good standing, accepted into a qualifying internship, and unrelated to disqualified persons. The foundation would use objective selection criteria, supervise and mentor recipients, require reports, stop payments for noncompliance, and recover misused funds. The IRS approved the procedures under section 4945(g)(3), so grants made under the described program would not be taxable expenditures.

Ruling snapshot

• Question: Do the foundation's procedures for religious-tolerance internship grants satisfy section 4945(g)(3)?
• Outcome: Approved
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), 170(c)(2)(B), 4945(g); 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: 201536026 Employer Identification Number:

Release Date: 9/4/2015
Contact person - ID number:

Date: June 9, 2015 Contact telephone number:

LEGEND UIL: 4945.04-04

$s= dollar amount
$t= 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 a program to reduce religious intolerance in general, and on college
campuses in particular.

Your grants will be awarded to college and graduate students who accept unpaid or low-
paying internships with an organization (NGOs and not-for-profits) whose work aligns
with your mission. The grants will be used to support the recipient’s reasonable living
expenses during the course of the internship.

The specific purpose of the program is to enable students to participate in unpaid or low-
paying internships with organizations whose work aligns with your mission by reducing
religious intolerance on campuses, religious hate crimes, and expanding the students’
knowledge and understanding of these issues. With the support of your Executive
Director and working with professionals in these issues, the students will return from their
internships with the knowledge and experience that will allow them to educate and
positively influence their classmates and others.

You will announce your internship program on your website via press releases, blast
emails to individuals and organizations who are interested in your work, and through a
network of other groups working on campus issues.

You will award a total of $s annually to provide funding for four to six students. The size
of each grant will depend on the student’s proposed budget. The maximum individual
grant is $t.

Your eligibility criteria include:

• The applicant’s current enrollment in good standing in a credentialed
undergraduate or graduate program;

• Evidence of the applicant’s acceptance of an unpaid or low-paying internship with
a not-for-profit organization or NGO that will allow the student to work on an issue
that aligns with your mission; and

• Certification that the applicant is not related to any of your Directors or Officers (or
other disqualified persons).

You will select recipients on an objective and nondiscriminatory basis. Selected students
must demonstrate:

(i) Strong academic performance;

(ii) A well-considered plan to advance knowledge related to your mission;

(iii) A commitment to using the knowledge to positively impact others; and

(iv) A commitment to “giving back” by serving as mentors to future participants in
your program.

Before selecting the grantees, you will verify the accuracy of the representations made
and materials submitted by the potential recipients in connection with the application and
review process.

Once the recipients have been selected, your Executive Director will be significantly
involved in supervising, supporting and mentoring these individuals. When the internship
is completed, the recipient will submit a final report or written workpapers prepared
during the internship.

Grants will be paid on a periodic basis over the term of the internship. If, through your
close supervision of the recipients over the term of the internship, you determine that any
of the requirements of the program are not being met, no further payments will be
awarded. In addition, before receiving grant funds, the recipient must provide written
agreement to repay any grant funds that have not been used for your charitable
purposes. If there is any indication that a grantee has misrepresented his or her
experience or work, a member of your Board of Directors will conduct an investigation.
You will take all reasonable steps to recover grant funds where there is evidence that
they have been misused. The final payment will be made upon your acceptance of the
grantee’s final report.

Letter 4779 (10-2012)
Catalog Number 58222Y

The current selection committee members include the President, Vice President,
Treasurer, and the Executive Director. At this time, only those persons holding these
offices and titles shall be included on the selection committee. In no event shall any
member of the selection committee be in a position to receive any private benefit, directly
or indirectly, if certain potential grantees are selected over others. Grantees may not
have a family or business relationship with any of the members of the selection
committee or any officers or substantial contributors to you.

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
• 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

Letter 4779 (10-2012)
Catalog Number 58222Y

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,

Tamera L. Ripperda
Director, Exempt Organizations

Letter 4779 (10-2012)
Catalog Number 58222Y