Foundation's summer-camp grant procedures receive advance approval

Plain-English summary

A private foundation proposed educational grants that would help children attend overnight summer camps promoting their religious identity, traditions, history, and culture. Eligible recipients generally must be under 18, identify with the specified religion, and not have attended such a camp before, although financially needy prior recipients may receive a second-year grant. The foundation will use a selection committee, pay approved camps directly, monitor attendance and possible diversion, and maintain grant records and reports. The IRS approved the procedures under Section 4945(g)(3), so expenditures made under the approved program will not be taxable expenditures.

Ruling snapshot

• Question: Do the foundation's procedures for awarding educational summer-camp grants satisfy Section 4945(g)(3)?
• Outcome: Approved, assuming the program is conducted as proposed.
• Key authorities: IRC §§ 74, 117, 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

Number: 201825035 Employer Identification Number:

Release Date: 6/22/2018
Contact person - ID number:

Date: March 27, 2018 Contact telephone number:
LEGEND UIL: 4945.04-04

B= Name

C = Names

D = Ethnicity

E = Name

F = Length

G = Organization

t dollars = Amount
u = Number
v dollars = 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/loans 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
Your letter indicates that you will operate an educational grant program called B.

The purpose of B is to provide funds to enable children from the counties of C to attend
overnight summer camp for promoting D religious identity and D culture among children.
You intend for B to bring more of these children into an environment where they can
achieve a better education and understanding of the D religion and the D traditions,
history, and culture. You will pay the funds directly to the summer camps to offset the
recipients’ cost of attendance.

You will promote B in many ways such as through the distribution of post cards and
brochures at various events as well as post information on social media sites. You will
use materials from G a tax-exempt organization who has worked with numerous
communities to fund children to attend D camps. In addition, the application to apply for B
is available on G’s website; your web site will provide a link to G’s website.

You will budget in the range of t dollars to fund in the range u grants based on your
projections. Individual grants will be in the range of v dollars depending on the duration of
the particular camp.

To be eligible, individuals must be children under 18 years of age who self-identify of the
D religion, and have not previously attended an overnight D summer camp (unless
receiving a renewal grant). Recipients must select, from a list you provide, one of the tax-
exempt summer camps or E summer camps administered by a non-profit, tax-exempt
organization that you have preapproved.

Grants may also be awarded to fund a second year for children who previously received
a grant to attend one of the approved camps and previously attended the applicable
summer camp. These children must demonstrate financial need.

Your board of trustees intends to administer B with the assistance of an advisory
committee consisting of individuals with a demonstrated commitment to the promotion of
the D life and culture, which will serve as the selection committee. The advisory
committee will report to your board of trustees who has final authority for all decisions.

You will monitor the grants by insuring the recipients have attended the duration of the
camp. You will also take steps to monitor risk of any diversions by the recipient
organization to insure compliance with your requirements to determine if grants used for
these camps in future years are appropriate.

You represent that you will maintain the following: (1) all records relating to individual
grants including information obtained to evaluate grantees, (2) identify whether 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.

You represent that you will complete the following: (1) arrange to receive and review
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 will check the OFAC List of Specially Designated Nationals and Blocked
Persons for names of individuals and entities with whom you are dealing to determine if
they are included on the list. You will comply with all statutes, executive orders, and
regulations that restrict or prohibit persons from engaging in transactions and dealings

Letter 4779 (10-2012)
Catalog Number 58222Y

with designated countries, entities, or individuals, or otherwise engaging in activities in
violation of economic sanctions administered by OFAC. If necessary, you will acquire
from OFAC the appropriate license and registration where necessary.

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

Letter 4779 (10-2012)
Catalog Number 58222Y

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,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4779 (10-2012)
Catalog Number 58222Y