Advance approval of grant procedures funding teachers' advanced degrees (4945(g)(1) and (g)(3))

Plain-English summary

A private foundation runs a grant program that helps teachers at religious day
schools in a particular region pursue advanced degrees and certificates. It
asked the IRS to approve its award procedures in advance, and the IRS approved
them under both IRC § 4945(g)(1) and § 4945(g)(3). This advance sign-off matters
because IRC § 4945 taxes a private foundation's grants to individuals for study
unless the procedures are approved ahead of time. Which subsection applies
depends on where the recipient studies: grants for study at accredited
universities fall under § 4945(g)(1), while grants for other institutions or
professional-development programs fall under § 4945(g)(3). The IRS found the
program uses objective, nondiscriminatory selection and the required follow-up
reporting, so the payments are not taxable expenditures. Recipients must have
teaching experience, commit to keep teaching for two years, and attend
workshops. This is a routine green light for a foundation investing in teacher
development at faith-based schools.

Ruling snapshot

• Question: Do the foundation's scholarship and educational-grant procedures for funding teachers' advanced study qualify for advance approval so the grants are not taxable expenditures?
• Outcome: approved
• Key authorities: IRC § 4945(g)(1) and § 4945(g)(3); IRC § 117(a); IRC § 74(b); IRC § 170(b)(1)(A)(ii); IRC § 509(a)(1); Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 02/10/2026
Tax Exempt and Government Entities Taxpayer ID number:

Person to contact:

Name:
ID number:
Telephone:
Release Number: 202619020
Release Date: 5/8/26
LEGEND UIL: 4945.04-04

B = Scholarship Program
C = Religion

D = County, State

E = County, State

F = Number

g dollars = dollar amount
h percent = percentage

Dear

You asked for advance approval of your scholarship procedures under Internal Revenue Code (IRC) Section
4945(g)(1) and advance approval of your educational grant procedures under 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 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.

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)).

We also 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 an educational grant program called B. The purpose of B is to provide
funding to educators currently employed in C day schools located in D or E to encourage their professional and

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

personal growth by enabling them to pursue advanced degrees and certificates, deepen their expertise, and
amplify their social impact to elevate the quality of C educational institutions throughout the region.

To be eligible for B, applicants must:

• have at least one year of experience teaching in a C day school located in D or E and commit to teaching in
  such schools for two years following completion of their courses of study;

• pursue a degree or certificate-granting program of study in education or in a field directly related to the
  subject matter currently taught by applicants; and

• attend at least three teacher workshops in the D area throughout each academic year.

Eligible applicants must submit a completed application that includes a letter of recommendation from their
current supervisor and answers to several short-form essay questions. Your selection committee, which will
include your chief executive officer and members from your board of directors, will use the application and
supporting materials to select grant recipients.

Applicants will be selected based on the quality of their responses to your essay questions, the strength of their
recommendation, relevant teaching experience, the specific skills or knowledge to be gained from the degree or
certificate, and the relevance of the educational program to their current or future teaching aspirations.

You will award approximately F grants worth g dollars per year. You will cover up to h percent of a recipient's
tuition and related fees for up to two years, subject to renewal, provided that the amount awarded per year to
each recipient does not exceed g dollars. Depending on your available funds and the success of your program,
you may increase or decrease the number and amount of your grants awarded annually.

You will publicize B on your website and send fliers to C day schools in D and E to encourage them to notify
their educators about B. You will also provide application information through your website.

Your grants are paid directly to your recipients. To receive payment, the recipient must first submit proof of
payment of expenses incurred in connection with the educational program or, on a case by case basis, a copy of
a current invoice for such expenses. You will ensure all funds are used solely for their intended purposes.

Recipients may use funds to attend a variety of educational programs at organizations including:

(a) accredited universities described under IRC Sections 509(a)(1) and 170(b)(1)(A)(ii),
(b) institutions of higher learning, or
(c) reputable professional development organizations.

Grants awarded to recipients attending organizations in item (a) above will be described under IRC Section
4945(g)(1). Grants awarded to recipients attending programs at organizations listed in items (b) or (c) above
will be described under IRC Section 4945(g)(3).

Depending on your eligible pool of candidates each year, you may award more grants under IRC Section 4945
(g)(1) or IRC Section 4945(g)(3), or an equal number under each provision; however, you will still award a total
of approximately F grants annually. All other components of B, including its purposes, eligibility criteria,
selection criteria, publicity, administration of funds, and recordkeeping and oversight procedures, will be
applied uniformly to all applicants as described within this letter on an objective and nondiscriminatory basis.

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.

IRC Section 4945(g)(1) Requirements:

• 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).
  IRC Section 4945(g)(3) Requirements:

• 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 IRC Section 117(a) and is to be used for study at an educational
  organization described in IRC Section 170(b)(1)(A)(ii).

• 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.

• 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.

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.

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