IRS approved scholarships for math, science, and education students

Plain-English summary

A private foundation proposed renewable scholarships for students from a specified area who would attend college in a specified state and pursue mathematics, science, or education degrees. Applicants needed specified grade point averages, class rank in the top quarter, good character, and financial need. A selection committee would review academic records, recommendations, requested aid, and other submitted information, and a trustee would interview each applicant. Recipients had to provide quarterly progress reports, and further payments could stop if reports were missing or did not show educational use. The IRS approved the objective and nondiscriminatory procedures under section 4945(g)(1).

Ruling snapshot

• Question: Do the foundation's proposed renewable scholarship procedures satisfy section 4945(g)?
• Outcome: approved, assuming the program is conducted as proposed
• 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

Release Number: 201934009
Release Date: 8/24/2019
Employer Identification Number:

Date: May 30, 2019
Contact person - ID number:

Contact telephone number:

LEGEND:

UIL: 4945.04-04

C = county/state
D = state

x dollars = amount
y 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
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

You will operate a scholarship program for high school students in C, in order to provide
for tuition, books, equipment, and other necessary expenses related to attendance to a
college or university in D. You aim to encourage students graduating from C to pursue an
undergraduate degree in mathematics, education, or the sciences.

To be eligible for a scholarship, the student must:

• Be a resident of C currently or planning to attend a university of college in D and
pursuing a degree in math, science or education

Letter 4792 (10-2012)
Catalog Number 58263T

• Have maintained a 3.0 Grade Point Average in high school

• Be ranked in the top 25% of their graduating class

• If currently enrolled in a college or university, maintain a 2.75 Grade Point Average
• Be of good character and have financial need

Applicants will need to submit a written request setting forth their achievements and
activities. This will include academic records, transcripts, letter(s) of recommendation,
amount of financial aid requested, and any other information the applicant chooses to
submit.

Awards will be made on an objective and non-discriminatory basis. Your selection
committee will review all applications, and one of your Trustees will interview the
applicant.

You intend to allocate x dollars per year towards scholarships for qualified applicants. No
less than y dollars will be awarded. The scholarship is eligible for renewal.

The recipient will submit progress reports to you after each quarter. If no report is
received, or if the report does not show how the award furthers the student’s education,
no additional funds will be issued. You will take any needed and reasonable steps to
recover funds from the recipient and will retain all records of any awards made.

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:

Letter 4792 (10-2012)
Catalog Number 58263T

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.

• 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.

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

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4792 (10-2012)
Catalog Number 58263T