IRS approves a private foundation's leadership scholarship procedures

Plain-English summary

A private foundation asked the IRS to approve its procedures for scholarships
to students attending private higher-education institutions, particularly a
specified university. Applicants must meet citizenship or immigration-status
requirements, have at least a 3.0 GPA, pursue a leadership-focused field, and
submit materials about their leadership goals, community involvement, and
spiritual journey. The foundation's board will select recipients, send awards
directly to their schools, monitor academic standing, and investigate any
diversion of funds. The IRS approved the procedures under IRC § 4945(g)(1),
so grants made as described will not be taxable expenditures. Awards used for
qualified tuition and related expenses also are not taxable to recipients,
subject to IRC § 117(b).

Ruling snapshot

• Question: Do the foundation's scholarship procedures satisfy the advance-approval requirements of IRC § 4945(g)(1)?
• Outcome: Approved
• Key authorities: IRC §§ 117, 170, and 4945

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities

Date:
07/24/2025

Taxpayer ID number:

Person to contact:
Name:
ID number:
Telephone:

Release Number: 202549023
Release Date: 12/05/2025

LEGEND

B = Region
C = University
D = City

UIL: 4945.04-04

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 of IRC 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 won't 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 (subject to the limitations provided in
IRC Section 117(b)).

Description of your request

Your letter indicates you will operate a scholarship program. You will provide scholarships to individuals
attending private higher educational institutions in B, particularly C in D. All awards will be used for
educational purposes only (tuition, books, supplies). The number of recipients and amounts provided will vary
based on the applicants' qualifications and needs, along with the availability of assets at that time. C will direct
any interested and qualified candidates to an online application link. Applications will be accepted year-round.

Applicants must be U.S. citizens or have legal immigrant status. Applicants must attend or be in the process of
applying to a private higher educational institution, particularly C. Applicants must be pursuing fields of study

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

with a leadership focus.

Qualified candidates must:

• Have a GPA of 3.0 or higher,

• Be enrolled or show intent to pursue a field of study with a leadership focus,

• Submit an essay outlining his or her leadership goals in this particular field of study,

• Provide past and current examples of community involvement and engagement.

• Complete an essay outlining and describing his or her spiritual journey.

Candidate must maintain fields of study consistent with your qualifications/criteria of eligibility. Candidates
must inform you if any changes are made to the field of study being pursued.

Awards will be sent directly to the institution of higher education on behalf of the recipient receiving the
scholarship to be applied to the student's overall financial aid package. C will apply funds to individuals who
remain in good academic standing. Candidates will provide grade transcripts to you upon request. In the event a
recipient fails to maintain the grade/eligibility requirements, that recipient will not be eligible for any future
scholarship awards from the foundation.

Your Board of Directors will be responsible for evaluating candidates and determining recipients/awards.

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 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 IRC Section 117(a).

• The grant is to be used for study at an educational organization described in IRC Section 170(b)(1)(A)(ii).

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

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 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