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Abstract: 

A scholarship grant to an individual will not be a taxable expenditure under IRC § 4945 if the grant is awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by IRS. A recent private letter ruling demonstrates the easy way to run a scholarship grant program by simply leaving the work to another entity that is classified as a public charity for tax purposes. In PLR 200503030 the foundation’s program worked like this: Under the terms of an agreement, the foundation will make annual contributions to a publicly-supported charity, “B,” to fund scholarships for the benefit of eligible students who reside in the western counties of a particular state.

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