Professional-development grant procedures received advance approval

Plain-English summary

A private foundation proposed grants for professional-development opportunities benefiting people who work at its grantee organizations. Applicants could seek funding for conferences, training, seminars, courses, and similar opportunities, with selections based on relevance, need, proposal quality, and benefits to both the participant and organization. Grant funds would go directly to the nonprofit organizations under contracts, and the foundation would require status reports and could seek repayment for violations. The IRS approved the procedures under section 4945(g)(3), assuming the program operated as proposed. Expenditures made under those procedures would not be taxable expenditures, subject to the letter's limits and ongoing recordkeeping requirements.

Ruling snapshot

• Question: Did the foundation's proposed procedures satisfy the advance-approval rules for educational grants to individuals?
• Outcome: approved
• Key authorities: IRC §§ 74(b), 117(a), 170, 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

Employer Identification Number:

Number: 201737015
Release Date: 9/15/2017
Contact person - ID number:

Contact telephone number:
Date: June 20, 2017

LEGEND:

w = number
X = fund name
y dollars = amount
z dollars = amount

UIL:

4945.04-04

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 are creating X to award grants to individuals, who work at your grantee
organizations, for professional development opportunities. Specifically, individuals or
organizations may request funding for conferences, training, seminars, courses, and
other professional development opportunities. X will be publicized through email to all
past grantees, which includes over 200 entities. Your board approved y dollars to be
allocated to X and you expect to award up to w grants. Applicants may request up to z
dollars per organization.

Grantee organizations are located in approximately 14 different counties and several
issues areas. Your goal is to select grantees that represent this diversity. Potential
recipients must submit an application form and provide specific details about the cost of
the program or opportunity they want to pursue. Grant recipients are selected based on
the strength of their request, including relevance to their organization, need, quality of
proposal and how it will benefit both the individual and organization.


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Grant funds are remitted directly to the nonprofit organizations. The purpose of the funds
will be specified in the grant contract. A status report will be requested after the
opportunity concludes. The grant recipients will be asked how the funds were used, what
benefits the applicant and the organization received, and how the opportunity will
strengthen the organization. Any violations of the grant agreement will be dealt with on a
case by case basis, likely requesting repayment of the grant if the original intention can
no longer be executed.

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.

Letter 4779 (10-2012)
Catalog Number 58222Y


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• 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.

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,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4779 (10-2012)
Catalog Number 58222Y