Wednesday February 24, 2021Private Letter RulingFoundation's Scholarship Awards Approved
GiftLaw Note:
Foundation is a private foundation exempt from federal income tax. Foundation requested advance approval of its educational grant procedures under Sec. 4945(g). The program will offer stipends to high school juniors and seniors from low-income households to permit participation in an after-school program that provides study in the arts. Stipends will be offered as an alternative to taking a part-time job and paid in two installments directly to recipients. Eligibility for the program will be available once per student. Applicants will be required to submit a statement of interest and an original piece of academic writing. Recipients will be selected by the executive director and educational consultant. Recipients will be required to sign an agreement with responsibilities outlined. Recipients will be required to attend all after-school sessions, actively participate in the sessions and complete all projects, reading and assignments. Each participant will be permitted two absences during the program. Stipend amounts will be based on the approximate amount a student could otherwise earn at a part-time job. Expenditures from private foundations to individuals for travel, study or other similar purposes are generally taxable expenditures. However, Sec. 4945(g) provides an exception for grants that meet certain requirements. Under Sec. 4945(g), a grant will not be considered a taxable expenditure if the foundation awards the grant on an objective and nondiscriminatory basis, the IRS approves the grant procedure in advance, the grant is a scholarship or fellowship subject to Sec. 117(a) and the grant is to be used for study at an educational organization described in Sec. 170(b)(1)(A)(ii). Here, the Service determined that the grant met the requirements of Sec.4945(g) and approved Foundation's request.
PLR 202045013 Foundation's Scholarship Awards Approved
11/6/2020 (8/11/2020) 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 you are a private foundation that is exempt from federal income tax. Our determinationWe 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 requestYour letter indicates that you will operate an educational grant program called B. Your purpose is to advance the general public's knowledge of, interest in and appreciation for the fine arts and promoting education and scholarly research in the fine arts. You will operate B, an after-school program that offers the students in their junior or senior year of high school learning opportunities through the study of the arts. The participants in B will engage with a range of art professionals at museum and institutions in C, develop individual and collaborative projects (including oral presentations, research papers and digital projects) and build knowledge of the career opportunities available in the fields of curations, exhibition making and education. You will award stipends to high-school students from low-income households for the specific objective as an opportunity to participate in an after-school program, rather taking a part-time job. Stipends will be paid directly to participants in two installments. Students will not be eligible to participate in B more than once. You will publicize B on your website, social media account and through word of mouth. Participants in B will be selected based on the quality of their application materials and on the location of their residents and the school they attend. You will require each applicant to submit (i) a statement summarizing why he/she wants to join B and (ii) original piece of academic writing (e.g., essay or article) of which applicant is proud. You will seek to create a diverse cohort of students from low-income households who do not otherwise have exposure to the study of the art. Applicants will be selected for participation by your executive director and your educational consultant. They will evaluate each applicant by reviewing his or her application. You will enter into agreement with each participant upon approval of application. You will set forth the responsibilities and requirements for each party. The amount of each stipend will be calculated to approximate the amount that each student could otherwise earn by taking part-tine job. It will vary from time to time and depend on the length of the program. Stipends will be paid directly to participants in two installments. The first installment would be paid to participant upon successful completion of the first half of the program, and the second installment will be paid upon successful completion of the remainder of the program. Each participant in B will be awarded stipend if he or she (i) attends all after-school sessions, (ii) actively participates in those sessions, and (iii) completes all projects, reading and assignments. Each participant will be permitted up to two absences for sickness and emergencies. There will be no stated minimum or maximum number of stipends made in any tax year. You anticipate approximately * * * to * * * participants in B. You will retain all material information relating to each stipend, including (i) information relation to selection of participant, including the participants' application and confirmation that no such participant was "disqualified person" as defined in Code Section 4946(a)(1); (ii) the name and address of the participant; (iii) the amount of each payment, the recipient of such payment and the date thereof; ( iv) documentation of the participant's satisfactory completion of the program; and (v) any additional material information procured in the process of administering the program. Basis for our determinationThe law imposes certain excise taxes on the taxable expenditures of private foundations (IRC Section 4945). 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 of the following requirements of IRC Section 4945(g) is not a taxable expenditure.
Other conditions that apply to this determination
Internal Revenue Service Exempt Organizations Determinations P.O. Box 2508 Cincinnati, OH 45201 Please keep a copy of this letter in your records. If you have any questions, please contact the person listed at the top of this letter. Sincerely, Stephen A. Martin Director, Exempt Organizations Rulings and Agreements cc: * * * Published November 13, 2020
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