IRS Approves Foundation's Scholarship Procedures

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 in Code section 117(b)).

You will advise your scholarship committee of the amount available for scholarships. The members of the committee review applications completed by potential recipients and rank candidates for awards based on their character, moral aspects, proficiency in their studies in high school and their intention to seek college education. The scholarship committee then submits their selections to your trustee. All scholarships are awarded on an objective and non-discriminatory basis. No scholarship may be awarded to any disqualified person as defined in IRC Section 4946.

The selection committee is comprised of the C Superintendent of Schools, the Superintendent of the D, and the principal of Z. If there is no longer a superintendent of schools, or a county superintendent, or a principal, and the persons managing the school system shall have different designations, that such person or persons, shall be substituted for, and become, the committee. The scholarship program is publicized through the Z guidance counselor's office.

You will pay the scholarship proceeds directly to the college or university the recipient attends for the benefit of the recipient, and provide a letter to each college or university specifying that the college or university's acceptance of the funds constitutes the college or university's agreement to refund any unused portion of the scholarship if a recipient fails to meet any term or condition of the scholarship; and notify your trustee if the scholarship recipient fails to meet any term or condition of the scholarship. Students must provide transcripts and proof of enrollment to continue to receive the award.

You will maintain case histories showing recipients of your scholarships, or other educational grants, including names, addresses, purposes of the award, amount of each grant, manner of selection, and relationship (if any) to your officers, trustees, or donors of funds.

You will arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded; to investigate diversions of funds from their intended purposes; and take all reasonable and appropriate steps to recover diverted funds, ensure other grants funds held by the grantee are used for their intended purposes, and withhold further payments to grantee until you obtain grantees assurances that future diversions will not occur and the grantees will take extraordinary precautions to prevent future diversions from occurring.

You will maintain records including information obtained to evaluate recipients, identify whether a recipient is a disqualified person, establish the amount and purpose of each award, and establish that you under took the supervision and investigation of awards.

• 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.

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