internal_revenue_service number release date index number ------------------- ------------------------------------------------------------ ------------------ -------------------------------------------------- ------------------------------------------ ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc corp plr-129760-08 date date legend successor-in- interest ------------------------------------------------------------------------ ----------------------------------------------------------- --------------------------------------------------- target ------------------------------------------------------------------- ----------------------------------------------------------- -------------------- ------------------------------- foreign subs ---------------------------------------------------------------------------- ------------------ ------------------------------------------------------------------- ---------------------------------------------------------------- --------------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------- -------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------------- -------------------------------------------------------------------------- ---------------------------------------------------------------------- plr-129760-08 ------------------------------------------------------------------ ----------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------- ----------------------------------------------------------------------------- -------------------------------------------------------------------- ----------------------------------------------------------------------------------------- --------------------------------------------------------------------- ---------------------------------------------------------------------------- -------------------------------------------------------------------- ---------------------------------------------------------------- -------------------------------------------------------------- date date --------------------------- --------------------------- company official ------------------------------------------------------------------------------------------------------------------ ----------------------------------------------------------------------------------------- -------------------- dear ------------- this letter responds to a letter dated date submitted by successor-in- interest on behalf of target and a number of its foreign subsidiaries the foreign subs requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election additional information was submitted in a letter dated date the extension is being requested in order to allow target and foreign subs to file an election to restore value under sec_1_382-8 of the income_tax regulations the election the election was required to be filed with target’s consolidated federal_income_tax return for the taxable_year ended date citations in this letter to regulations under sec_382 are to regulations in effect for the taxable_year ended date the material information submitted for consideration is summarized below target was the common parent of a consolidated_group target and foreign subs were component members of a controlled_group under sec_1_382-8 foreign subs were all controlled_foreign_corporations as defined in sec_957 of the internal revenue plr-129760-08 code the code were not engaged in the conduct_of_a_trade_or_business in the united_states and did not file a united_states federal_income_tax return target underwent an ownership_change on date as a result target's value was reduced under sec_1_382-8 by the value of the stock of foreign subs sec_382 of the code provides that the amount of the taxable_income of any new_loss_corporation for any post-change_year which may be offset by pre-change losses shall not exceed the sec_382 limitation for such year under sec_382 the sec_382 limitation is determined by multiplying the value of the old_loss_corporation by the applicable long term tax-exempt rate a special rule designed to prevent double counting by controlled groups is set forth in sec_1_382-8 sec_1_382-8 requires the value of the stock of each component_member of the controlled_group be reduced by the value of the stock owned by that component_member in any other component_member for purposes of applying sec_1_382-8 a consolidated_group loss group or loss subgroup is treated as a single corporation under sec_1_382-8 component members of a controlled_group can elect under sec_1_382-8 to restore some or all of the value to the member whose value is reduced under sec_1_382-8 the election to restore value is made following the procedures set forth in sec_1_382-8 the election was required to be filed with target's income_tax return for its tax_year ended date however for various reasons target and foreign subs failed to make the election in a timely manner under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_382-8 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for target and foreign subs to file the election provided target and foreign subs show they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government plr-129760-08 information affidavits and representations submitted by successor-in-interest and company official explain the circumstances that resulted in the failure to timely file the election the information establishes that target reasonably relied on a qualified_tax professional who failed to make or advise target to make the election see sec_301_9100-3 based on the facts and information submitted including the affidavits submitted and the representations that have been made we conclude that target and foreign subs acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter for successor-in-interest on behalf of target and foreign subs to file the election the election is to be filed with the director who has jurisdiction over target's returns a copy of this letter should be attached to the election the above extension of time is conditioned on the taxpayers’ target’s and the members of its controlled_group tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liability for the years involved a determination thereof will be made by the director's office upon audit of the federal_income_tax returns involved in addition no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers' liability is lower sec_301_9100-3 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular we express no opinion with respect to whether an ownership_change occurred whether target and foreign subs are component members of a controlled_group or the amount of value if any that may be restored further we express no opinion as to the tax effects or consequences of filing the return or the election late under the provisions of any other section of the code or regulations or as to the tax treatment of any conditions existing at the time of or effects resulting from filing the return or the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by successor-in-interest and company official under penalties of perjury however the director should verify all essential facts moreover notwithstanding that an extension is granted under sec_301_9100-3 to file the election any penalties and interest that would otherwise be applicable still apply plr-129760-08 this letter_ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely _______________________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service number release date index number ----------------------------- --------------- ---------------------------------------- ------------------- ----------------------------------- department of the treasury washington dc person to contact ---------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-141089-06 date date ------------------------------------------ ------------------------------------------- x ----------------------- ---------------- y ------------------------------ ------------ state --------------- state state ------ ---------- state -------------------------- date ---------------------- date date --------------------------- --------------- w x --------------- dear ----------------- authorized representative requesting a ruling that x's rental income from twenty-six properties in state state state and state the properties is not passive_investment_income within the meaning of sec_1362 intends to elect to be treated as an s_corporation effective date through independent contractors provides various services to the tenants of the properties services provided by x include but are not limited to the following site inspections maintenance and repairs relating to tenant space improvements roofing hvac plumbing sprinkler electricity and lighting systems and also general janitorial security and landscaping services in addition to services provided to tenants x the information submitted states that x was incorporated in state on date x this responds to a letter dated date submitted on behalf of x by x's the information submitted states that x either directly through its affiliate y or sec_1362 provides that an election under sec_1362 shall be sec_1362 provides that an election under sec_1362 shall be sec_1361 defines an s_corporation as a small_business_corporation for plr-141089-06 directly through y and through independent contractors handles the leasing and administrative functions involved with the properties including the payment of taxes and insurance premiums the billing of tenants and collecting of rents and the negotiation of leases in the taxable_year ending date x received or accrued a total of approximately dollar_figurew in rents with respect to the properties and paid_or_incurred a total of approximately dollar_figurex in relevant expenses other than depreciation which an election under sec_1362 is in effect for the taxable_year terminated whenever at any time after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation terminated whenever the corporation has accumulated_earnings_and_profits at the close of each of consecutive taxable years and has gross_receipts for each of such taxable years more than percent of which are passive_investment_income any termination under this paragraph shall be effective on and after the first day of the first taxable_year beginning after the third consecutive taxable_year referred to above passive_investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities rents does not include rents derived in the active trade_or_business of renting property rents received by a corporation are derived in an active trade_or_business of renting property only if based on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based upon all the facts and circumstances including but not limited to the number of persons employed to provide the services and the types and amounts of costs and expenses_incurred other than depreciation based solely on the facts and the representations submitted we conclude that the rental income that x derives from the properties is not passive_investment_income as described in sec_1362 sec_1362 provides that except as otherwise provided the term sec_1_1362-2 of the income_tax regulations provides that except as specifically set forth above we express no opinion as to the federal tax plr-141089-06 consequences of the transaction described above under any other provision of the code specifically we express no opinion on whether x is a small_business_corporation eligible to make an s election further the passive_investment_income rules of sec_1362 are completely independent of the passive_activity rules of section sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 code provides that it may not be used or cited as precedent being sent to x's first and second authorized representatives this ruling is directed only to the taxpayer requesting it sec_6110 of the pursuant to the power_of_attorney on file with this office a copy of this letter is sincerely enclosures copy of this letter copy for sec_6110 purposes j thomas hines chief branch associate chief_counsel passthroughs special industries


t c memo united_states tax_court c merritt and dorothy pumphrey petitioners v commissioner of internal revenue respondent docket no filed date jay fred cohen for petitioners alan r peregoy for respondent memorandum findings_of_fact and opinion dawson judge this case was assigned to special_trial_judge robert n armen jr pursuant to the provisions of sec_7443a of the internal_revenue_code_of_1986 as amended and rule sec_180 sec_181 and sec_183 the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge armen special_trial_judge respondent determined a deficiency in petitioners' federal_income_tax for the taxable_year in the amount of dollar_figure respondent also determined that petitioners are liable for an excise_tax under sec_4980a for the taxable_year in the amount of dollar_figure the only issue for decision is whether the transfer refund distribution received by petitioner c merritt pumphrey in from the maryland state employees' retirement_system qualifies for forward averaging under sec_402 the resolution of this issue turns on whether the transfer refund distribution constitutes a lump sum distribution within the meaning of sec_402 irrespective of how we decide the issue in dispute petitioner c merritt pumphrey concedes that he is liable for the excise_tax under sec_4980a in contrast respondent concedes that petitioner dorothy pumphrey is not liable by virtue of unless otherwise indicated all section references are to the internal_revenue_code in effect for the taxable_year in issue and all rule references are to the tax_court rules_of_practice and procedure sec_4980a imposes a 15-percent excise_tax on excess distributions from qualified_retirement_plans this tax is included within ch of the i r c it is therefore subject_to the deficiency procedures set forth in subch b of ch of the i r c see sec_6211 having filed a joint income_tax return for such tax respondent also concedes that if we decide the issue in dispute in petitioners' favor then the transfer refund distribution qualifies for forward averaging under the more favorable 10-year method rather than the less favorable 5-year method utilized by petitioners on their income_tax return for findings_of_fact some of the facts have been stipulated and they are so found petitioners resided in ellicott city maryland at the time their petition was filed with the court petitioner c merritt pumphrey petitioner was the clerk of the circuit_court for howard county maryland he was originally appointed in to complete the term of the former clerk and was thereafter elected to the position petitioner held office until when he was defeated in the general election on date petitioner remained in office until date at which time his successor took the oath and assumed the duties of the office as the clerk of a circuit_court petitioner was a member of the employees' retirement_system of the state of maryland the retirement_system until he elected to transfer to the employees' pension system of the state of maryland the pension system petitioner elected to transfer from the retirement_system to the pension system on date the day after he lost the date general election petitioner's election to transfer from the retirement_system to the pension system was effective retroactively to the first of that month ie to date the retirement_system is a qualified defined_benefit_plan under sec_401 the retirement_system requires mandatory nondeductible employee contributions the pension system is also a qualified defined_benefit_plan under sec_401 but generally does not require mandatory nondeductible employee contributions the state of maryland contributes to both the retirement_system and the pension system on behalf of the members of those systems the trusts maintained as part of the retirement_system and the pension system are both exempt from taxation under sec_501 in petitioner received a transfer refund distribution the transfer refund in the amount of dollar_figure on account of his election to transfer from the retirement_system to the pension system the dollar_figure transfer refund consisted of dollar_figure in previously taxed contributions made by petitioner and dollar_figure of earnings the earnings represented interest computed based on an annually compounded rate of approximately for a discussion of the retirement_system and the pension system see generally hylton v commissioner tcmemo_1995_27 hoppe v commissioner tcmemo_1994_635 hamilton v commissioner tcmemo_1994_633 594_fsupp_1353 d md so stipulated percent and constitute the taxable_portion of the transfer refund petitioner did not roll over the transfer refund into either an individual_retirement_account or an individual_retirement_annuity when petitioner transferred from the retirement_system to the pension system he had attained the age of if petitioner had not transferred to the pension system but had remained a member of the retirement_system he would have been entitled to retire and receive a normal service retirement benefit including a regular monthly annuity he would not have been entitled to receive a transfer refund because a transfer refund is payable only as a consequence of transferring from the retirement_system to the pension system also as a consequence of transferring from the retirement_system to the pension system petitioner became and presently is a member of the pension system as a member of the pension system petitioner is entitled to receive a retirement benefit based upon his salary and his creditable years_of_service specifically including those years of creditable service recognized under the retirement_system however because petitioner received the transfer refund on account of petitioner became a member of the retirement_system in and therefore had been a member of the retirement_system for some years at the time of his election to transfer to the pension system transferring from the retirement_system to the pension system petitioner's monthly annuity is less than the monthly annuity that he would have received if he had not transferred to the pension system but had retired under the retirement_system petitioner received a form w-2p from the maryland state retirement agency for the form w-2p reported the distribution of the transfer refund in the amount of dollar_figure the form also reported that the taxable_portion of the transfer refund was dollar_figure on their income_tax return for petitioners reported as income the taxable_portion of the transfer refund as set forth on the form w-2p and elected 5-year forward averaging under sec_402 in this regard petitioners attached form_4972 tax on lump-sum_distributions to their income_tax return and reported on said form ordinary_income in the amount of dollar_figure ie the taxable_portion of the transfer refund as set forth on the form w-2p petitioners then computed the tax on petitioner estimated that his monthly annuity under the pension system is approximately one-half of what it would have been if he had retired under the retirement_system however as previously indicated petitioner would not have received the transfer refund if he had retired under the retirement_system the inducement to accept a less generous monthly annuity under the pension system was the transfer refund the discrepancy between the taxable_portion of the transfer refund as reported on the form w-2p ie dollar_figure and the taxable_portion of the transfer refund as stipulated by the parties ie dollar_figure is unexplained in the record we will give effect to the parties' stipulation said amount and included such tax as part of their total income_tax_liability on page of their form_1040 in the notice_of_deficiency respondent determined that petitioners did not qualify for 5-year forward averaging accordingly respondent treated the transfer refund in the amount of dollar_figure as subject_to the regular income_tax respondent contends that the transfer refund does not qualify for forward averaging because it does not constitute a lump sum distribution within the meaning of sec_402 opinion as a general_rule a distribution from a qualified_plan such as the retirement_system is taxed to the recipient in the year distributed under the rules relating to annuities sec_402 see sec_72 however sec_402 provides for a preferential forward averaging method of computing the tax on certain such distributions the parties agree that petitioners are entitled to this preferential method of computing the tax on the transfer refund if the transfer refund constitutes a lump sum distribution within the meaning of sec_402 the tax_reform_act_of_1986 replaced the 10-year forward averaging method with a 5-year forward averaging method for lump sum amounts distributed after date in taxable years ending after such date tax_reform_act_of_1986 publaw_99_514 sec a h 100_stat_2085 however the tax_reform_act_of_1986 secs h and provide transitional rules under which lump sum distributions made after date will nevertheless continue to qualify under certain limited circumstances for the more generous 10-year continued a lump sum distribution for purposes of sec_402 is defined in sec_402 as follows a lump sum distribution --for purposes of this section the term lump sum distribution means the distribution or payment within one taxable_year of the recipient of the balance_to_the_credit of an employee which becomes payable to the recipient-- i on account of the employee's death ii after the employee attains age iii on account of the employee's separation from the service or iv after the employee has become disabled from a_trust which forms a part of a plan described in sec_401 and which is exempt from tax under sec_501 for purposes of this subsection the balance_to_the_credit of the employee does not include the accumulated_deductible_employee_contributions under the plan within the meaning of sec_72 emphasis added there is no dispute that the distribution in issue was received by petitioner after he attained the age of nor is there any dispute that the retirement_system is a plan described in sec_401 and that the trust forming a part thereof is exempt from tax under sec_501 moreover there is no dispute that the transfer refund distribution was made within a single taxable_year therefore the only issue in dispute is whether petitioner received the balance_to_the_credit when he received the transfer refund continued forward averaging method id 100_stat_2085 because of his age petitioner falls within the scope of the transitional rules provided of course that the transfer refund qualifies as a lump sum distribution see pages supra describing respondent's concession in this regard in support of her determination that petitioner did not receive the balance_to_the_credit when he transferred from the retirement_system to the pension system respondent relies on the fact that petitioner's years of creditable service under the retirement_system carried over to the pension system see md ann code art 73b sec_115 and that those years_of_service increased the monthly annuity benefit to which petitioner is entitled by contrast petitioners contend that petitioner received the entire account balance from the retirement_system when he received the transfer refund therefore petitioners conclude that the balance_to_the_credit requirement of sec_402 is satisfied we begin our analysis with sec_402 that section provides in relevant part as follows c aggregation of certain trusts and plans --for purposes of determining the balance_to_the_credit of an employee under subparagraph a -- i all trusts which are part of a plan shall be treated as a single trust all pension plans maintained by the employer shall be treated as a single_plan emphasis added respondent appears to concede implicitly that the transfer refund included all of petitioner's contributions and the earnings thereon cf wheeler v commissioner tcmemo_1993_561 a member of the retirement_system did not receive the balance_to_the_credit upon receiving a transfer refund a portion of the member's contributions was transferred from the retirement_system to the pension system during the years in issue the state of maryland maintained both the retirement_system in which petitioner participated and the pension system to which petitioner transferred effective as of date accordingly in order to decide whether petitioner received the balance_to_the_credit we must treat the retirement_system and the pension system as a single pension_plan sec_402 under maryland law petitioner's annuity under the pension system is calculated by taking into account petitioner's average final compensation and petitioner's years of creditable service md ann code art 73b sec_117 because sec_402 requires that we treat the retirement_system and the pension system as a single pension_plan we conclude that by transferring from the retirement_system to the pension system petitioner did not forfeit his right to a future monthly annuity but simply elected to receive an initial single payment to be followed by a reduced monthly annuity effectively petitioner's transfer allowed him to receive the balance_to_the_credit in two parts an initial single payment to be followed by a reduced monthly annuity based on all of his years of creditable service and on his salary during those years see green v commissioner tcmemo_1994_340 the testimony of petitioner at trial reflects the foregoing thus q now mr pumphrey you did ultimately retire and i believe your testimony has been that you retired from the pension system is that correct a well it has to be correct yes sir because i had no other choice q and you are currently receiving an annuity from that pension system a yes sir q do you understand based on what that annuity is calculated a yes sir my years_of_service and the tie-ins the salary q and do those years_of_service include the years_of_service that you earned under the retirement_system a yes sir absolutely q so that when you received your pension annuity pursuant to the plan provisions your annuity is calculated on all the years_of_service under both the retirement_system and the pension system correct a right absolutely later during the trial in a colloquy with the court petitioner testified as follows the court now the pension that you actually received and presumably are continuing to receive to this day was based on your entire employment tenure as the clerk of court of howard county i mean going all the way back to and through your retirement the witness i certainly assume so petitioners also argue that their case is different than all of the reported cases because it deals with an elected official that was separated from employment because of the loss of an election and not as a result of any voluntary separation the distinction that petitioners draw however represents a distinction without a difference because the fact that petitioners rely on so heavily is simply not relevant to the controlling law ie the aggregation provisions of sec_402 in view of the foregoing we hold that the transfer refund did not constitute a lump-sum_distribution within the meaning of sec_402 because petitioner did not receive the balance_to_the_credit when he transferred from the retirement_system to the pension system accordingly the transfer refund received by petitioner does not qualify for forward averaging under sec_402 see hamilton v commissioner tcmemo_1994_633 addressing whether a taxpayer had received the balance_to_the_credit in the context of whether the taxpayer was entitled to compute tax on a transfer refund using the year forward averaging method set forth in sec_402 hoppe v commissioner tcmemo_1994_635 same see also dorsey v commissioner tcmemo_1995_97 addressing whether a taxpayer had received the balance_to_the_credit in the context of whether a transfer refund distribution qualified for tax-free_rollover treatment under sec_402 brown v commissioner tcmemo_1995_93 same cf supra with tcmemo_1993_561 in closing we note that in a case decided earlier this year the united_states district_court for the district of maryland reached the same conclusion in respect of the lump sum distribution issue that this court has reached sites v united_states aftr 2d ustc par big_number d md the final paragraph of the district court's analysis deserves to be quoted as follows the court believes that the statutory analysis and reasoning of hoppe v commissioner t c memo is sound because the retirement_system and pension system were both maintained by taxpayer's employer the state of maryland they are to be aggregated for purposes of determining the balance_to_the_credit of an employee under sec_402 whereas taxpayer received a refund of his contributions and the accumulated interest his service credits were transferred to and remained within the pension system by choosing to transfer to the pension system taxpayer opted to receive a refund of his contributions and accumulated interest along with reduced annuity payments in the future thus in effect taxpayer elected to receive the balance_to_the_credit of his account in two-parts the refund payment and the future annuity payments consequently he did not receive the balance_to_the_credit of his account on the transfer refund date id aftr 2d pincite7 ustc par big_number at big_number in order to give effect to our disposition of the disputed issue the parties' concessions and the parties' stipulation referenced in supra note sec_4 and it would appear that such stipulation would also affect the amount of the excise_tax under sec_4980a we leave this matter to the parties as part of the rule computation decision will be entered pursuant to rule


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh number release date date date legend x school y school z dollars amount 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 won't 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 an educational program to make grants to assist students from x to attend y or the college or university of their choosing although preference will be given to those attending y the grants will cover the cost of tuition room and board fees and other traditional education costs and not fund research or other projects in general you intend to make up to four grants annually of up to approximately z dollars each however the number of grants and the amount of each grant may vary from year to year depending on the number of qualified applicants letter catalog number 58263t you will disseminate information about your program to teachers counselors administrators and other representatives of x in addition you plan to solicit applicants through your personal contacts and letters to possible candidates _ to be eligible for your program an applicant must be a graduating senior attending x with a target gpa or higher who has been accepted to a college or university relatives of members of the selection committee your officers directors or substantial contributors are not eligible for your program eligible applicants must submit an application by a specific date to x’s counseling office with supporting documents including transcripts letters of reference community service documentation college acceptance letters scholarships from other sources and other information that you deem necessary in the selection process applicants must also prepare a statement on why they should be awarded the scholarship in addition you may require applicants to demonstrate financial need your selection committee which will consist of one or more of your directors and may also include persons not affiliated with you who are knowledgeable in the field of education will make the final selection of the recipients to narrow the field to a smalier number of applicants you may appoint members of the x staff to conduct a preliminary screening to select the best qualified applicants these selected applicants may then be asked to meet with one or more selection committee members in person or by telephone as part of the evaluation process your selection committee will base the final selection of the recipients on factors including prior academic performance performance on standardized tests recommendations from instructors or other individuals not related to the potential recipients financial need and conclusions drawn from the applicant's application package and personal interviews as to motivation and character in addition your selection committee will give preference to applicants planning to attend y and will have flexibility to authorize grants to applicants whose gpa is below you will send the recipients an award letter to specify the terms and conditions for each grant the recipients must sign and return a copy of that letter to you indicating their acceptance of the terms of the grant examples of terms and conditions specified in the letter will include the specific purpose of the grant its duration the total amount of the grant the payment schedule for the grant and if applicable_requirements for reports including due dates for the reports grants are renewable up to four academic years as long as the recipient maintains a minimum gpa of or higher in rare cases you will have the flexibility to renew grants for recipients whose gpa falls below in all instances you will pay the scholarship directly to the educational_institution who must agree to use the grant funds to defray the recipient’s expenses or to pay the funds to the recipient only if the recipient is enrolled at such educational_institution and their letter catalog number 58263t standing at such educational_institution is consistent with the purposes and conditions of the grant you will rely on the educational_institution to provide you a semi-annual confirmation report to assure you that the requirements of the grant are being met and if not to advise you of the recipient's failure to meet the requirements the reports will also show the recipient’s courses taken and grades received if any in each academic period because you are using the procedures for the supervision of grants described in sec_53_4945-4 you have not made any provisions for the investigation of jeopardized grants you represent that you will maintain the following all records relating to individual grants including information to evaluate grantees identify whether a grantee is a disqualified_person establish the amount and purpose of each grant and establish that you undertook the supervision and investigation of grants described above 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 e e 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 other conditions that apply to this determination e e e this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't 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 must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh letter catalog number 58263t e eo e 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 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've 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 stephen a martin director exempt_organizations rulings and agreements letter catalog number 58263t