Scholarship Awards Will Not 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)).

Generally, the amount of each scholarship will be between b and c dollars, but will be dependent upon the amount available you are required to annually distribute to satisfy Code Section 4942. The number of awards made each year would generally range from 10-20. You estimate the number of applications received to be between 75-100 annually. The number of students' currently attending X is approximately d. X publicizes the scholarship through their school website.

Criteria for selection includes meeting minimum requirements of financial need, matriculation as a student at X, above average scholarship and high moral character. All scholarships are awarded on an objective and non-discriminatory basis. No scholarship may be awarded to any disqualified person as defined in Code Section 4946.

The scholarship committee recommends the amounts based on the amount of funds available, taking into consideration the need of each student. Your committee is composed of one representative of you and three representatives from X.

You shall continue assistance provided the individual continues matriculation as a student at X, maintains an overall grade point average of 2.50, never appears on any list published by an agency of the United States indicating sympathy with or membership in any organization which is subversive to the interests of the United States and that in your opinion is worthy of further financial assistance.

You will pay the scholarship proceeds directly to the university/college the recipient attends for the benefit of the recipient. You will provide a letter to each university/college specifying that the university/college's acceptance of the funds constitutes the university/college's agreement to (i) refund any unused portion of the scholarship if a scholarship recipient fails to meet any term or condition of the scholarship; and (ii) notify you if the scholarship recipient fails to meet any term or condition of the scholarship. If the university/school will not agree to such terms the trustee will obtain the needed reports and grade transcripts from the scholarship recipient.

If the school does not agree to the terms of the letter, they are to return the check and individual expenditure responsibility, which would require proof of enrollment, would be done by sending a grant letter to the student and having them sign before any check is mailed. If the student does not sign the agreement, they would not receive the scholarship.

You represent that you will:

• Arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded;

• Investigate diversions of funds from their intended purposes;

• Take all reasonable and appropriate steps to recover diverted funds, 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 diversions from occurring.

• 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.