IRS approves a foundation's arts and humanities fellowship procedures

Plain-English summary

The private foundation requested advance approval for a fellowship program supporting artists, scholars, and curators working in the arts and humanities. The program will select recipients through external and internal committees using portfolios, credentials, prior work, and the relationship of proposed work to the foundation's charitable programs. The IRS approved the procedures under IRC § 4945(g)(3), so grants made under them will not be taxable expenditures if the foundation follows the proposed procedures. The approval requires objective and nondiscriminatory selection, reports on the recipients' work, and appropriate records and oversight. The letter also states that the program is limited to the facts described in the request and may not be cited as precedent.

Ruling snapshot

• Question: Do the foundation's proposed arts and humanities fellowship procedures satisfy the requirements for advance approval under IRC § 4945(g)(3)?
• Outcome: Approved.
• Key authorities: IRC §§ 4945(d)(3), 4945(g), 4945(g)(3), 74(b), 117(a), 170(b)(1)(A)(ii), 170(c)(2)(B), and 6110; Treas. Reg. § 53.4945-4(c)(1).

Full text (IRS public release)

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

Date:
06/10/2026
Taxpayer ID number:

Person to contact:

Release Number: 202636021
Release Date: 9/4/26

LEGEND UIL: 4945.04-04
X = Program
y dollars = Amount

Dear

You asked for advance approval of your educational 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 grant. Based on the information you submitted,

and assuming you will conduct your program as proposed, we determined that your procedures for awarding educational grant 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 under IRC Section 4945(g)(3) called X.

Your charitable purpose and mission is to support communities through the power of the arts and humanities. By providing X, you strive to build objective communities enriched by meaning and guided by critical thinking, where ideas and imagination can thrive.

You plan to provide X to selected artists, scholars, and curators so they can devote time to pursuing work in alignment with your charitable purpose. X will provide such individuals with space and time to pursue their own artistic or scholarly work that enhances the arts and humanities and promotes your charitable objectives.

You will form a Nomination Committee of external experts. The Committee will include individuals that come from one or more of the previous recipients of your other grant program, which makes grants to organizations that are recognized as exempt for purposes similar to yours, one or more representatives from a college or university, and one or more persons who are leaders of like-minded charitable organizations. All members of

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

the Committee will have expertise regarding the artists and scholars intended to be supported through X.

You do not intend to widely publicize X; rather, you will rely on the expertise of the Nomination Committee to identify potential recipients through publicly available resources and through soliciting recommendations from outside experts in the relevant fields related to your charitable purpose. The Nomination Committee may also identify potential recipients by conducting outreach to universities, cultural institutions, or other programs where it is likely to identify qualified candidates. The goal is to locate candidates that have a passion for the arts and humanities.

You will also form an Advisory Committee that will consist of your staff members and may also include outside representatives. Once the Nomination Committee has identified all potential fellows, the Advisory Committee will construct portfolios for each candidate containing publicly available information and information gathered from experts in the field relevant to the topic, such as a biographical summary, a detailed statement of the applicants' work, letters of recommendation from experts in the field, samples of previous artistic or scholarly work, and accomplishments within their field of artistry or study.

The Advisory Committee will submit a list of the potential fellows and their accompanying portfolios to your President. The selection criteria for X will include the quality of the portfolio and previous artistic or scholarly work, credentials of the potential fellow, and the relationship of the applicant's anticipated work to your charitable programs, projects, or areas of concern. X will be awarded on an objective and nondiscriminatory basis. Your President may select one or more of the potential recipients identified by the Nomination Committee to receive X.

You plan to award one to two grants per year, in the amount of y dollars each. From time to time, such amount will be reviewed and adjusted to reflect changes to the cost of living and other relevant factors. X is intended to cover all the recipient's living expenses during the term of the grant, thereby allowing the recipient to devote substantial time to pursuing artistic and scholarly work. X will be paid out either in a lump sum at the beginning of the established grant term or through installments throughout the term. You will also consider X a priority in relation to other demands on your funds.

The requirements and conditions of X will be set forth in a letter sent to the recipient who will be required to communicate acceptance thereof to you in writing. Terms and conditions will include the specific purpose and topic of the fellowship, the duration of the grant, the total amount of the grant, and a requirement (including due dates) to furnish narrative reports on the use of your funds and the grantee's progress toward achieving the purposes of the grant.

You will provide each of the recipients with an email address and they may request temporary office space that can be used for the purposes of X. The recipients will also be invited to participate in relevant meetings, workshops, brown bags, town halls, and other related activities. The recipients will be invited to meet with certain members of your executive staff periodically throughout the established term and to spend a certain amount of time per quarter at your offices. These specifics may change from time to time as X is refined.

You will require narrative reports from the X recipients annually and upon the completion of the established term. You will review each narrative report submitted by the X recipient to determine whether the purposes of the grant are being or have been fulfilled, and to identify any issues requiring further scrutiny or investigation.

While you do not anticipate renewing fellowships, any renewal for any succeeding period will be contingent on compliance with the terms of X and evidence of adequate performance at the time of review.

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

Disqualified persons, including officers, directors, and their family members will not be eligible to receive your grants, nor will members of the Nomination Committee or their families or members of the Advisory Committee or their families.

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 if 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 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,
  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.

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

• 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 grants
  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 4792 - Redacted

Letter 437

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