IRS approves expanded health-workforce fellowships

Plain-English summary

A private foundation proposed expanding its fellowships beyond traditional health professionals, faculty, and scholars to a broader range of people working to improve health and healthcare. Fellows would develop evidence, advance research, share knowledge, and build leadership skills, with selection based on experience, qualifications, and potential contribution. Funding could cover tuition, stipends, research, travel, leadership development, institutional costs, and related support, generally paid through a host organization. Public dissemination requirements would limit private benefit to noncharitable hosts, while periodic reports, budget oversight, payment withholding, and recovery procedures would protect the grant purposes. The IRS approved the specific-purpose grant procedures under IRC § 4945(g)(3).

Ruling snapshot

• Question: Do the foundation's expanded health-workforce fellowship procedures satisfy the advance-approval rules for grants to individuals?
• Outcome: Approved, subject to conducting the programs as proposed
• Key authorities: IRC §§ 74(b), 117, 170, and 4945(g)(3); 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: 201627003
Release Date: 7/1/2016 Employer Identification Number:

Date: 4/8/2016
Contact person - ID number:

Contact Number:

Legend: UIL: 4945.04-04

B = program vision

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 grants. Based on the information you
submitted, and assuming you will conduct your program as proposed, we determined that
your procedures for awarding specific purpose grants meets 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

The purpose of your programs is to achieve a specific objective, produce a report or other
similar product, or improve or enhance scientific, teaching or other similar capacity, skill
or talent in accordance with section 4945(g)(3).

Your overall goal is to build the nation’s health and healthcare workforce. In the past you
have focused on professionals, faculty, and scholars. You have requested and already
received approval for those grant making procedures. You are now expanding your
programs to support a larger effort beyond traditional healthcare influence.

Your new programs are intended to build a healthy society by providing evidence based
initiatives to affect education and prevention in the healthcare system.

You will support selected fellows for the purposes of:
• improving or developing clear, accessible evidence to advance informed
development and refinement of current knowledge;
• advance new research projects; and


• disseminate knowledge while developing the leadership and various skills
individuals will need to contribute to building a B.

The grants are designed to encourage and further the recipients’ personal and intellectual
involvement in their given field and in cross-sector collaborations.

The primary criteria for awarding grants include experience, academic or leadership
qualifications and an applicant’s potential to make a significant contribution to your vision
of building a B. Criteria for each program are tailored to the goals of the specific
program.

The number of fellows will be determined based on the needs and capacity of the
particular program. Therefore, the number of grants will vary from year to year.

Your process for selecting fellows is administered by your organization’s staff, frequently
with input and advice from an administering organization and an advisory committee of
content experts and others who can add insight into the particular program area.

You administer your programs with the assistance of various national program offices
which are generally universities or other educational institutions. Because you need to
reach fellows across all types of settings, you will provide support to individuals
regardless of the type of institution with which they are currently affiliated.

The amount of the fellowships will vary by program based on the support necessary to
achieve the program's goals. The types of activities funded will include faculty, facilities,
and institutional costs of maintaining the program, tuition, stipends, leadership
development, research expenses, travel, and other costs attributable to individual fellows.
In addition, you or an administering organization may provide services directly or through
consultants to support the fellow’s activities.

You will publish your programs using calls for proposals. The calls will be announced
through your website, social media, academic and medical institutions, professional
societies, your alumni and grantees, and direct outreach.

You will maintain all required information contained in the grant applications such as
letters of agreement, grantee reports, and other documentation. When you provide
support through non-charitable host institutions, safeguards will be included to ensure the
grant does not provide more than an incidental benefit to the institution with which the
fellow is affiliated. These safeguards include sharing the outcome with the public,
publishing the results in journals, or releasing the results to the public without charge.
You would also prohibit any provisions requiring the fellow to remain at the host institution
after participating in the program.

Grant recipients must submit periodic financial and narrative reports to receive additional
payments on, or renewal of funding. The reports must demonstrate consistent program

Letter 4779 (10-2012)
Catalog Number 58222Y

participation such as regular participation in meetings, trainings, and group projects and
discussions, and progress toward program goals.

In the cases where funding to support tuition is provided, a minimum grade point average
will be required.

Fellowship grants are distributed to the host organization with which the fellow is
affiliated. At this time, you do not make any grant distributions directly to individuals. The
host institutions are required under the grant agreements to maintain oversight over the
use of grant funds.

Fellows are required to submit reports to you at least annually describing the progress of
their particular project or activities and accounting for the grant funds. Copies of papers,
manuscripts and other materials produced under the grant must also be provided.
Grantees are also expected to submit a final report within 30-60 days following the end of
the grant period.

Narrative reports on the progress of the fellows and their projects or activities are
reviewed by the administering organization (if applicable) or the granting organization
program staff. Deviations from the grant budget of more than 10 percent require prior
approval from you.

If the grantee submits an unsatisfactory report, fails to submit a required report, or if you
learn that all or any part of the grant funds awarded are being diverted from the intended
purposes, you will withhold any further payments to the grantee. You will take all
reasonable and appropriate steps to recover any grant funds not properly accounted for
or to ensure restoration of the diverted funds to the purposes of the grant. This would
include legal action if deemed appropriate under the circumstances. Any grantee
deemed to have diverted grant funds shall be eligible to receive further payments only if
such grantee:

(1) Voluntarily returns the diverted funds;

(2) Gives you his or her written assurances that future diversions shall not occur;

and

(3) Agrees to provide additional progress reports, on a bi-weekly, monthly,

quarterly, or semi-annual basis as determined appropriate, during the duration of

the grant period.

Unused funds are required to be transferred back 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.

Letter 4779 (10-2012)
Catalog Number 58222Y

• 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
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).

Letter 4779 (10-2012)
Catalog Number 58222Y


• 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 any questions, please contact the person listed at the top of this letter.

Sincerely,

Jeffrey I. Cooper
Director, Exempt Organizations
Rulings and Agreements

Letter 4779 (10-2012)
Catalog Number 58222Y