I
105TH CONGRESS
1ST SESSION
H. R. 353
To amend the Internal Revenue Code of 1986 to clarify the treatment of
educational grants by private foundations, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 7, 1997
Mr. TANNER (for himself and Mr. CLEMENT) introduced the following bill;
which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to clarify
the treatment of educational grants by private founda-
tions, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. TAXABLE EXPENDITURES OF PRIVATE FOUN-
DATIONS NOT TO INCLUDE CERTAIN EDU-
CATION GRANTS AND LOANS.
(a) IN GENERAL.—Section 4945 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection
(i) as subsection (j) and by adding after subsection (h)
the following new subsection:
‘‘(i) QUALIFIED EMPLOYER-RELATED GRANT PRO-
GRAMS.—
‘‘(1) IN GENERAL.—An individual grant shall
be treated as made on an objective and nondiscrim-
inatory basis for purposes of subsection (g) if it is
demonstrated to the satisfaction of the Secretary
that it was made pursuant to a qualified employer-
related grant program.
‘‘(2) QUALIFIED
EMPLOYER-RELATED
GRANT
PROGRAM.—For purposes of this subsection, the
term ‘qualified employer-related grant program’
means any employer-related grant program which—
‘‘(A) is not used to recruit employees of
the employer, or to induce employees to con-
tinue their employment with the employer or
otherwise follow a course of action sought by
the employer,
‘‘(B) selects grantees by a committee con-
sisting entirely of individuals who are not—
‘‘(i) in a position to directly or indi-
rectly derive a private benefit if certain ap-
plicants are selected, or
‘‘(ii) current or former directors, offi-
cers, or employees of the employer or dis-
qualified persons with respect to the pri-
vate foundation,
‘‘(C) limits potential grantees to those who
meet the minimum standards for admission to
an educational institution (within the meaning
of section 170(b)(1)(A)(ii)),
‘‘(D) selects grantees based upon objective
criteria which are—
‘‘(i) related to enabling grantees to
obtain an education solely for their per-
sonal benefit, and
‘‘(ii) not related (aside from the initial
qualification of the group of potential
grantees) to the employment of the grant-
ees or employees whose spouses or children
are grantees or to the employer’s line of
business,
‘‘(E) does not fail to make grants, or does
not terminate or decline to renew grants pre-
viously made, solely because of the failure of—
‘‘(i) employees who are grantees, or
employees whose spouses or children are
grantees, to remain employed by the em-
ployer for any length of time, or
‘‘(ii) grantees to agree to become em-
ployed by the employer at any time,
‘‘(F) does not limit the courses of study
for which the grants are available,
‘‘(G) is not established pursuant to an
agreement which the Secretary of Labor finds
to be a collective bargaining agreement between
employee representatives and the employer, if
there is evidence that the program was the sub-
ject of good faith bargaining between such em-
ployee representatives and such employer, and
‘‘(H) excludes from among the potential
grantees—
‘‘(i) disqualified persons with respect
to the private foundation, and
‘‘(ii) highly compensated employees or
spouses or children of highly compensated
employees.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) EMPLOYER-RELATED
GRANT
PRO-
GRAM.—The term ‘employer-related grant pro-
gram’ means any program of making grants
conducted by a private foundation that—
‘‘(i) treats employees (or spouses or
children of employees) of an employer as a
group from which grantees of all or a por-
tion of the grants will be selected,
‘‘(ii) limits the potential grantees of
all or a portion of the grants to employees
(or spouses or children of employees) of an
employer, or
‘‘(iii) otherwise gives employees (or
spouses or children of employees) of an
employer a preference or priority over
other individuals in being selected as
grantees of such grants.
‘‘(B) 
HIGHLY
COMPENSATED
EM-
PLOYEE.—The term ‘highly compensated em-
ployee’ means a highly compensated employee
under subparagraph (A) or (B) of section
414(q)(1), except that the $80,000 amount
under subparagraph (B) shall be adjusted at
the same time and in the same manner as
under section 415(d).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to grants or loans made after the
date of enactment of this Act.
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