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Can 501c3 Offer Scholarships To Thier Programs?

Defamation Law Discussion Forum

Can 501c3 Offer Scholarships To Thier Programs?

Postby aswynn81 » Thu Dec 01, 2016 9:07 am

A local Austin-based 501c3 runs a self-help/growth program. Its reach is national and statewide. People who cannot afford to pay the program costs are offered a scholarship. The scholarship is comprised of alumni donations and private fundraising. Is if ok to call them scholarships? Are there any restrictions to the scholarship? I.E. Donors cannot request the money for scholarships is awarded to a certain demographic?
aswynn81
 
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Joined: Fri Apr 01, 2011 7:18 pm

Can 501c3 Offer Scholarships To Thier Programs?

Postby Peppino » Sat Dec 03, 2016 9:30 am

I have in my profile that this free forum is only for general questions relating to IRS federal exemption issues of 501(c)(3) organizations. I know of no IRS regulation that precludes calling such grants "scholarships".  In fact, if the organization gives grants for educational

purposes, it would need to complete Schedule H of form 1023 and submit to the IRS. You can see that in the first column of page 23 of IRS

Instructions to Application for Exemption

www.irs.gov/pub/irs-pdf/i1023.pdf

---Start of Excerpt--

Generally, distributions made to

individuals may advance educational

purposes if selection is made:

• In a non-discriminatory fashion in terms

of racial preference,

• Based on need and/or merit, and

• To a charitable class in terms of being

available to an open-ended group, rather

than to pre-selected individuals.

A scholarship or fellowship is tax free

to the recipient only if he or she is:

• A candidate for a degree at an eligible

educational institution; and

• Uses the scholarship or fellowship to

pay qualified education expenses.

---End of Excerpt--

Donors may request that the organization make grants to certain demographics, but the organization is not required to comply with such a request, otherwise, the donation may not be deductible, for example, if the group of potential recipients is too small a group. See the IRS Memo "Donor Control" at

www.irs.gov/pub/irs-utl/topico.pdf starting on the third pdf page where the IRS gives a listing of

the factors it would look at to determine whether an organization

that has substantial donor control would be able to obtain and

maintain a 501(c)(3) organization status(and, therefore, allow

the donors to deduct their donations from their taxable income on

their federal tax returns).

Thank you for asking.

Harvey Mechanic, Attorney at Law - [email protected]
Peppino
 
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Joined: Sun Mar 02, 2014 3:40 am

Can 501c3 Offer Scholarships To Thier Programs?

Postby Beaton » Mon Dec 05, 2016 8:27 am

A local Austin-based 501c3 runs a self-help/growth program. Its reach is national and statewide. People who cannot afford to pay the program costs are offered a scholarship. The scholarship is comprised of alumni donations and private fundraising. Is if ok to call them scholarships? Are there any restrictions to the scholarship? I.E. Donors cannot request the money for scholarships is awarded to a certain demographic?
Beaton
 
Posts: 40
Joined: Wed Jan 01, 2014 1:04 am


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