Scholarship Awards Won't Be Taxable

Contact person - ID number: * * *

You asked for advance approval of your scholarship grant procedures under Internal Revenue Code section 4945(g). This approval is required because you are a private foundation that is exempt from federal income tax. You requested approval of your scholarship program to fund the education of certain qualifying students.

Also, 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 provide in Code section 117(b)).

Scholarships will be awarded to selected eligible applicants who are seniors at U or to select eligible applicants who are seniors at any high school located in V, and who are children of employees of X or Y. "Disqualified persons" are ineligible from receiving scholarship awards.

Your Board of Directors will appoint an independent selection committee, which will be responsible for the administration of the scholarship program. The selection committee shall consist of individuals who occupy the following type of positions within the T: School District Superintendent, a high school Principal, a Guidance Counselor or community leader. It is anticipated that the committee will consist of three members. Members of the selection committee shall be totally independent (except for participation on the Committee) and separate from you, W and his family members, and X and Y. If any of your employees or the above employers or their spouses hold a position in a School District, such individuals shall not be appointed to the scholarship selection committee.

Notices regarding the availability of scholarship applications will appear in the Z. In addition, notices will be sent to the Guidance Office of U and to the employees of X and Y living in V.

The selection committee will receive and review applications and award the scholarship to a high school senior considering the following qualifications and selection criteria:

Eligible applicants will include students whose parents are employees and students whose parents are not employees. In the event an award is given to a child of an employee, scholarships will be awarded based upon facts and circumstances that demonstrate that the scholarships will not be considered compensation for past, present or future services or otherwise provide a specific benefit to the employer.

The scholarship will be paid directly to the student or to the educational organization and divided equally between the number of semesters in each academic year at the student's educational organization. The recipient will be required to submit a transcript of his or her academic record, verified by the educational institution each year. If the student fails to continue as a full-time student, make satisfactory progress towards a degree or fails to maintain the 2.0 GPA, the student will be required to return the unused portion of the scholarship applicable to that semester, and forfeit the remainder of the scholarship award for subsequent semesters and years. If the student continues to meet the eligibility criteria and provide the required documentation on a timely basis, the scholarship will continue for subsequent semesters and years without the need for submission of new applications. If permitted by the educational organization, you may pay the scholarship directly to the educational institution.

Each recipient will be required to submit a transcript of his or her academic record for each semester and confirm his continued enrollment as a full-time student (except when on externships or other school sponsored semesters that might be less than full-time credit). The purpose of these requirements is to confirm that the recipient is progressing towards the selected degree and is maintaining the required grade point average. If the transcript reveals that the recipient has failed to make satisfactory progress towards the selected degree and cumulative grade point average in a given academic year, the recipient will forfeit the scholarship for subsequent semesters and years.

You will maintain records of the recipients of the scholarships, including the names, addresses, year of award, amount of each scholarship.

• 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 Code section 117(a).

• The grant is to be used for study at an educational organization described in Code section 170(b)(1)(A)(ii).

• 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 Cincinnati Office of Exempt Organizations at:

•  

  Internal Revenue Service

   

  Exempt Organizations Determinations

   

  P.O. Box 2508

   

  Cincinnati, OH 45201

   

• You cannot 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 Code 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.

Please keep a copy of this letter in your records.

If you have questions, please contact the person listed at the top of this letter.