Filmmaker fellowship grant procedures approved

Plain-English summary

A private foundation proposed a one-year fellowship program for filmmakers from a redacted ethnic community. The grants would support culturally significant documentary and narrative films, with recipients retaining ownership of their work and helping arrange public showings. Applicants would be evaluated on their experience, artistic potential, project plans, budgets, and other stated criteria, while relatives of insiders and selection committee members would be excluded. The foundation also proposed quarterly financial and narrative reports, recovery procedures for diverted funds, and detailed recordkeeping. The IRS approved the procedures under section 4945(g)(3), so grants made under the program as described will not be taxable expenditures.

Ruling snapshot

• Question: Do the foundation's fellowship procedures for filmmakers satisfy the advance-approval requirements of section 4945(g)(3)?
• Outcome: Approved, subject to the described selection, monitoring, recovery, and recordkeeping procedures
• Key authorities: IRC §§ 74(b), 117(a), 170(b)(1)(A)(ii), 170(c)(2)(B), 4945(d)(3), and 4945(g); Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 07/17/2023
Tax Exempt and Government Entities Taxpayer ID number:
, P.O. Box 2508
Cincinnati, OH 45201

Person to contact:

Release Number: 202341014
Release Date: 10/13/2023

LEGEND UIL: 4945.04-04
X = Ethnicity
y dollars = Amounts

Dear

You asked for advance approval of your educational grant procedures under Internal Revenue Code (IRC)
Section 4945(g)(3).

This approval is required because IRC Section 4945 provides for the imposition of taxes on each taxable
expenditure of a private foundation. IRC Section 4945(d)(3) provides that the term "taxable expenditure"
includes any amount paid or incurred by a private foundation as a grant to an individual for travel, study, or
similar purposes by the individual, unless the grant satisfies the advance approval requirement of IRC Section
4945(g).

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 IRC Section 4945(g)(3). As a result, expenditures you make
under these procedures won't be taxable.

Description of your request

Your letter indicates you will operate a one-year fellowship program for native X filmmakers. Native X
filmmakers are an under-served film-making population and your fellowship program will support the
production of content that will educate the public about native X culture. You are committed to elevating the
artistic voices of X filmmakers by empowering them with resources to explore how both documentary
and narrative features can educate audiences, celebrate community, and bridge cultural divides. Your goal is to
nurture and sustain the X film-making community and you will ensure each fellowship recipient benefits
from programming that deepens and enriches the learning experience. Funded projects will include a broad
spectrum of artistic directions, so long as the stories told are from a native X perspective and the projects
supported are culturally significant. You will initially facilitate introductions between fellowship recipients. If
there is cohort interest in building community through more formalized collaborations, you will support the
establishment of discussion groups, webinars, and/or forums.

Each fellowship will be between in the range of y dollars to be used to support project expenses, including
travel, and for the production of films by native X filmmakers. You intend to cast a wide net in publicizing your

Letter 4792 (Rev. 1-2022)
Catalog Number 58263T

fellowship program. Specifically, you will (a) establish a website that will contain application information; (b)
conduct targeted outreach to nonprofits, arts organizations, educators, government entities, and other
community-based organizations engaging with native X artists; (c) collaborate with national organizations
supporting filmmakers and their allies; and (d) pursue paid advertising and promotion opportunities as needed.
You anticipate awarding or fellowships annually. Fellowship recipients will retain ownership of all
intellectual property they produce during the grant period. You will work with fellowship recipients to facilitate
public showings of the films created to ensure the films are viewed by a wide and diverse audience.

The fellowship is available to X filmmakers with professional experience and a portfolio of work. You
will accept showreels, website portfolios, or portfolios accessed through social media platforms. Each applicant
is required to submit: (a) a curriculum vitae; (b) college and/or graduate school transcripts if applicable; (c)
professional references; (d) a personal essay describing their proposed project and their experience as a X
filmmaker; and (e) a project budget detailing how the funds will be used. The project must be reasonably
concluded during a one-year fellowship. Each applicant must demonstrate the proposed project involves work
that is culturally significant and contributes in a meaningful way to highlight, celebrate, and/or illuminate the

X experience and/or culture. In addition, the project narrative and proposed budget must align. No
fellowships will be awarded to non-U.S.-based filmmakers. As part of the application process, applicants will
provide attestations confirming that they are eligible and able to fulfill the fellowship requirements.

In evaluating applications, you will assess the personal qualities of potential recipients, their interests and goals,
experience, academic achievements, family background, financial need, track record of achieving objectives,
artistic potential, technical skills, capacity to excel while working in a team and/or independently, creative
vision, as well as the timeliness and relevance of the project. Further, you will review the professional portfolios
and achievements of applicants, assess their written application material and project descriptions, contact
references, and interview potential applicants. You will also weigh the life experience, gender expression, and
ancestry of applicants to ensure diversity.

You anticipate fellowship renewals will be rare but recognize that renewals may occasionally be necessary to
ensure a project's completion. Prior to approval of any fellowship renewal, you will require a full and timely
financial and narrative report for the prior funded fellowship, as well as a written proposal justifying that
fellowship's renewal.

You will administer the funds by:

(a) Ensuring the fellowship agreement signed by recipients includes a detailed project budget, milestones, and
deliverables; delineates recipients’ responsibilities; and includes a right of return for all fellowship funds not
expended as authorized by you within the year.

(b) Monitoring the expenditure of all fellowship funds. Recipients will provide quarterly financial reports to

you detailing project spending and explaining any variances.
(c) Assessing project progress by reviewing quarterly narrative reports detailing project progress toward
milestones and deliverables, highlighting any problems, and identifying solutions to these problems.

You anticipate that your Board of Directors will establish a selection committee made up of industry
professionals, community-based partners, and/or educators. Your Board of Directors will appoint individuals to
the selection committee based on their willingness to serve, identification with your mission, professional
experience and expertise, and capacity to assist with application review.

No relative of members of the selection committee, or of your officers, directors, or substantial contributors are
eligible for the fellowship program.

Letter 4792 (Rev. 1-2022)
Catalog Number 58263T

You represent that you will complete the following:

* Arrange to receive and review grantee reports annually and upon completion of the purpose for which the
grant was awarded,
* Investigate diversion of funds from their intended purposes,
* Take all reasonable and appropriate steps to recover the diverted funds and 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 diversion from occurring.

You also represent that you will:

* Maintain all records relating to individual grants including information obtained to evaluate grantees,

* Identify a grantee is a disqualified person,
* Establish the amount and purpose of each grant, and

* Establish that you undertook the supervision and investigation of grants described above.

Basis for our determination
IRC Section 4945 imposes excise taxes on the taxable expenditures of private foundations. 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 the following requirements of IRC Section 4945(g) is not a taxable expenditure.

* The foundation awards the grants 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 IRC Section 117(a) and is to be used for study at an educational
organization described in IRC Section 170(b)(1)(A)(ii); or
- A prize or award subject to the provisions of IRC 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 Regulation 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.

Letter 4792 (Rev. 1-2022)
Catalog Number 58263T

* 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 IRS at:
Internal Revenue Service
Exempt Organizations Determinations
TE/GE Stop 31A Team 105
P.O. Box 12192
Covington, KY 41012-0192
* You can't 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 IRC 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'll make this determination letter available for public inspection after deleting personally identifiable
information, as required by IRC Section 6110. We've enclosed Letter 437, Notice of Intention to Disclose -
Rulings, and a copy of the letter that shows our proposed deletions.

If you disagree with our proposed deletions, follow the instructions in the Letter 437 on how to notify us.

* If you agree with our deletions, you don't need to take any further action.
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, you can contact the person shown at the top of this letter.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:

Letter 437

Letter 4792 (Rev. 1-2022)
Catalog Number 58263T