IRS approved annual nursing scholarships based on merit and need

Plain-English summary

A private foundation proposed annual scholarships for full-time students in specified nursing programs at a college. Applicants needed a minimum 3.5 grade point average and demonstrated financial need, and prior recipients had to reapply each year under the same standards. The college would evaluate applicants and recommend recipients and amounts, but the foundation retained final selection authority. Scholarship funds would be paid directly to the school, which agreed to return unused amounts and report failures to meet award conditions. The IRS approved the objective and nondiscriminatory procedures under section 4945(g)(1).

Ruling snapshot

• Question: Do the foundation's proposed merit- and need-based nursing scholarship procedures satisfy section 4945(g)?
• Outcome: approved, assuming the program is conducted as proposed
• Key authorities: IRC §§ 117, 170(b)(1)(A)(ii), 4942, 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: 201936011
Release Date: 9/6/2019
Employer Identification Number:

Date: June 10, 2019
Contact person - ID number:

Contact telephone number:

LEGEND:

UIL: 4945.04-04

B = scholarships
C = college

D = scholarship fund

E = school

G = administrator
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 program called B to provide annual scholarships to students attending
the C, or its successor.

The awarding of B, or the renewal thereof, shall be based on considerations of scholastic
merit and the financial needs of the student. E is responsible for selecting students, within
a framework established by the administrators for E.

The number of scholarships that will be awarded each year and the amount of each
scholarship will vary depending on the amount of funds available to be distributed. You

Letter 4792 (10-2012)
Catalog Number 58263T

are required to annually distribute the greater of the net income of your trust or the
amount necessary to satisfy Section 4942 of the Code. The number of qualified
applicants and the scholastic achievement of each student will also be considered when
determining the amount of each scholarship.

Solicitation and announcement for B is provided through C. Students will access
information about the scholarship through E's portal. Your trustees will utilize C’s existing
central scholarship application and administration system to identify eligible candidates
for consideration for a scholarship. E utilizes an application that is specific to B and its
eligibility requirements.

Criteria for student eligibility includes demonstration of financial need, high scholastic
achievement and enrollment in nursing programs at C.

Eligible candidates for this scholarship must:

• Be enrolled full-time in the C.

• Be admitted to the RN to B.S.N Completion Program/ the B.S.N. program or a
Graduate Nursing Program (MSN or DNP)

• Have a minimum GPA of 3.5

• Demonstrate financial need for scholarship assistance. Student financial need will be
identified through the Free Application for Federal Student Aid (FAFSA) and take into
account any other scholarships or financial assistance the student may receive.

Prior year recipients must apply on an annual basis in order to be considered for an
additional award. Renewal applicants must meet the same eligibility criteria as that of
new applicants.

You will pay funds directly to E for the benefit of the recipient. You will provide a letter to
E specifying that E's acceptance of the funds constitutes the college's agreement to: (i)
refund any unused portion of the scholarship if a scholarship recipient fails to meet any
term or condition of the scholarship; and (ii) notify you if the scholarship recipient fails to
meet any term or condition of the scholarship.

You haves sole discretion to select student recipients and determine amounts of awards.
E will evaluate the applicants and recommend scholarship recipients and scholarship
amounts to you. E designates the position of G to send recommendations to you,
however, you are responsible for approval of students to receive scholarship funds, as
well as the amount of those scholarship awards.

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.

Letter 4792 (10-2012)
Catalog Number 58263T

• 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.

• 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,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4792 (10-2012)
Catalog Number 58263T