Art study-abroad grant procedures approved

Plain-English summary

A private foundation proposed one-time grants for undergraduate and graduate art students participating in a university study-abroad program. The grants would cover program fees, group travel, accommodations, and a travel allowance while students studied art and history. Recipients would be selected using academic performance, instructor recommendations, financial need, interviews, personal statements, and artistic work. The university would confirm enrollment and a minimum grade-point average, receive most funds directly, provide a professor chaperone, and require each recipient to report after returning. The IRS approved the procedures under section 4945(g)(3), effective from the date of the foundation's original request.

Ruling snapshot

• Question: Do the foundation's study-abroad grants for university art students satisfy the advance-approval rules for educational grants?
• Outcome: approved
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), and 4945(g)(3); Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

Transcriber's note: this document is a four-page scan. Obvious OCR errors in bullets, spacing, and form labels were corrected by comparison with every page image. Redacted identifying fields are marked [redacted]. Original grammatical irregularities are preserved. The wording is otherwise preserved verbatim.

Internal Revenue Service Department of the Treasury
P.O. Box 2508
Cincinnati, OH 45201

Release Number: 202002017
Release Date: 1/10/2020 Employer Identification Number: [redacted]
Date: October 16, 2019

Contact person - ID number: [redacted]

Contact telephone number: [redacted]

LEGEND UIL: 4945.04-04
B = University
C = City

d dollars = Amount
e dollars = Amount

Dear [redacted]:

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

Your letter indicates that you will operate an educational grant program. You will provide
grants to worthy art students enrolled at B.

The purpose of the grant program is to improve and enhance the artist's capacity and
skills as well as develop their talent. The grant provides funds for transportation, food,
housing, and miscellaneous expenses to students for the study abroad program in C
where they will study art and history.

To be eligible to apply for a grant, the applicants must be undergraduate and graduate
students who attend B and participate in the C study abroad program. The criteria you
use to select recipients include academic performance, recommendations from
instructors, financial need, and a personal interview. The personal interview will concern
the individual's motivation, character, ability, and potential.

You will award as many scholarships each year that you can financially support to
qualified art and design students for the sole purpose of attend the C study abroad
program. The grants are a one-time award and are not renewable.

The program is open to all qualified art students enrolled at B. All grants will be awarded
on an objective and non-discriminatory basis. The selection committee will consider
objective criteria, such as, but not limited to, the applicant's academic performance and
art, personal statement, letters of recommendation, and the applicant's demonstrated
financial need.

The scholarship provides financial support to the students which include payment of
program fees, B-arranged group travel and accommodations, and an allowance of d
dollars for travel expenses in C. The amount of each grant is approximately e dollars.

You confirm the recipients' enrollment and minimum GPA requirement of 3.0 with the
Dean of the appropriate office at B. Supervision of the funds is exercised primarily
through the direct disbursement to B to be applied to the students' accounts. The
recipients are chaperoned in C by a Professor from B. Upon return from C, each recipient
is required to prepare and deliver a report of his or her experience.

Your Board of Directors act as your selection committee. No one on the selection
committee derives any direct or indirect benefit from the selection process. No funds
have been, nor will they be, diverted to any use not in furtherance of a purpose specified
in the grant program.

You represent that you will (1) arrange to receive and review grantee reports annually
and upon completion of the purpose for which the grant was awarded, (2) investigate
diversions of funds from their intended purposes, and (3) take all reasonable and
appropriate steps to recover diverted funds, ensure other grant funds held by a grantee
are used for their intended purposes, and 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 diversions from occurring.

You represent that you will maintain all records related to the following: (1) individual
grants including information to evaluate grantees, (2) grantees which are identified as a
disqualified person, (3) how the amount and purpose of each grant was established, and
(4) how you established supervision and investigation of grants described above.

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.

Letter 4779 (10-2012)
Catalog Number 58222Y

• 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 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. The effective
date of our approval is October 1, 2018, which is the date your request was
submitted.

• 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).

Letter 4779 (10-2012)
Catalog Number 58222Y

• 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