Advance approval of a memorial scholarship's procedures under § 4945(g)(1)

Plain-English summary

A private foundation set up a memorial scholarship honoring a specific person and asked the IRS to approve in advance how it will pick recipients. Private foundations owe an excise tax on grants to individuals for study unless the IRS pre-approves their selection procedures under section 4945(g). The scholarship goes to graduating seniors at a named school who show significant community service, especially with underserved communities or people with disabilities, and who plan careers in service-oriented fields. Applicants submit a transcript, an essay, and a recommendation letter, and a conflict-screened committee scores them on a five-part rubric. Awards can be renewed for up to three years if the student keeps at least a 3.0 GPA and stays enrolled, and funds must be spent only on qualified education costs, with unused or misspent amounts returned. The IRS approved the procedures, so grants made under them are not taxable expenditures and are tax-free to recipients who use them for qualified tuition and related expenses under section 117.

Ruling snapshot

• Question: Do the foundation's memorial scholarship selection procedures qualify for advance approval under section 4945(g)?
• Outcome: approved
• Key authorities: IRC §§ 4945(g), 4945(d)(3), 117(a), 170(b)(1)(A)(ii)

Full text (IRS public release)

Department of the Treasury                    Date: 02/27/2026
Internal Revenue Service
IRS Tax Exempt and Government Entities         Taxpayer ID number:

                                               Person to contact:
                                               Name:
                                               ID number:
                                               Telephone:

Release Number: 202621014
Release Date: 5/22/26

LEGEND
B = Scholarship                                UIL: 4945.04-04
C = Person
D = School
E = City, State
F = Number
y dollars = dollar 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 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 memorial scholarship program called the B. The purpose of the B is to
honor the memory of C by providing annual scholarships to graduating seniors at D in E who best demonstrate
through merit a strong alignment with the guiding values and legacy of commitment to community service of C.

You will publicize the B on your website and social media, as well as through emails and phone calls to
counselors at D. You anticipate your scholarships will be worth y dollars each. The number of scholarships you

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

anticipate awarding annually is F. Scholarships are renewable for up to three years for recipients who provide
you with official year-end transcripts and a brief annual impact statement.

Your scholarship is intended solely for qualified educational expenses as defined under IRC Section 117(a) for
tuition and required fees, books, supplies, equipment, and other qualified costs at accredited U.S.-based colleges
or universities. Scholarship funds may not be applied toward room, board, or other non-qualified expenses.

To be eligible, applicants must be graduating from D and intend to matriculate full-time to accredited colleges
or universities and:

* have a minimum cumulative GPA equal to or greater than 3.0 on a 4.0 scale,

* demonstrate significant involvement in community service or caregiving, particularly with underserved
communities or people with disabilities, and

* plan to pursue a career or continued involvement in service-oriented fields of study, such as education,
social work, healthcare, disability services, or other related nonprofit work.

Eligible applicants must submit:

* a completed application form that includes an official high school transcript,

* one essay from a selection of different topics you provide as part of your application, and

* one letter of recommendation from a teacher, supervisor, or community leader who can speak to the
applicant’s character and community service.

Your selection committee will consist of professionals who either knew C, or have themselves been an active
part of community service and/or work that exemplifies the spirit of the B. Each committee member will sign
conflict of interest and confidentiality agreements and recuse themselves from any discussions or votes on
applicants to whom they may have a personal connection.

Selection criteria will involve a scoring rubric where five separate categories based on demonstrated service,
impact on others, alignment with the guiding values and spirit of C, the depth and authenticity of the essay
response, and the strength of the recommendation letter are given equal weight in the final selection.

Awards will be made without regard to race, religion, gender, disability, or other protected class, and the same
GPA and enrollment standards required for scholarship eligibility apply each year toward scholarship renewals.

You will disburse your scholarship funds in one of three ways:

(a) direct payment to your scholarship recipient,
(b) direct payment to the recipient’s college or university bursar, or
(c) direct deposit into a qualified Section 529 educational savings plan.

For option (a) above, the educational institution will only apply funds to your recipients’ actual costs for tuition,
fees, and other qualifying expenses, as described in this letter. For options (b) and (c) above, you will require
your recipients to sign an agreement to use scholarship funds only for their intended purposes and provide
receipts or distribution statements for all paid expenses.

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

Students must return to you any portion of a scholarship that:

* is not spent on qualified expenses within 12 months of receipt, or

* is substantiated by non-qualified receipts (e.g., housing, meal plans, etc.), or

* remains unspent in the recipient’s Section 529 educational savings plan after withdrawal for non-
qualified purposes.

After completion of their first semester, recipients must submit to you copies of their official first semester
transcripts showing a GPA equal to or greater than 3.0 and proof of second semester enrollment. Failure to meet
GPA and/or enrollment requirements will result in a written notice and a 60-day cure; otherwise, the scholarship
is considered forfeited.

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.

* The effective date of our approval is , which is the date your request was submitted.

* 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.

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

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