C.12. Grants Designed to Benefit a Specific Racial or Ethnic Minority Group

(1) A private foundation may provide scholarships that are specifically geared toward

racial or ethnic minorities and not be in violation of the objective and nondiscriminatory requirement of Section 4945(g).

(2) For example, see Treas. Reg. 53.4945-4(b)(5), Example 2:

Example: X company has organized a private foundation which, as its sole activity, provides 100 college scholarships per year to children of X company’s employees. It also provides 20 college scholarships per year to a certain ethnic minority group. All members of this ethnic minority group (other than disqualified persons with respect to the private foundation) living in State Z are eligible to apply for these scholarships. It is estimated that at least 400 persons will be eligible to apply for these scholarships each year. Selection of the recipients are based on prior academic performance, performance on certain tests designed to measure ability and aptitude for college works, and financial need. Under these circumstances, the operation of this scholarship program by the private foundation: (1) is consistent with the existence of the private foundation’s exempt status under Section 501(c)(3); (2) utilizes objective and nondiscriminatory criteria in selecting scholarship recipients from among the applicants; and (3) utilizes a selection committee which appears likely to make objective and nondiscriminatory selections of grantees.

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