Veterinary scholarships and research grants approved

Plain-English summary

A private foundation requested approval for grants supporting veterinary students' education and research on canine and feline health. Applicants would submit transcripts, recommendations, an essay, and a proposed research or clinical project, with final selection by the foundation's board. Disqualified persons and related insiders were excluded, payments and later installments depended on academic performance and reporting, and the foundation would investigate misuse and recover diverted funds. The IRS approved the scholarship procedures under section 4945(g)(1) and the educational grant procedures under section 4945(g)(3).

Ruling snapshot

• Question: Do the foundation's veterinary scholarship and educational grant procedures satisfy sections 4945(g)(1) and 4945(g)(3)?
• Outcome: approved
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), 4945(g), 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

Employer Identification Number:

Date: September 28, 2016
Contact person - ID number:

Number: 201652024 Contact telephone number:
Release Date: 12/23/2016

LEGEND UIL: 4945.04-04

W= Company Name
X= Location
y = Number

z dollars= Amount
Dear

You asked for advance approval of your scholarship grant procedures and education
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.

Our determination

We approved your procedures for awarding scholarships and educational grants. 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
requirement of Code Section 4945(g)(1) and 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.

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 a grant making program.

Your purpose is to foster and promote scientific research, education and other charitable
programs and initiatives in the areas of canine and feline health.

The purpose of your program is to support the education or research of deserving
candidates who have a proven interest in advancing the health of canine and feline pets.
The grants cover a fixed amount of the recipient’s veterinary school tuition and related

costs at educational institutions described in Section 170(b)(1)(A)(ii), and/or costs related
to specific educational or research projects in canine and feline health. All grant
recipients will be required to perform a research or clinical project during the term of the
grant. You currently anticipate awarding approximately y grants per year for z dollars per
year for three years but the exact number of grants as well as the exact amount and term
of each award will vary depending on the availability of funds and will be determined by
your board.

Information about the grant program will be included on your website, and may be
publicized through a brochure or similar materials produced by you as well as sent
directly to accredited veterinary schools and other educational institutions.

Eligible candidates will be United States citizens who are full-time students and are
entering their second year of study at an accredited veterinary school. Special
consideration may be given to eligible candidates who graduated from a high school or
college located in X.

Eligible individuals must apply directly to you and will be required to submit a personal
resume, veterinary school and college transcripts, recommendations from two veterinary
school professors, an essay on a topic you designate, and a description of a research or
clinical project proposed and designed by the applicant, which will be performed while
receiving the grant.

The selection of recipients may be carried out through a multiple step process but all
grants will be subject to final approval by your board. In some cases, your board may
directly review applications and select the grant recipients based on its review. In other
cases, the board may delegate the initial review process to your officers or staff members
or a committee designated by them comprised of members with relevant expertise, who
will review the grant applications and select finalists. The finalists’ names will then be
submitted to your board for final review and approval.

Grants will be awarded on the basis of (i) the interest of the students in canine and feline
(pet) health, including without limitation nutrition and the prevention, diagnosis and
treatment of disease, (ii) the student’s academic and professional achievements to date,
and (iii) the student’s proposed research or clinical project to be performed while
receiving the grant, and that project’s potential to enhance the student’s education and
training in veterinary medicine or contribute to the field.

You may expand or modify these selection criteria as you gain experience with the grant
program. Grants will be available without regard to race, color, religion, creed, national or
ethnic origin, age, sex, gender, sexual orientation, veteran’s status, disability, or any
other legally recognized classification. Grant recipients may not be “disqualified persons”
with respect to you, within the meaning of Code Section 4946. Grant recipients
furthermore may not be, or be related to, any officer, director, employee or substantial
contributor of yours or your principal sponsor, W, or a member of your scholarship
committee, nor may they be persons whose selection would result in private benefit to

any officer, director, employee or substantial contributor of, or a member of your
scholarship committee.

Grants will be made pursuant to written commitments from the recipients to abide by the
grant program guidelines, including reporting obligations. Grants will be generally
distributed in annual installments during each of the recipient's second, third and fourth
years of veterinary school. The grant payments for the second and third years of the
grant will be dependent on a recipient meeting certain academic performance criteria
established by you and adequately reporting to you on the progress of the recipient's
grant-funded activities.

For scholarship and fellowship grants described in 4945(g)(1), funds will be paid directly
to the recipient's veterinary school for tuition. For scholarship and fellowship grants, the
recipient will be required to make arrangements for you to receive a report, at least
annually and verified by the educational institution attended by the recipient showing the
recipient's courses taken (if any) and grades received (if any) in each academic period. If
a recipient's grant-funded activities do not include taking courses, the recipient must
submit a report to you on the progress of his or her research or clinical project, as
applicable, at least annually, and such report must be approved by a supervising faculty
member or other school official. All scholarship and fellowship recipients must submit a
final report upon conclusion of their studies or research or clinical activities.

For all grants, 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
grant payments to the extent possible 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 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 you
have 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.

You will maintain accurate records relating to all grants, including names of and contact
information for grantees, purposes and amount of each award, manner of selection, and
relationship (if any) to officers, directors or other disqualified persons.

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
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 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