IRS approves three scientific grant programs

Plain-English summary

A private foundation proposed three grant programs supporting research and education in two scientific fields. One program would fund student research projects based on scientific merit and insight. A second would reward innovative applications or techniques with funding, specialized equipment, and software access. A third would help students attend scientific conferences to present accepted abstracts, with one award per student or abstract and forfeiture for nonattendance. Expert selection committees would use objective and nondiscriminatory standards, exclude insiders and disqualified persons, and oversee reports, diversion recovery, records, and OFAC screening. The IRS approved all three programs under Section 4945(g)(3), so grants made as proposed would not be taxable expenditures.

Ruling snapshot

• Question: Did the foundation's proposed research, innovation, and scientific-conference grant procedures satisfy the advance-approval rules?
• Outcome: Approved.
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), 4945(g)(3), and 4946; 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: 202127042
Release Date: 7/9/2021 Employer Identification Number:

Contact person - ID number:
Date: April 13, 2021
Contact telephone number:

LEGEND UIL: 4945.04-04
B = Subject

C = Subject

D = Name

E = Name

F = Name

G = Subject

t dollars = Amount
u dollars = Amount
v dollars = Amount
y = Number

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.

Since your inception, you have been operated to consistently support the scholarly
activities of the B Community.

The purpose of your grant making program is to support researchers and students as
well as others with significant involvement in B and around the world whose work provides
innovation in the scientific fields of B and C.

2

Under your educational grant program, you will award D, E, and F. You will promote and
publicize the availability of your grants through public online domains including your
website, scientific forums, social media; advertisements in scientific publications; and
sponsorships of scientific conferences and educational symposia.

The Selection Committee will be appointed by your Program Director and will generally
be comprised of University Professors, Medical Doctors, and renowned researchers in
the fields of B and C.

In selecting individual grant recipients from eligible applicants, the Selection Committee
will use objective and non-discriminatory criteria. The Selection Committee will not
discriminate on the basis of race, gender, sexual orientation, ethnicity, nationality, or
religion. The Selection Committee will be subject to your Board’s ultimate direction and
authority.

Further, persons not eligible to receive awards under your grant making program are (i)
your past or present directors or officers; (ii) any family members of such individuals; (iii)
any person who is considered a “disqualified person” with respect to you withing the
meaning of Section 4946; (iv) members and family members of the selection committee.

Details of D

The purpose of D is to provide financial assistance to undergraduate and graduate
students from academic institutions conducting a research project in the G domain.

To apply for D, the undergraduate/graduate student responsible for the research project
can submit the application found on your website; or, a supervisor or university official
may submit the application on behalf of the student. The application must identify the
undergraduate or graduate student responsible for performing the research described in
the application and be electronically submitted to you on your website by a specific due
date.

The application must generally include the following:

• Biographical and Contact information

• Student Curriculum Vitae

• Transcripts and detailed experience in B and C

• Description of the proposed project with timelines

• A budget and budget justification

• Letters of Reference and Recommendation

• Student Statement

The Selection Committee will use criteria for the selection of recipients based on the
strength and the scientific merit of the application and the scientific insight shown in the
application. Specifically, completed applications are scored based on the significance. Of
the innovation, the scientific approach, the clarity of the description and the relevance of
the project to the goals of D.

Letter 4779 (10-2012)
Catalog Number 58222Y

3

The amount awarded will be based on the proposal and be up to t dollars and cannot be
used for indirect costs and fringe benefits, tuition, and social and entertainment. It will be
paid to the student’s educational institution.

Details of E

The purpose of E is to promote innovative uses of C as well as to recognize
advancements in the understanding, techniques/technologies or applications of its signal.
E is generally open to students, researchers and academia with an interest in C.
Interested applicants must electronically submit a detailed proposal with supporting
documentation which illustrates such an innovation by a specified due date in late
summer/early fall.

Under E, the Selection Committee will review all complete proposals and will recognize
the best submission that clearly illustrates:

• C as a key element of the research.

• An innovative application, understanding or technique/technology that uses
  signals of C.

• Evidence of its usefulness.

The recipient will receive u dollars in funding, specialized equipment and access to
software licenses which help evaluate data. All proceeds of the grant will typically be paid
to the educational institution the recipient is affiliated with.

Details of F

The purpose of F is to provide grants in order assist students to attend select scientific
domestic and international conferences in order to present their work to the research
community. Awards will be directly paid to the recipient for up to v dollars and mailed to
them. Presently you plan to award up to y such awards annually. To be eligible, the
applicant must be a student at a domestic or international academic institution, have
submitted an abstract to one of the supported conferences, and the abstract must be
accepted for presentation as either a poster or oral presentation.

Your selection committee will review and evaluate the submissions and choose those
that show the most merit. Once the abstract has been accepted, the recipients are
required to submit the abstract as either an oral or poster presentation at one of the
supported conferences. You will consider multiple abstract submissions from a single
student regardless of the conference; however, a student can only receive one award.
Should multiple students submit for an award using the same abstract and the abstract is
deemed worthy of receiving an award, you will only provide one award for the abstract.If
the recipient fails to attend the conference, the funding is forfeited.

Oversight for all Grants

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, (3) take all

Letter 4779 (10-2012)
Catalog Number 58222Y

4

reasonable and appropriate steps to recover the diverted funds, ensure other grant funds
held by the 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 the grants described above.

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
with designated countries, entities, or individuals, or otherwise engaging in activities in
violation of economic sanctions administered by OFAC. 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.

Letter 4779 (10-2012)
Catalog Number 58222Y

5

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
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.

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