department of the treasury internal_revenue_service washington d c ---- -------------- contact person telephone number identification_number number release date se t eo ra t1 date date uil employer identification nos legend a b c d o a b c d e x dear ------------------ this letter responds to your request for rulings under sec_501 sec_509 and sec_513 of the internal_revenue_code facts a is a political_subdivision of the state of x a has been recognized as an organization described in sec_501 sec_509 and sec_170 of the code a is a community- based provider of extensive health care and related_services a operates integrated healthcare facilities which include hospitals with over big_number beds on five campuses a maintains an open medical staff provides medical services to the needy regardless of their ability to pay and operates an emergency room a’s bylaws require that at all times at least a majority of the members of its board_of trustees consists of independent members of the community a has adopted a conflicts of interest policy a carries on significant medical education and research activities o is an operating division of a o is engaged in research_and_development of intellectual_property including patents copyrights processes formulae technology and innovations intellectual_property b is a x public benefit non-membership nonprofit corporation which has been recognized as an organization described in sec_501 and sec_509 of the code b holds interests in healthcare related entities and performs management and oversight functions for related_organizations b’s bylaws provide that a’s board_of trustees determines the number of b’s directors and appoints all of b’s directors b’s bylaws also provide that at least a majority of b’s directors m ust be former members of a’s board_of trustees c is a x public benefit non-membership nonprofit corporation which has been recognized as an organization described in sec_501 and sec_509 of the code c operates as a supporting_organization for the benefit of both a and b c’s bylaws provide that b has the power to appoint c’s board_of directors c’s principal purposes are to develop hold and manage intellectual_property and carry on basic discovery applied and sponsored research and research development c holds legal_title to and beneficial_ownership of or license to use intellectual_property developed as a result of research by the interested parties a b and c collectively are referred to as the interested parties a b or c individually is referred to as an interested_party c holds and manages the intellectual_property and may sell transfer assign and or license to third parties some or all of the intellectual_property or rights to its use a’s board_of trustees determined that in order to most effectively and efficiently exploit the commercial and development potential of certain intellectual_property an independent for-profit corporation should be established to operate for the benefit of the interested parties therefore c established d a for-profit corporation as a subordinate of c d’s board may include trustees directors officers or employees of the interested parties d has issued a shares of its voting common_stock all of which are outstanding in return for c making a capital_contribution of dollar_figureb to d c received c of these shares as compensation_for services that employees and contractors provided to an interested_party the interested_party directed d to issue shares of its common_stock to these employees and contractors in addition as compensation_for services that employees and contractors provided to d d issued shares of its common_stock to these employees and contractors a total of d shares of d common_stock have been issued to employees and contractors all of which are restricted pursuant to certain deferred_compensation or restricted_stock agreements in the future as compensation in whole or in part for services that employees or contractors may perform for an interested_party or interested parties the interested_party may transfer some of the shares of d common_stock that the interested_party owns or may grant options to purchase shares of d common_stock that the interested_party owns to such employees or contractors in addition in the future as compensation in whole or in part for services that employees or contractors may perform for d d may issue or transfer shares of its common_stock or may grant options to purchase shares of its common_stock all shares of d common_stock that subsequently may be issued to employees and contractors will be restricted further for fair value d may issue or sell additional shares of its common_stock to third parties including an interested_party in addition for fair value c may transfer or sell some of the shares of d common_stock that it owns to third parties including another interested_party in any event at all times the interested parties in the aggregate will own a majority of the outstanding common_stock of d the interested parties have represented that they and d will at all times operate as separate independent and autonomous organizations and will deal with each other on an arm’s-length fair_market_value basis none of the interested parties will be involved in the day-to-day operations or day-to-day management of d and d will have its own employees officers and directors except for one officer of d who is also an officer of the interested parties a intends to transfer and assign to c all right title and interest in certain intellectual_property developed by o and c intends to license to d certain intellectual_property pursuant to license agreements intellectual_property assigned by a to c and licensed by c to d is referred to as the licensed intellectual_property the licenses c grants to d will be exclusive except c will be permitted to sub-license the licensed intellectual_property to educational and or research institutions hospitals and nonprofit_organizations for educational and research purposes d’s purposes include a isolating from the interested parties those activities which are not substantially related to their tax-exempt purposes allowing flexibility to expand non-exempt unrelated activities through additional taxable activities and affiliations providing or assisting in providing the commercial development and commercial exploitation of the licensed intellectual_property and providing limitation of liability for legal claims the activities of d will include a holding licensed intellectual_property b selling and sub-licensing licensed intellectual_property to third parties b c d c d managing the commercial development of licensed intellectual_property for the benefit of an interested_party and providing various administrative and management services in connection with the licensed intellectual_property to or for the benefit of an interested_party a will provide various administrative and management services to d for a fair_market_value fee an interested_party may lease real_property to d at fair_market_value rents subject_to the approval of the lessor-interested party d may sublease the real_property to third parties rulings requested the current status of each interested_party as an organization described in sec_501 of the code and either sec_509 or sec_509 will not be adversely affected by the formation and capitalization of d when d is formed each of the interested parties will be a controlling_organization and d will be a controlled_entity within the meaning of sec_512 of the code under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party d’s receipt of royalties in connection with the sublicensing by d of licensed intellectual_property will not result in unrelated_business_taxable_income to d to the extent that sec_512 applies to such royalties under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party d’s receipt of rents in connection with the subleasing by d of real_property owned and leased by an interested_party to d will not result in unrelated_business_taxable_income to d to the extent that sec_512 applies to such rents under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party d’s issue transfer or sale of d’s common_stock or grant of options to purchase d’s common_stock will not result in unrelated_business_taxable_income to d to the extent that sec_512 applies to such sale or grant an interested party’s sale of d common_stock or grant of options to purchase d common_stock owned by the interested_party will not result in unrelated_business_taxable_income to the interested_party within the meaning of sec_511 through of the code to the extent that sec_512 applies to such sale or grant under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party d’s provision of business management and administrative services to or for the benefit of an interested_party regarding licensed intellectual_property will not result in unrelated_business_taxable_income to d the transfer by an interested_party of shares of d common_stock owned by the interested_party or grant of options to purchase d common_stock owned by the interested_party to an employee or a contractor as compensation_for services that the employee or contractor performs for an interested_party or interested parties will not adversely affect the interested party’s current status as an organization described in sec_501 sec_509 or sec_509 of the code provided that the total compensation paid to such employee or contractor for the services performed for the interested parties is reasonable in amount under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party the general rules in sec_511 through will apply under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party an activity of d that is substantially related to an exempt_purpose of an interested_party will not result in unrelated_business_taxable_income to d law sec_318 of the code provides that if percent or more in value of the stock in a corporation is owned directly or indirectly by or for any person such person is considered as owning the stock owned directly or indirectly by or for such corporation in that proportion which the value of the stock which such person so owns bears to the value of all of the stock in such corporation sec_318 of the code provides that if percent or more in value of the stock in a corporation is owned directly or indirectly by or for any person such corporation is considered as owning the stock owned directly or indirectly by or for such person sec_501 of the code provides in part for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable educational or scientific purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in such section sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_a_-1 of the regulations provides that the words private_shareholder_or_individual refer to persons having a personal and private interest in the activities of the organization sec_509 of the code provides the term private_foundation means an organization described in sec_501 other than one described in sec_509 or sec_1_501_c_3_-1 of the regulations provides that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_c_3_-1 of the regulations provides that an organization is not organized and operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations exempt from federal_income_tax under sec_501 sec_512 of the code defines the term unrelated_business_taxable_income as gross_income derived by an organization from an unrelated_trade_or_business regularly carried on by it less the allowable deductions which are directly connected with such trade_or_business sec_512 of the code excludes dividends interest and other_payments from the computation of unrelated_business_taxable_income sec_512 of the code excludes royalties from the computation of unrelated_business_taxable_income sec_512 of the code excludes certain rents from the rental of certain real and personal_property from computation of unrelated_business_taxable_income sec_512 of the code provides that gains or losses from the sale exchange or other_disposition of property other than inventory-type property is excluded from unrelated_business_taxable_income sec_512 of the code provides special rules for certain amounts that a controlling_organization receives from a controlled_entity sec_512 of the code provides that notwithstanding sec_512 and a controlling_organization receiving a specified_payment from a controlled_entity must include such payment as an item_of_gross_income derived from an unrelated_trade_or_business to the extent such payment reduces the net_unrelated_income of the controlled_entity or increases any net_unrelated_loss of the controlled_entity sec_512 of the code defines the term net_unrelated_income for the purposes of a controlled_entity which is not exempt from tax under sec_501 as the portion of the entity's taxable_income which would be unrelated_business_taxable_income if such entity were exempt under sec_501 and had the same exempt purposes as the controlling_organization sec_512 of the code defines the term net_unrelated_income for the purposes of a controlled_entity which is exempt from tax under sec_501 as the amount of the unrelated_business_taxable_income of the controlled_entity sec_512 of the code defines the term specified_payment as any interest annuity royalty or rent sec_512 of the code provides in part that the term control means in the case of a corporation ownership by vote or value of more than percent of the stock of such corporation and in any case other than a corporation or partnership control means ownership of more than percent of the beneficial interests in the entity sec_512 of the code provides that that sec_318 relating to constructive_ownership of stock applies for purposes of determining ownership of stock in a corporation and similar principles apply for purposes of determining ownership of interests in any other entity sec_513 of the code defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of the organization for income or funds or the use it makes of the profits derived to the exercise or performance by the organization of the purpose or function constituting the basis for its exemption under sec_501 sec_1_513-1 of the regulations provides in pertinent part that gross_income of an exempt_organization subject_to the tax imposed under sec_511 of the code is includible in the computation of unrelated_business_taxable_income if it is income from trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related other than through the production of funds to the organization's exercise or performance of its exempt_function sec_1_513-1 of the regulations provides that trade_or_business is related to exempt purposes in the relevant sense only where the conduct of the business activities has causal relationship to the achievement of exempt purposes other than through the production_of_income and it is substantially related for purposes of sec_513 of the code only if the causal relationship is a substantial one thus for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes analysis ruling_request no each interested_party has been recognized as an organization described in sec_501 of the code and either sec_509 or sec_509 a is a community-based provider of extensive health care and related_services o is an operating division of a that is engaged in research_and_development of intellectual_property b holds interests in healthcare related entities and performs management and oversight functions for related_organizations c develops holds and manages intellectual_property and carries on basic discovery applied and sponsored research and research development c holds legal_title to and beneficial_ownership of or license to use intellectual_property developed as a result of research by the interested parties c holds and manages the intellectual_property and may sell transfer assign and or license to third parties some or all of the intellectual_property or rights to its use a’s board_of trustees determined that in order to most effectively and efficiently exploit the commercial and development potential of certain intellectual_property an independent for-profit corporation should be established to operate for the benefit of the interested parties therefore c established d a for-profit corporation as a subordinate of c following the formation and capitalization of d each interested_party will continue the same activities that it carried on previously therefore each interested_party will continue to be organized and operated exclusively for exempt purposes within the meaning of sec_1_501_c_3_-1 of the regulations therefore the formation and capitalization of d will not adversely affect the current status of each interested_party as an organization described in sec_501 of the code and either sec_509 or sec_509 ruling_request no b’s bylaws provide that a’s board_of trustees determines the number of b’s directors and appoints all of b’s directors b’s bylaws also provide that at least a majority of b’s directors must be former members of a’s board_of trustees c’s bylaws provide that b has the power to appoint c’s board_of directors in return for c making a capital_contribution of dollar_figureb to d c received c shares of d common_stock representing e percent of d’s issued and outstanding common_stock in the future as compensation in whole or in part for services that employees or contractors of an interested_party or interested parties may perform for the interested_party c may transfer some of the shares of d common_stock that c owns or may grant options to purchase shares of d common_stock that c owns in addition in the future as compensation in whole or in part for services that employees and contractors of d may perform for d d may issue or transfer shares of its common_stock or may grant options to purchase shares of its common_stock all shares of d common_stock that subsequently may be issued to employees and contractors will be restricted further for fair value d may issue or sell additional shares of its common_stock to third parties including an interested_party in addition for fair value c may transfer or sell some of the shares of d common_stock that it owns to third parties including another interested_party in any event at all times the interested parties in the aggregate will own a majority of the outstanding common_stock of d since at all times the interested parties will directly and indirectly own a majority of the outstanding common_stock of d under sec_318 of the code the interested parties will control d within the meaning of sec_512 of the code therefore d is a controlled_entity with respect to each interested_party and each interested_party is a controlling_organization with respect to d within the meaning of sec_512 ruling_request no d’s activities include selling and sub-licensing licensed intellectual_property to third parties in return d will receive royalties therefore for purposes of sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party under sec_512 any royalties d receives from the sublicensing of licensed intellectual_property to third parties would be excluded from the computation of d’s unrelated_business_taxable_income ruling_request no an interested_party may lease real_property to d at fair_market_value rents subject_to the approval of the lessor-interested party d may sublease the real_property to third parties therefore for purposes of sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party under sec_512 any rents d receives from the subleasing to third parties of real_property leased to d by an interested_party would be excluded from the computation of d’s unrelated_business_taxable_income ruling_request no d has issued a shares of its voting common_stock all of which are outstanding as compensation_for services that employees and contractors provided to d d issued shares of its common_stock to these employees and contractors in the future as compensation in whole or in part for services that employees or contractors may perform for d d may issue or transfer shares of its common_stock or may grant options to purchase shares of its common_stock further for fair value d may issue or sell additional shares of its common_stock to third parties including another interested_party therefore for purposes of sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party under sec_512 if d issues or transfers shares of its common_stock or grants options to purchase shares of its common_stock to employees or contractors as compensation in whole or in part for services the employees and contractors perform for d or if for fair value d issues or sells additional shares of its common_stock to third parties including another interested_party any gain_or_loss that d may realize from these transactions would be excluded from unrelated_business_taxable_income ruling_request no in the future as compensation in whole or in part for services that employees or contractors may perform for an interested_party or interested parties the interested_party may transfer some of the shares of d common_stock that the interested_party owns or may grant options to purchase shares of d common_stock that the interested_party owns therefore if an interested_party transfers some of the shares of d common_stock that it owns or grants options to purchase shares of d common_stock that it owns to employees or contractors as compensation in whole or in part for services the employees and contractors perform for the interested_party under sec_512 of the code any gain_or_loss that the interested_party may realize from these transactions would be excluded from unrelated_business_taxable_income within the meaning of sec_511 through ruling_request no d’s activities include managing the commercial development of licensed intellectual_property for the benefit of an interested_party and providing various administrative and management services in connection with the licensed intellectual_property to or for the benefit of an interested_party therefore for purposes of sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party d’s managing the commercial development of licensed intellectual_property for the benefit of an interested_party and providing various administrative and management services in connection with the licensed intellectual_property to or for the benefit of an interested_party will contribute importantly to the accomplishment of an interested party’s exempt purposes therefore any income that d receives from these activities will not result in unrelated_business_taxable_income to d ruling_request no as compensation in whole or in part for services that employees or contractors may perform for an interested_party or interested parties the interested_party may transfer some of the shares of d common_stock that the interested_party owns or may grant options to purchase shares of d common_stock that the interested_party owns to such employees or contractors the payment of reasonable_compensation by an organization described in sec_501 of the code to its employees or contractors does not constitute prohibited inurement under sec_1_501_c_3_-1 of the regulations does not constitute impermissible private benefit under sec_1_501_c_3_-1 and will not adversely affect the organization’s private_foundation_status under sec_509 sec_509 or sec_509 of the code therefore if an interested_party transfers shares of d common_stock that the interested_party owns or grants options to purchase shares of d common_stock that the interested_party owns to employees or contactors as compensation in whole or in part for services that these employees or contractors perform for an interested_party or interested parties as long as the total compensation paid_by the interested parties to these employees or contractors is reasonable in relation to the total value of all services they perform for the interested parties such transactions would not result in prohibited inurement under sec_1_501_c_3_-1 of the regulations or impermissible private benefit under sec_1_501_c_3_-1 and would not adversely affect the interested party’s private_foundation_status under sec_509 or sec_509 of the code ruling_request no for purposes of sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party the same general rules in sec_511 through will also apply to d in computing d’s unrelated_business_taxable_income ruling_request no for purposes of sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party an activity of d that is substantially related within the meaning of sec_1_513-1 of the regulations to an exempt_purpose of an interested_party will not result in unrelated_business_taxable_income to d ruling sec_1 the current status of each interested_party as an organization described in sec_501 of the code and either sec_509 or sec_509 will not be adversely affected by the formation and capitalization of d when d is formed each of the interested parties will be a controlling_organization and d will be a controlled_entity within the meaning of sec_512 of the code under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party d’s receipt of royalties in connection with the sublicensing by d of licensed intellectual_property will not result in unrelated_business_taxable_income to d to the extent that sec_512 applies to such royalties under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party d’s receipt of rents in connection with the subleasing by d of real_property owned and leased by an interested_party to d will not result in unrelated_business_taxable_income to d to the extent that sec_512 applies to such rents under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party d’s issue transfer or sale of d’s common_stock or grant of options to purchase d’s common_stock will not result in unrelated_business_taxable_income to d to the extent that sec_512 applies to such sale or grant an interested party’s sale of d common_stock or grant of options to purchase d common_stock owned by the interested_party will not result in unrelated_business_taxable_income to the interested_party within the meaning of sec_511 through of the code to the extent that sec_512 applies to such sale or grant under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party d’s provision of business management and administrative services to or for the benefit of an interested_party regarding licensed intellectual_property will not result in unrelated_business_taxable_income to d the transfer by an interested_party of shares of d common_stock owned by the interested_party or grant of options to purchase d common_stock owned by the interested_party to an employee or a contractor as compensation_for services that the employee or contractor performs for an interested_party or interested parties will not adversely affect the interested party’s current status as an organization described in sec_501 sec_509 or sec_509 of the code provided that the total compensation paid to such employee or contractor for the services performed for the interested parties is reasonable in amount under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party the general rules in sec_511 through will apply under sec_512 of the code in computing d’s net_unrelated_income if any or the portion if any of d’s taxable_income that would be unrelated_business_taxable_income under sec_512 if d were exempt from tax under sec_501 and had the same exempt purposes as an interested_party an activity of d that is substantially related to an exempt_purpose of an interested_party will not result in unrelated_business_taxable_income to d this ruling letter is based on the understanding there will be no material changes in the facts upon which it is based this ruling letter does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described this ruling letter is directed only to the organization that requested it sec_6110 of the code provides it may not be used or cited by others as precedent this ruling letter will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely lawrence m brauer acting manager exempt_organizations technical group enclosure notice


department of the treasury employer_identification_number contact person - 1d number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date legend b name c name d location e name f name g name x dollars amount y number dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures will not be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 description of your request your letter indicates you will operate a scholarship program called c you engage in charitable activities by enhancing access to higher education specifically you will catalog number 58263t letter provide scholarships to worthy needy and ambitious students residing in the geographical area of d including professional schools and post graduate education to further their education at secondary schools and at universities grants funded by you will be administered supervised and paid out by b b is exempt from federal_income_tax under sec_501 of the internal_revenue_code and has been classified as a publicly_supported_organization you will make annual contributions to b to fund scholarships annually the amount of each award is generally at least x dollars and is dependent upon the amount available you are required to annually distribute needed to satisfy code sec_4942 b will promote c to schools in the d area using fliers and posters as well as by posting information about c on its website in addition applications and their instructions are available on b’s website the applications are sent directly to b to be eligible applicants must be a united_states citizen or legal resident a graduate of any private or charter school located in d or a graduate of a high school from e f or g unified school district in d and currently enrolled in undergraduate or graduate study at an accredited two or four year college university or vocational technical school for an entire academic year applicants must submit detailed biographical information including lists of activities awards work experience other scholarships and financial information from their individual and their parents form_1040 if the applicant is a dependent applicants must also provide transcripts and have a high school or college counselor or advisor an instructor or work supervisor complete an outside appraisal incomplete applications will not be considered b will evaluate the applicants and select recipients based on the academic record demonstrated leadership and participation in school and community activities unusual or family circumstances honors work experience and the outside appraisal need will be calculated by b and must be demonstrated to receive an award all awards are made on an objective and nondiscriminatory basis no scholarship will be awarded to any disqualified_person as defined in code sec_4946 in no instance does your trustee play a part in the selection financial awards are not renewable but students may reapply as long as they meet the renewal eligibility criteria to qualify they must maintain a grade point average of at least y continue to show financial need and continue to further their education at secondary schools at universities including professional schools_for post graduate education b will notify the recipients by early summer and will send a letter to each recipient's university college specifying the university college’s acceptance of funds constitutes their agreement to notify you if the recipient fails to meet any term or condition of the scholarship upon acceptance b will make payments in two installments directly to the recipient’s school for the recipient’s benefit recipients are required to notify b of any letter catalog number 58263t changes in address school enrollment or other relevant information and to send b a complete transcript when requested b will maintain books_and_records case histories of all recipients who receive grants or contributions from you the case histories include the names addresses of each recipient the purpose of the grant and amount of each grant to each recipient as well as the manner of selection of each recipient basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 a ii other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures do not differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you may report any significant changes to your program by completing form_8940 and sending it to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 b you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary letter catalog number 58263t we have sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely director of exempt_organizations letter catalog number 58263t