C.4. Grants to Public Charities Subsequently Awarded to Individuals

(1) When the intermediate grantee organizations are described in Section 509(a)(1),

(2) or (3), grants for use by individuals will not be considered as grants to those persons if the:

a. Projects, for which the grants are used, are supervised by the public charities;

and

b. Public charities control the selection of the individual recipients. See Treas.

Reg. 53.4945-4(a)(4)(ii).

(2) However, the grantor private foundation may play a limited role in the selection

process. Specifically, it may suggest candidates for the grants if there is an objective manifestation of control over the selection process by the grantee public charity.

(3) Rev. Rul. 77-212, 1977-1 C.B. 356 illustrates the requirement that the public

charity controls the selection process. In this revenue ruling, a private foundation provides grants to a vocational school (which is described in Section 509(a)(1)) that are used to purchase tools for students. The students submit grant applications with lists of needed tools to the selection committee composed of representatives of the private foundation. The recipients are selected on ability and financial needs. The grants are made to the vocational school which then purchases the tools for the students. The IRS concluded that the grants are deemed to be made to the individual students by the private foundation because the foundation retained the authority to select the grantee students. See Treas. Reg. 53-4945-4(a)(4)(iv) for additional examples.