Degree and trade-school scholarship procedures approved

Plain-English summary

A private foundation proposed scholarships, apprenticeships, and fellowships for people pursuing degrees, certifications, or similar credentials at accredited colleges, universities, and trade schools. Applicants could not be dependents of the foundation's disqualified persons. A selection committee would consider applications, transcripts, test scores, achievements, financial need, personal challenges, prospects for completing the program, and recommendation letters. Recipients would have to remain in good standing, carry a minimum course load, maintain a minimum grade point average, and provide annual reports. The foundation also agreed that it could stop funding and try to recover funds if grant terms were violated. The IRS approved the procedures under § 4945(g)(1), so grants made as proposed would not be taxable expenditures, and qualified educational use may be excluded from recipients' income under § 117.

Ruling snapshot

• Question: Do the foundation's procedures for degree, certification, and trade-school awards satisfy IRC § 4945(g)(1)?
• Outcome: Approved, subject to the described eligibility, selection, and monitoring rules.
• Key authorities: IRC §§ 117, 170(b)(1)(A)(ii), 4945(d)(3), 4945(g)(1).

Full text (IRS public release)

                                                                            Date:
 Department of the Treasury                                                  01/30/2025
 Internal Revenue Service                                                   Taxpayer ID number:
 Tax Exempt and Government Entities

IRS P.O.
Box 2508 Person to contact:
Cincinnati, OH 45201 Name:
ID number:
Telephone:
Release Number: 202517021
Release Date: 4/25/2025

LEGEND UIL: 4945.04-04
X number of scholarships
y $ amount
Dear
You asked for advance approval of your scholarship procedures under Internal Revenue Code (IRC) Section
4945(g)(1). You requested approval of your scholarship program to fund the education of certain qualifying
students.
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 ofIRC Section
4945(g).
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 IRC Section 4945(g)( 1 ). As a result, expenditures you make under these
procedures won1t be taxable.
Additionally, 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 ( su�ject to the Iimitations provided in
IRC Section l l7(b)).
Description of your request
Your letter indicates you will provide educational scholarships, apprenticeships, and fellowships for individuals
to pursue degrees, certifications, or similar credentials from accredited colleges, universities, and trade schools.
You will award approximately X educational scholarships each academic year, for y per scholarship.

You will publicize your program through advertisements in various media and announcements for your program
are currently in development.

Applicants must be enrolled in an accredited US college/university/trade school or similar education
institution or academy, and not be a dependent ofany disqualified person with respect to you.
Letter4792 (Rev.1a2022)
Catalog Number 58263T
The selection committee, as appointed by your directors, will evaluate candidates based on the following
criteria:

• Written application
• Transcripts of courses and grades
• Test scores
• Resume/CV of achievements, activities, and honors
• Financial need
• Personal challenges
• Potential for successfully attaining degree and for future success
• Letters of recommendation

Recipients must remain in good standing at their educational institution and maintain a minimum
course load and GPA. You will require year end reports from either the recipients or their respective
schools. If the terms of the grant are violated, funding may be terminated, and you will attempt to
recover the funds.

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 ofIRC 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 ofIRC Section 117(a).
• The grant is to be used for study at an educational organization described in IRC 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 IRS at:
Internal Revenue Service
Exempt Organizations Determinations
TE/GE Stop 31 A Team 105
P.O. Box 12192
Covington, KY 41 012-0192
• 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)(8).
• You should keep adequate records and case histories so that you can substantiate your grant
distributions with the IRS if necessary.

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

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 oflntention 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,
~ ,12_.. ~
Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements
Enclosures:
Letter 437

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