IRS approves student travel and hardship fellowships

Plain-English summary

A private foundation asked the IRS to approve a fellowship program for
students who show promise but lack the resources to pursue educational and
career opportunities. Awards may cover travel for study, research,
internships, or work experience, as well as hardships that could interrupt a
student's educational or professional development. Applicants must provide
school records and explain their financial need, intended use of funds, goals,
and commitment to achieving those goals. The foundation's board will select
recipients, and recipients must submit monthly reports documenting how the
funds were used. The IRS approved the procedures under section 4945(g)(3), so
grants made under them will not be taxable expenditures.

Ruling snapshot

• Question: Do the foundation's student fellowship procedures qualify for advance approval under section 4945(g)(3)?
• Outcome: Approved
• Key authorities: IRC § 4945(d)(3); IRC § 4945(g)(3); IRC § 117(a); IRC § 170(b)(1)(A)(ii); IRC § 74(b); Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 05/01/2026
Tax Exempt and Government Entities Taxpayer ID number:

Person to contact:

Name:
ID number:
Telephone:
Release Number: 202630021
Release Date: 7/24/26
LEGEND UIL: 4945.04.04
y dollars = Dollar Range
C = Range
Dear

You asked for advance approval of your grant procedures under Internal Revenue Code (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 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 a fellowship program. The purpose of program is to help students who
show great promise for success but lack financial means to achieve their educational and career goals, including
those lacking the financial means to travel for critical study, research, internship and/or work opportunities, or
hardships that may occur during their educational or professional development journey.

You will publicize the availability of fellowships to students by providing the fellowship details and application
directly to vocational schools, high schools, colleges and universities. You will primarily issue fellowships in
the form of grants, though you may consider loans without interest and without recourse.

You anticipate awarding fellowships ranging in the amount of y dollars to C students per year depending on the
available budget. Fellowships will not be renewable however recipients may reapply for additional fellowships
in subsequent years.

Eligible applicants must be enrolled in a high school, vocational, or higher education institute, including
community college, undergraduate college or university. Applicants must provide past school records and

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

submit an application detailing:
• Their financial need,
• Why the funds are being requested,
• How the funds will be used,
• Their educational and career goals, and
• Their commitment to achieving their goals.

Your board of directors will select fellowship recipients based on the candidate's demonstrated financial need,
commitment to achieving their educational and career goals, excellence with special trades and skills, and
personal history set forth in their application.

You will pay grants directly to students so they may be used for (1) travel expenses, room and board, and other
expenses necessary to travel for research and work experience while attending high school, vocational school,
or college or university, and (2) hardship expenses that may otherwise hinder a student's ability to pursue
educational and professional experiences. When possible, expenses will be paid directly to or disbursed through
the school financial aid office on the recipient's behalf. Each recipient will be required to submit concise
monthly reports that include a detailed description and proof of how the fellowship funds were used.

You represent you will:

• 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 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 you will:
• Maintain all records relating to individual grants, including information obtained to evaluate grantees,
• Identify whether 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 grants 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); or

- 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; or

- To achieve a specific objective; produce a report or similar product; or improve or enhance a literary,

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

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.

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