Sample Documents for Scholarship Funds
Community foundations that award scholarships and other grants to individuals from funds with donor involvement should be sure these funds comply with the requirements of the Pension Protection Act of 2006.
The PPA prohibits grants to individuals from funds that meet the fairly broad definition of donor-advised funds. For this reason, all funds that will be making grants to individuals must be sure not to fall within the definition of donor-advised funds, even inadvertently. Under Section 4966 of the Tax Code, a fund will not be considered a donor-advised fund if all of the following are true:
- The sponsoring organization (the community foundation) appoints all of the members of the scholarship committee and the donor's advice is given solely as a member of the committee.
- Neither the donor nor the parties related to the donor control the scholarship committee directly or indirectly.
- All grants are awarded on an objective and nondiscriminatory basis using a procedure that has been approved in advance by the board of directors of the sponsoring organization and that has been designed to ensure that all such grants meet the requirements of paragraphs (1), (2), or (3) of section 4945(g) of the Tax Code.
The following are all of the Council’s sample scholarship procedures designed to help foundations meet the third prong of the above test as well as properly conveying information to grantees.
Sample Scholarship Fund Documents
These sample documents are being provided for informational purposes only as part of your participation in the Community Foundations National Standards program and are not to be shared without the permission of the Council on Foundations. Use of the sample document does not create an attorney-client relationship, and the information provided is not a substitute for expert legal, tax, or other professional advice tailored to your specific circumstances. The information may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.