Health-care scholarship procedures receive advance approval

Plain-English summary

A private foundation proposed multiple scholarship programs for people pursuing nursing, medical, and related health-care education. Applicants had to demonstrate academic ability, character, citizenship, and financial need, and independent health-care professionals would select recipients. The foundation also promised annual grant reports, investigation and recovery of diverted funds, payment holds when needed, and detailed records. The IRS approved the procedures as objective and nondiscriminatory under section 4945(g)(1), so grants made under them would not be taxable expenditures. Awards used for qualified tuition and related expenses would also be nontaxable to recipients within section 117's limits.

Ruling snapshot

• Question: Did the foundation's procedures for its health-care scholarship programs satisfy the advance-approval requirements?
• Outcome: Approved.
• Key authorities: IRC §§ 117, 170(b)(1)(A)(ii), and 4945(g)(1).

Full text (IRS public release)

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

Number: 201634028
Release Date: 8/19/2016

Employer Identification Number:
Date: May 23, 2016

Contact person - ID number:

Contact telephone number:

LEGEND UIL: 4945.04-04

C = Scholarship Program
D = Scholarship Program
E = Scholarship Program
F = Scholarship Program
G = Scholarship Program
H = Scholarship Program
J = Scholarship Program
K = Scholarship Program
M = Scholarship Program
O = Scholarship Program
P = Scholarship Program
Q = Scholarship Program
R = Scholarship Program

T = County

U = County

V = School

W = Medical Center
X = Board

Y = State

z dollars = Amount

cc dollars = Amount
dd dollars = Amount
ee dollars = Amount
ff dollars = Amount

gg dollars = Amount
hh 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

Letter 4792 (10-2012)
Catalog Number 58263T

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(b)).

Description of your request

Your letter indicates you will operate various scholarship programs. The overall purpose
of the scholarships is to provide financial support to individuals working toward a degree
in health care or related fields, including nurses, technicians and doctors. The scholarship
recipients must be employees at hospitals in P and Q counties in the State of U or
enrolled in a degree program at R, a local nursing school.

Publication of the scholarship programs is through your website, annual presentations at
R, application packets provided to the students upon enrollment at R and informational e-
mails to local hospitals for dissemination to employees.

The selection criteria for the scholarships include demonstrated academic ability and
desire, character, good citizenship and economic necessity. Applications and supporting
documentation are required for all programs and recipients must re-apply each year
demonstrating that they continue to meet the requirements of the specific scholarship
program. Recipients may not be related to members of the selection committee or any
“disqualified person” of your organization. For all scholarship programs, amounts are
based on available funds.

Each scholarship program has its own selection committee of healthcare professionals
who are not in a position to create a conflict of interest or receive a private benefit in the
selection of recipients.

The B program is for the benefit of aspiring students in the health services. The
committee will award scholarships to select individuals who are pursuing a career in a
health related profession This scholarship is open to all employees of hospitals in P and
Q counties pursuing health related education. The scholarship amount is w dollars — y
dollars per semester. The B committee meets twice a year.

The C program assists individuals with some of the costs involved in pursuing a license
or degree in nursing and to help alleviate the shortage of nursing in the region. The

Letter 4792 (10-2012)
Catalog Number 58263T

committee provides scholarship to licensed vocational nurses, resident nurses and
candidates seeking Master’s levels nursing degrees in P and Q counties. The scholarship
amount is x dollars per year for licensed vocational nursing (LVN) students and z dollars
per year for advanced nursing degrees.

D offers nursing scholarships in the local region to assist in alleviating the nursing
shortage in this area. Funds have been given to individuals pursuing their LVN degree at
R. The amount of the scholarship varies, but it was cc dollars to LVN students last year.

E was created to provide one scholarship annually to an LVN student who meets the
criteria. This is selected by a committee and given to a student at R. The amount of the
scholarship is v dollars.

F provides two scholarships annually to two LVN students who meet the criteria. Awards
are determined by a committee and given to a student at R. The amount of the
scholarship is x dollars.

The G scholarship is awarded to the LVN student who has the highest clinical
achievement for the year at R. The amount of the scholarship is x dollars.

H was created to provide assistance to students seeking certification in hospice or
palliative care. The amount of the scholarship is v dollars given at various times,
depending on application submission.

J is awarded to a graduate who has successfully obtained licensure from T and intends to
pursue an Associate, Bachelor's or Master's Degree in nursing. The amount of the
scholarship is x dollars (advanced degrees) and z dollars (Bachelor of Science Nursing
BSN).

K promotes continuing education for obstetrical nursing personnel of S. It is open to all
qualifying personnel at hospitals in P and Q counties. The amount of the scholarship is x
dollars per semester.

L scholarships are given to the top four academic students at R in the amount of z
dollars.

Four M scholarships in the amount of bb dollars are given to two LVN students who
demonstrate outstanding clinical achievement especially to elderly patients and two LVN
students who meet academic scholarship standards.

N scholarships in the amount of z dollars are awarded to students in financial need at R.

The O scholarship in the amount of v dollars is given to a student at R who has a history
of community service.

You represent that you will complete the following: (1) arrange to receive and review

Letter 4792 (10-2012)
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grantee reports annually and upon completion of the purpose for which the grant was
awarded, (2) investigate diversion of funds from their intended purposes, and (3) take all
reasonable and appropriate steps to recover the diverted funds, ensure other grant funds
held by a grantee are used for their intended purposes, and (4) withhold further payments
to grantees until you obtain grantees' assurances that future diversions will not occur and
that grantees will take extraordinary precautions to prevent future diversion from
occurring.

You represent that you will maintain the following: (1) all records relating to individual
grants including information obtained to evaluate grantees, (2) identify a grantee is a
disqualified person, (3) establish the amount and purpose of each grant, and (4) establish
that you undertook the supervision and investigation of grants described above.

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 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.

Letter 4792 (10-2012)
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• 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.

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,

Jeffrey I. Cooper
Director, Exempt Organizations
Rulings and Agreements

Letter 4792 (10-2012)
Catalog Number 58263T