C.1. Section — Publication 5590 — Exempt Organizations

(1) The definition of grants, for purposes of Section 4945(d)(3) include, but are not

limited to, such expenditures as:

a. Scholarships

b. Fellowships

c. Internships

d. Prizes

e. Awards

f. Loans (for purposes described in Section 170(c)(2)(B))

g. Program-related investments

h. Payments that support other exempt organizations (See Treas. Reg. 53.

4945-4(a)(2))

(2) A scholarship is defined to include any amount paid to, or for the benefit of, a

graduate or undergraduate student for the pursuit of his/her studies. See Treas. Reg. 1.117-3(a). It is a "no-strings" educational grant, with no requirements of any substantial quid pro quo from the recipient such as providing future services. See Rev. Rul. 77-44, 1977-1 C.B. 355.

a. Fellowships and internships include similar payments for the benefit of an

individual for the pursuit of his/her studies (see Section 117 and regulations thereunder).

b. Prizes and awards include payments made to individuals in recognition of

past educational, literary, artistic, or scientific accomplishments (see Section 74(b)). If the prize or award was restricted to be used by the recipient for his/her studies, it would be a Section 4945(d)(3) grant.

c. Long-term, low-interest loans made to students may be considered as grants

described in Section 4945(d)(3). See Rev. Rul. 77-434, 1977-2 C.B. 420.

(3) Grants do not ordinarily include:

a. Salaries or other compensation paid to employees (defined under Section

61); and

b. Payments (including reimbursements for travel expenses such as

transportation, board, and lodging) to persons for personal services in assisting a foundation in planning, evaluating or developing projects or areas of program activity by consulting, advising, or participating in conferences organized by the foundation. See Treas. Reg. 53.4945-4(a)(2) and Rev. Rul. 74-125, 1974-1 C.B. 327.

c. See also Rev. Rul. 81-293, 1981-2 C.B. 218 (foundation grant to individual

who independently hired and compensated research assistants with the grant funds was held not to be foundation grants to the research assistants under Section 4945(d)(3)).