Advance approval of a foundation's undergraduate scholarship procedures under 4945(g)(1)

Plain-English summary

A private foundation runs a named scholarship program for undergraduates
pursuing a degree in a particular field of study, and it asked the IRS to
approve its award procedures in advance. The IRS approved them under IRC
§ 4945(g)(1). This advance sign-off matters because IRC § 4945 taxes a private
foundation's grants to individuals for study unless the selection procedures
are approved ahead of time. The IRS found the program uses objective,
nondiscriminatory selection (minimum 3.0 GPA, essays, committee review with a
conflict-of-interest guard) and the required follow-up reporting, so the
foundation's payments are not taxable expenditures. The scholarships remain
tax-free to recipients used for qualified tuition under § 117. Scholarships can
be renewed for up to two years with continued enrollment and satisfactory
progress. This is a routine but necessary green light for a foundation that
funds college students in a targeted field.

Ruling snapshot

• Question: Do the foundation's undergraduate scholarship procedures qualify for advance approval so the grants are not taxable expenditures?
• Outcome: approved
• Key authorities: IRC § 4945(g)(1); IRC § 117(a) and (b); IRC § 170(b)(1)(A)(ii)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 02/11/2026
IRS Tax Exempt and Government Entities Taxpayer ID number:

Person to contact:

Release Number: 202619022
Release Date: 5/8/26

LEGEND UIL: 4945.04-04
T = Scholarship

U = Degree Program

V = Number

W = Number

x dollars = Amount

y dollars = Amount

Z = Field of Study

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 called T. The purpose of the program is to assist
undergraduate college students enrolled in accredited institutions with degree programs in U with a focus on Z.
The scholarships are intended to help defray the cost of tuition, fees, books, and other related educational

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

expenses necessary for obtaining an undergraduate degree in the field.

You plan to award between V and W scholarships annually in the amount of x dollars to y dollars. You will
publicize the scholarships through outreach to high schools, colleges, and universities with U programs, as well
as through youth and industry organizations.

To be eligible for a scholarship, students must be pursuing college degrees in U with an emphasis on Z. Eligible
candidates must have a minimum 3.0 grade point average and be either entering college or currently enrolled as
an undergraduate student. There is no income level requirement for applicants. From time to time, you may
impose additional restrictions (e.g. geographic limitations targeting recipients from disadvantaged rural or urban
areas). The number of potentially eligible individuals is uncertain and may vary over time.

Scholarship awards may be renewed for up to two years based on the recipient's continued enrollment in an
accredited college program in U with an emphasis on Z, satisfactory academic progress (maintaining a
minimum 3.0 GPA), and compliance with any reporting requirements you have established.

The selection criteria includes factors such as academic achievement, demonstrated interest in U and Z,
financial need, and potential for future contribution to the field. Recipients of T are selected through a rigorous
review process. The Committee will consider the following criteria when evaluating candidates:

• The accomplishments of the candidate and perceived potential of the candidate;

• Academic achievement, demonstrated by a minimum 3.0 grade point average;

• Commitment to the field, as evidenced by relevant experience, personal statements, and extracurricular
  involvement;

• Any additional priorities you establish, such as geographic considerations or community involvement.

Your selection committee is composed of two to three members of your board. Relatives of members of your
selection committee, officers, directors, or substantial contributors are not eligible to apply for scholarships. The
members of the group selecting the scholarship recipients (whether your Board or the Committee) will not be in
a position to derive a benefit, directly or indirectly, if certain potential grantees are selected over others. The
Board retains ultimate authority whether to grant a scholarship to the candidates recommended by the
Committee. In general, the Board expects to approve all grantees recommended by the Committee, provided
that the Board retains the right to decline a recommendation if the Board determines in good faith that selection
of a scholarship recipient will not advance your philanthropic priorities, as set by the Board from time to time.

You will require each recipient to sign a scholarship agreement before any funds are disbursed. Each
scholarship recipient must send you a brief report at the end of the academic year (June 30 of the year following
the award year) summarizing the scholarship experience. Using the reports required by the scholarship
agreement, you will monitor and evaluate the expenditure of scholarship funds and the progress made by each
recipient. Any apparent misuse of scholarship funds will be promptly investigated. If you discover that
scholarship funds have, in fact, been misused, you will require the scholarship recipient to return the funds
immediately, and you will make no further distributions to that recipient.

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 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).

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.

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 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 - Redacted

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