Nationwide scholarships for women receive IRS approval

Plain-English summary

A private foundation proposed nationwide scholarships for women pursuing undergraduate or graduate education and demonstrating financial need. Applicants needed a minimum 3.0 grade point average, transcripts, recommendations, a personal statement, and full-time enrollment at an accredited two-year or four-year institution. A committee would select recipients based on financial need and scholastic performance, and awards could renew for up to four years if recipients maintained eligibility, sufficient credits, and a 3.0 cumulative average. Payments would go directly to the educational institution, and the foundation committed to reporting, monitoring, recovery, and recordkeeping procedures. The IRS approved the procedures under Section 4945(g)(1), so awards made as proposed would not be taxable expenditures.

Ruling snapshot

• Question: Did the foundation's nationwide scholarship procedures for women satisfy the advance-approval requirements?
• Outcome: Approved.
• Key authorities: IRC §§ 117(a), 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

Number: 202117022
Release Date: 4/30/2021

Employer Identification Number:

Date: February 3, 2021
Contact person - ID number:

Contact telephone number:

LEGEND UIL: 4945.04-04

X = Program
y dollars = Amount
z 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 provide in Code Section 117(b)).

Description of your request

Your letter indicates you will operate a scholarship program called X. The purpose of X is
to support deserving young women who are high school graduates who are pursuing a
college education and demonstrate financial need. X is available nationwide with no
preference given to any particular high schools, colleges, or universities. X is also
available to anyone pursuing a graduate education.

To be eligible to apply for X, the applicant must:

Letter 4792 (10-2012)
Catalog Number 58263T

• Have a minimum GPA of 3.0 in high school

• Provide an official high school transcript or university transcript for renewing
application

• Provide two letters of recommendation

• Provide a personal statement with a maximum of 500 words that reflects the
applicant's need for financial assistance, and

• Must plan to attend or be attending an accredited 2- year college or 4-year
university full-time.

X will be publicized on your website. Your scholarship is renewable, can be renewed for
up to four years if the recipient submits a renewal application each year that
demonstrates continued eligibility. The terms of the scholarship award require that the
recipient be enrolled and successfully complete a minimum of 12 credit hours each
semester (or the equivalent under a quarter system) and maintain a minimum cumulative
GPA of 3.0 at the end of each academic year.

Your recipients will be selected by a committee which was established to ensure that all
applicants are thoroughly considered, and eligible candidates selected. Your applications
will be reviewed based on financial need and scholastic performance. You have no limit
to scholarships awarded annually.

Typically, the amount of each scholarship will be approximately between y dollars and z
dollars. The amount will be divided per semester or quarterly depending on the institution.
You award scholarships directly to the educational institution.

If you become aware that the recipient is not using the scholarship funds for educational
expenses, you will investigate. During the investigation, you will immediately withhold
further payments, and if it is determined that the recipient has used any part of the
scholarship for improper purposes, you will take reasonable and appropriate steps either
to recover the funds or to ensure that the diverted funds are repaid. This may include
pursuant of legal action against the recipient, if appropriate, unless legal action would not
likely result in the satisfaction of execution on judgment. You will reconsider providing the
recipient with additional scholarship funds only after the recipient assures you that future
diversions will not occur and agrees extraordinary precautions to prevent future
diversions.

You represent that you will arrange to receive and review grantee reports annually and
upon completion of the purpose for which the grant was awarded, investigate diversions
of funds from their intended purposes, and 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 relating to individual grants, including
information obtained to evaluate grantees, identify whether a grantee is a disqualified

Letter 4792 (10-2012)
Catalog Number 58263T

person, establish the amount and purpose of each grant, and establish that you
undertook the supervision and investigation of grants.

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:

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.

Letter 4792 (10-2012)
Catalog Number 58263T

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