C.7. Advance Approval of Section 4945(g)

(1) If a grant is described in Section 4945(d)(3), it is a taxable expenditure unless it

satisfies the requirements of Section 4945(g). Section 4945(g) provides, in effect, that any grant to an individual for travel, study, or similar purposes is not a taxable expenditure if it was awarded on an objective and nondiscriminatory basis; was made pursuant to a procedure approved in advance by the IRS; and either:

a. Constituted a scholarship or fellowship grant not includible as gross income

pursuant to Section 117(a) and was used to study at an educational organization described in Section 170(b)(1)(A)(ii);

b. Constituted a prize or award not includible as gross income pursuant to

Section 74(b)(1) and (2) (but disregarding (3)) and the recipient is selected from the general public (Note: If the prize or award is not intended to finance a future activity of the recipient and imposes no conditions on the recipient as to how it may be spent, advance approval of the grant-making procedure for such prize or award is not required because such a prize or award is not a grant for travel, study, or other similar purposes); or

c. Had the purpose of achieving a specific objective, producing a report or other

similar product, or improving or enhancing a literary, artistic, musical, scientific, teaching, or other similar capacity, skill, or talent of the grantee. See Section 4945(g)(1), (2) and (3).

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(2) A Section 4945(d)(3) grant must satisfy five requirements in order not to be

treated as a taxable expenditure. Each of these requirements are discussed below.