Teacher-renewal fellowship grant procedures approved

Plain-English summary

A private foundation proposed a fellowship program to address a school district's teacher shortage by supporting educators' renewal projects. Eligible applicants had to be experienced public-school teachers or administrators, hold teacher certification, submit recommendations, and intend to keep teaching in the district for a specified period. A community selection committee would evaluate the quality, organization, budget, creativity, personal value, and career-renewal potential of each proposed project. Recipients had to complete meaningful projects lasting several weeks and later report on their experience, use of funds, and receipts. The IRS approved the procedures under section 4945(g)(3), so grants made as described would not be taxable expenditures. The approval depended on objective selection, completion of the funded work, and the foundation's collection of reports.

Ruling snapshot

• Question: Do the teacher-renewal fellowship procedures qualify for advance approval under IRC § 4945(g)(3)?
• 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)

Department of the Treasury Date:
Internal Revenue Service 09/06/2023
Tax Exempt and Government Entities Taxpayer ID number:

Cincinnati, OH 45201

Person to contact:

Release Number: 202348013
Release Date: 12/1/2023

LEGEND UIL: 4945.04.04
B = School District

C = Fellowship

d dollars = dollar amount

e = number

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 fellowship program to address the shortage of teachers in B called C.
Your purpose is to provide grants to educators in B with up to d dollars each to engage in projects that will help
renew commitments to teaching and motivate them to stay in the teaching profession.

To be eligible for the fellowship an educator must:

• Have held a position as a K-12 teacher, principal or assistant principal for a minimum of e years at a public
  school in B;

• Be certified teachers;

• Submit letters of recommendation from supervisors and colleagues; and

• Affirm their intention to continue teaching for B for e years.

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

The selection committee will be members of the community whose purpose is to evaluate the submissions and
select the winners. Fellowship recipients will be selected based on the quality of their applications and will
include the following criteria:

• Recipients must meet eligibility requirements.

• The application must be clearly written and well organized.

• Their renewal project must contain a detailed timeline and budget.

• Illustrate how the applicant's project experience will generate a meaningful renewal in their career.

• Express clearly how the project they wish to pursue is of a unique creative quality and provides opportunities
  for personal fulfillment that might otherwise not be available.

• Show passion for the project.

In order to obtain funding applicants must describe a meaningful project that should involve several weeks of
work and result in a sense of personal renewal and professional commitment to teaching.

You require fellows to provide a report detailing their experience, a description of how the fellowship funds
were used and receipts confirming that fellowship funds were used appropriately after the project is completed.

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.

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