Exempt Organizations Technical Guide›TG 62: Excise Taxes on Taxable Expenditures – IRC Section 4945›Table of Contents
D.4. Earmarked Grants
Publication 5590 — Exempt Organizations Technical Guide TG 62: Excise Taxes on Taxable Expenditures under IRC 4945 · 2026-10-03 edition · updated 2026-10-04 · United States
(1) Occasionally, a private foundation makes a grant to another organization to
enable that recipient to make grants to other grantee organizations (secondary grantees). In such a case, the private foundation is not regarded to have made the grant to the secondary grantees if the private foundation does not earmark the use of the grant for any named secondary grantees, and if there does not exist an oral or written agreement whereby the grantor private foundation may cause the selection of the secondary grantee by the organization to which it has given the grant. See Treas. Reg. 53.4945-5(a)(6).
(2) If a grantor private foundation has reason to believe that certain secondary
organizations would derive benefits from its grant to the initial grantee
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organization, such grant still would be considered as a grant to that organization (and not to the secondary grantee organizations) so long as the initial grantee organization:
a. Exercises control over the selection process; and
b. Makes the selection completely independent of the grantor private foundation.
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