C.10. Selection Criteria

(1) The criteria used in selecting grant recipients from the potential grantees should

be related to the purpose of the grant. Criteria for selecting scholarship recipients might include (but are not limited to) the following:

a. Prior academic performance;

b. Performance on tests designed to measure ability and aptitude for college

work;

c. Recommendations from instructors;

d. Financial need; and

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e. Other facts and circumstances such as the conclusions which the selection

committee might draw from a personal interview as to the individual’s motivation, character, ability, and potential. Treas. Reg. 53.4945-4(b)(3).

(2) For example, in Rev. Rul. 76-340, 1976-2 C.B. 370, selection criteria (in addition

to academic standing, personal history, financial need) for a private foundation’s scholarship program included the cost of the program the potential grantee proposes to pursue and whether he/she is likely to finance it with the private foundation’s assistance. The IRS permitted the use of these two criteria since it would assure that the private foundation’s grants would support the completion of the grantee’s educational program.

(3) In contrast, the IRS, in Rev. Rul. 85-175, 1985-2 C.B. 276, did not permit the use

of criteria that gave preference to family members and relatives of the contributors to the private foundation. Such criteria were in fact not in adherence to the objective and nondiscriminatory requirement. If a substantial part of the private foundation’s activities was the awarding of grants on this basis, the organization would jeopardize its exempt status under Section 501(c)(3).