Scholarships & Grants to Individuals

Sample Documents for Scholarship Funds

council-webteam — Thu, 04 Jul 2019 01:05:43 +0000

Sample Documents for Scholarship Funds council-webteam Wed, 07/03/2019 - 21:05

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

Scholarship Policies & Procedures

Scholarship Fund Agreement

Board Resolution for Scholarship Funds

Scholarship Award Letter

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.

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FAQ: Scholarships

council-webteam — Mon, 10 Nov 2014 17:12:03 +0000

FAQ: Scholarships council-webteam Mon, 11/10/2014 - 12:12

FAQ: Scholarships

What are the advantages, disadvantages, and likely costs of scholarship programs?
What do the private foundation rules require, and how should community foundations apply the rules?
What rules or procedures govern community foundation scholarship programs?
Does a community foundation need to notify the IRS before starting a scholarship program?
What are the community foundation's tax reporting requirements in connection with scholarship assistance? What are the tax consequences to the student who receives scholarship aid?
Can a community foundation make scholarship grants to individuals?
May a scholarship fund be established through a donor-advised fund?
What constitutes a charitable class in establishing a scholarship program?
To whom should the community foundation make out the scholarship check, the student, or the school?
May a community foundation give a scholarship to a student attending a for-profit school, such as a vocational school?
Are there sample documents for scholarship funds?
Can we increase the number or size of awards after recipients are selected?

What are the advantages, disadvantages, and likely costs of scholarship programs?

Scholarship programs focus on youth and education, two central concerns of most community foundations. Good publicity about these programs can help create community awareness of the foundation's existence and resources and can generate contributions from diverse segments of the population. Through convening scholarship granting committees, the community foundation can bring new volunteers into its activities. The drawback of scholarship programs is that they involve a good deal of administrative work on the community foundation's part. Publicizing the existence of the programs, collecting applications, coordinating the work of review committees, disbursing funds, and tracking recipients are among the tasks that are involved in running scholarships. Traditionally, community foundations have estimated that administrative costs run from five to twenty percent of the programs. If administrative costs are to be deducted from the particular scholarship fund to which they are attributable, donors should be made aware of such charges from the start. Similarly, if the community foundation opts to levy a fixed administrative fee on scholarship funds, the donor should be aware of the amount.

What do the private foundation rules require, and how should community foundations apply the rules?

In addition to the existence of a charitable class, the private foundation rules require that grants be made in a objective and non-discriminatory fashion. The selection criteria for a foundation's grants should be reasonably related to the purpose of the grant. Thus, for a scholarship grant, likely criteria on which a decision might be based include prior academic performance; test scores; recommendations from instructors; and conclusions regarding an applicant's motivation, character, and potential that are formed from an interview with them. Financial need is another legitimate consideration. Donors may also want to identify particular skills and achievements; scholar-athletes and musicians are frequently targeted for scholarship aid.

The private foundation rules further provide that people charged with selecting scholarship recipients must not be in a position to derive an economic benefit, directly or indirectly, from the scholarship process. In general, relatives of applicants should not serve on committees that will consider these requests for aid. However, there may be circumstances in which it is impossible to avoid a conflict (when a scholarship committee is required to include the principal of the local high school and she has a son who's a terrific candidate for the award). The community foundation should attempt to spot such conflicts in advance and adopt policies to resolve them (for example, allowing the principal to recuse herself from voting that year so that her child can be eligible).

Private foundations have a duty to monitor the spending of the grant and ensure that it was used for a charitable purpose. Community foundations would be wise to track their scholarship grants as well by, for example, requesting that a recipient to whom a check is made out forward a verified copy of his or her transcript. Grants that are not used for educational purposes should be refunded to the community foundation.

These rules are explained and their relevance to community foundations discussed in Grants to Individuals by Community Foundations (Nober, J. Council on Foundations, 2000).

What rules or procedures govern community foundation scholarship programs?

Like all community foundation grants, scholarship grants must be made for charitable purposes. Since furthering education is a charitable purpose, scholarships are almost by definition a charitable activity, so long as the persons benefited are members of a charitable class (see #4 below). Beyond these general principles, there are actually no specific IRS rules for how community foundations are to make scholarship grants to individuals. In the absence of such guidance, the Council recommends that community foundations look to the very exacting requirements imposed on private foundations. While community foundations need not follow these rules to the letter (although in the case of scholarship programs administered for corporate employees and their children, close attention is highly recommended), they provide a set of guidelines that the IRS has approved. If a community foundation's scholarship program substantially complies with the private foundation rules, the community foundation can be fairly certain that it is operating safely. The guidelines for a community foundation's scholarship program should be clear, consistent, and widely available.

Does a community foundation need to notify the IRS before starting a scholarship program?

Newly formed community foundations that plan to offer scholarships should disclose this proposed activity in their Application for Exemption on Form 1023. Established community foundations that decide to establish scholarship programs should inform the IRS of this new activity when they file their next tax return on Form 990. Unlike private foundations, community foundations need not secure advance approval of their procedures for making scholarship grants to individuals. When private foundations establish scholarship funds through community foundations, however, the advance approval requirement may apply.

What are the community foundation's tax reporting requirements in connection with scholarship assistance? What are the tax consequences to the student who receives scholarship aid?

Under current IRS practice, community foundations making grants for scholarships have no tax-reporting requirements except to the extent that such payments represent compensation for services provided by the recipient. To the extent that the scholarship grant pays for costs other than tuition; fees; or books, supplies and equipment required for study at a tax-exempt institution, a student may be liable for income taxes on the grant, but it is not the community foundation's responsibility to provide tax advice to its grantees. Indeed, because it will be hard to know each individual's circumstances fully, it would be irresponsible and unwise to offer such advice.

Can a community foundation make scholarship grants to individuals?

Generally, yes, but a community foundation wishing to embark on a scholarship program should first determine that its governing instruments authorize the community foundation to make grants to individuals for educational purposes. In some cases a governing instrument will specify that grants may be made only to "organizations," and the community foundation will have to weigh whether it wants to amend the documents to allow grants to individuals. If changing the documents is not desirable, the foundation may still make grants for scholarship purposes to educational institutions and give the institutions the discretion to select the individual scholarship recipients. No community foundation should embark on a scholarship program without consulting expert legal counsel.

May a scholarship fund be established through a donor-advised fund?

No. The Pension Protection Act of 2006 prohibits grants to individuals from a donor-advised fund.

What constitutes a charitable class in establishing a scholarship program?

In general, a charitable class is a group that is large enough so that an indefinite number of individuals may benefit. However, a charitable class may properly be comprised of a comparatively small number of beneficiaries, provided the class is open and the identities of the individuals to be benefited remain indefinite. "All the graduating seniors at a local high school" is a common and generally acceptable class. A class that includes members of a single family, on the other hand, is likely to be too small to qualify as charitable. Potential recipients may be limited to members of one sex or an economically disadvantaged group. Race-based limitations pose special questions and should certainly be discussed with expert counsel.

To whom should the community foundation make out the scholarship check, the student or the school?

Either one is fine, but making the check out to the school may be easier for monitoring purposes. If the community foundation makes the payment to an educational institution and requires that the institution use the funds to defray the student’s expenses only if they are enrolled and their status is consistent with the conditions of the grant, the community foundation essentially places much of the monitoring burden on the school.

May a community foundation give a scholarship to a student attending a for-profit school, such as a vocational school?

To the extent that such a grant is for a charitable purpose, there should be no bar to providing financial assistance to a student attending vocational school. Establishing a fund to assist students at particular for-profit institution may also raise problems that establishing a fund for students attending a particular state university would not.

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Scholarships

JasonLudwig — Thu, 25 Jan 2024 19:04:00 +0000

Scholarships JasonLudwig Thu, 01/25/2024 - 14:04

Scholarships

Part of Mastering Foundation Law

Providing scholarships to individuals is a popular method of charitable giving in the U.S. But following the U.S. Supreme Court's decision in Students for Fair Admissions v. Harvard and the ongoing Alliance for Equal Rights v. Fearless Fund case, charitable organizations that award scholarship grants to individuals, or that want to begin awarding such grants, have more questions about their programs than ever before.

Mastering Foundation Law: Scholarships discusses the legal and administrative issues that arise most frequently when a nonprofit, tax-exempt entity under Internal Revenue Code section 501(c)(3) – both public charities and private foundations – designs and implements a scholarship grant program to individuals. It dives deep into topics such as:

Recent events;
Strategic, administrative, and tax considerations for community foundations;
Strategic, administrative, and tax considerations for private foundations; and
Consequences of making improper scholarship grants.

A broad overview of those topics is available in our Mastering Foundation Law: Scholarships Brief, available for free to member and nonmember foundations alike, to serve as a starting point for all foundations in this still-changing landscape.

Accessing this Chapter

As a benefit of Council membership, members can download this chapter for free. Nonmembers of the Council can purchase this chapter of the Legal Compendium in our store for $149.

Members Download for Free

Nonmembers Purchase from Store

Download the Brief for Free

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How Community Foundations Can Support Individuals and Small Businesses During the Coronavirus Pandemic

council-webteam — Wed, 22 Apr 2020 18:40:22 +0000

How Community Foundations Can Support Individuals and Small Businesses During the Coronavirus Pandemic council-webteam Wed, 04/22/2020 - 14:40

How Community Foundations Can Support Individuals and Small Businesses During the Coronavirus Pandemic

During the pandemic, many of us expected the stock market would fare poorly, that there would be long lines at food pantries, and that public health systems would be overwhelmed. Many of us did not expect to see record levels of unemployment, widespread permanent closures of small businesses, or the looming crisis that is impacting many communities that were already in turmoil.

In this new reality, foundations can play a vital role in supporting both individuals and small businesses.

Getting Started

Begin with the Council’s Comprehensive Coronavirus Legislation Guide for the Charitable Sector, which includes informationon what resources the federal government intends to provide. The coming availability, or not, of public resources will influence and impact your plans.

With this information about public sector resources in mind, you can begin to establish philanthropic support that fills the gaps or bridges to public support. As you do so, be certain to engage in your community’s conversations about how public-private capital can work together.

Supporting Individuals

While individuals across the country await unemployment and stimulus payments, many are in desperate need. Community foundations have long played a role of channeling funds to individuals in need in the wake of disasters.

Grants to individuals during a crisis must be made in a fashion similar to match typical scholarship requirements: there must be a broad enough pool of recipients and the grants must be objectively made. Council on Foundations attorneys released guidance on grants to individuals to help you learn more and explore the limitations in supporting individuals, noting:

Foundations that have engaged in disaster or hardship related grantmaking to individuals in the past can likely redeploy the procedures established previously. For those making grants to individuals for the first time, the foundation may need to implement new procedures around evaluation and recordkeeping for such grants.

Supporting Small Businesses with Grants

From restaurants to dry cleaners, barbers to boutiques, small businesses are in dire straits in this crisis. Philanthropy is no stranger to supporting economic development, community revitalization, and entrepreneurship. This form of philanthropic activity matters now more than ever.

Here are some important considerations for you to keep in mind when you are supporting for-profit businesses.

Engage Local Expertise

From the outset and throughout your efforts, engage frequently, consistently, and deeply with your local Chamber of Commerce, Economic Development office, Small Business Administration office, and similar local government agencies. Their insights and knowledge of local small business activity and economic development efforts are a vital component of your strategy.

Review IRS Publication 3833

Start by reviewing IRS Publication 3833. This publication is the best guidance we have so far on how to provide charitable support for small businesses. While the publication was written to guide support for communities in crises created by natural disasters, the parameters and examples it contains offer a roadmap for how we can adapt in this new circumstance we face as a nation.

IRS Publication 3833 states that disaster assistance may be provided to businesses to achieve the following charitable purposes: to aid individual business owners who are financially in need or otherwise distressed, to combat community deterioration, and to lessen the burdens of government.

Using the publication as a guide, keep in mind the following:

Document the nature of the curtailed business operations that are causing “financial need or otherwise distressed” business owners
- For financial need: Focus on minority-held businesses, or those in minority or underserved/underinvested communities or neighborhoods
- For otherwise distressed: Focus on businesses that can easily document how their operations are reduced or lost due to the COVID-19 public health crisis
To “combat community deterioration,” follow the above criteria for areas likely to feel the impact sooner (i.e. underserved/underinvested communities)
Related to lessening “the burdens of government,” follow the criteria above and focus on gaps between COVID-related public support and actual needs

Make “Recoverable Grants”

A recoverable grant is one in which you can recover a portion or all of the grant in the future. Use this tool as much as you can when supporting for-profit businesses, with the option to not recover if the business can prove its usage for charitable purposes. Examples of such charitable purposes include:

Use of funds to pay rent, when the loss of income due to the COVID-19 pandemic is demonstrated
Support to a restaurant providing food delivery service to home-bound residents
Support to a business that is providing free storage space to a food bank

However, because of the unknown nature of this crisis, be prepared that you may not recover all the recoverable grants you make.

Sample Recoverable Grant Agreement

Utilize CDFIs

Community Development Financial Institutions (CDFIs) are banks, credit unions, loan funds, microloan funds, and venture capital providers that share a common goal of expanding economic opportunity in low-income communities. Whenever possible, community foundations should utilize CDFIs to make the actual decisions for who receives funding from the community foundation. The CDFI is a qualified grantee of the community foundation and can administer the selection and distribution of funds on behalf of the community foundation.

Document Carefully

Be sure to document and justify your actions in written and filed documentation to substantiate your work. If you wouldn’t report it and wouldn’t stand behind it with the IRS or local media, it is definitely not worth it. See an example of granting to small business guidelines created by the Community Foundation of Greater Des Moines.

Grantmaking Guidelines for Disaster Relief Assistance to Small Businesses

Charitable Alternatives to Providing Direct Cash for Small Businesses

Where possible, work with partners to assist small businesses in ways other than giving direct cash, such as through:

Assistance in securing SBA loans via the federal stimulus package
Pro bono legal services to aid in contract negotiations for debt collection, deferred rent, etc.
Technical assistance to adapt to doing online sales, social media marketing campaigns, etc.
Support for marketing campaigns that promote “local” businesses and available services still provided during the pandemic

Remember that Nonprofits are Also Businesses

Nonprofits—including community foundations—qualify for federal Small Business Administration assistance related to the COVID-19 crisis such as the Paycheck Protection Program. These links provide helpful information:

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Making Grants to Crowdfunding Campaigns During Disasters

council-webteam — Wed, 22 Apr 2020 15:44:37 +0000

Making Grants to Crowdfunding Campaigns During Disasters council-webteam Wed, 04/22/2020 - 11:44

Making Grants to Crowdfunding Campaigns During Disasters

You may wonder whether you can make grants to GoFundMe campaigns that are supporting localized efforts during disasters. Proceed cautiously: GoFundMe and many similar crowdfunding platforms are not registered 501(c)(3) public charities, and therefore you need to examine carefully if the campaigns hosted on these sites are charitable in nature.

How Can Foundations Make Grants to GoFundMe and Other Crowdfunding Platforms?

If the page and account was set up by a charitable organization to benefit that charitable organization, you can make a grant just like you would any grant to any other charity. In this case, the charity is using the platform as a method to accept contributions for themselves. For GoFundMe, such pages will have a green check mark and a note that all contributions are 100% tax-deductible.

On the other hand, if the campaign was set up by an individual, or a non-charitable entity, with the intention that the money raised would go first go to the individual/non-charity who would then disperse to other organizations, you would treat this as a grant to a non-charity. In this case, you would need to collect documentation to show how your grant served a charitable purpose. Such documentation could include checks and transmittal letters from the individual/non-charity to charitable organizations matching the amount of your grant, or documentation of an objective and nondiscriminatory program of making grants to individuals in need. However, if your grant came from a donor-advised fund, you would need to exercise full expenditure responsibility.

Tip for your nonprofit partners: Individual donors sometimes create fundraising campaigns for their organization and unwittingly make life difficult for the charity in question. We recommend that you help your nonprofit partners understand the need for campaigns to be set up in their name, not in the name of the individual supporter.

Note: There are some charitable crowdfunding platforms, such as GlobalGiving, where this issue is not relevant.

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Can Corporate Giving Benefit Company Employees? Let's Find Out

kelsey.gerber@cof.org — Wed, 24 Oct 2018 19:51:47 +0000

Can Corporate Giving Benefit Company Employees? Let's Find Out kelsey.gerber@… Wed, 10/24/2018 - 15:51

Can Corporate Giving Benefit Company Employees? Let's Find Out

Webinar Recording

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At the Council, we are often asked how corporations can fund scholarship programs for company employees and dependents. Similarly, corporations often want to assist employees in times of crisis, whether due to a natural disaster or a more personal tragedy. In both cases, the corporation must walk a fine line between charitable giving and taxable compensation and benefits. In this hour, the Council on Foundations Legal team member Ben McDearmon discusses how corporate foundations and corporate giving programs can structure charitable giving in ways that provides assistance to employees while staying in compliance with tax law. Giving through corporate foundations and the use of intermediaries such as community foundations will also be discussed.

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Legal Considerations for Corporate Foundations

suzanne.friday@cof.org — Fri, 16 Feb 2018 18:08:06 +0000

Legal Considerations for Corporate Foundations suzanne.friday… Fri, 02/16/2018 - 13:08

Legal Considerations for Corporate Foundations

A Chapter in Mastering Foundation Law:
The Council on Foundations Compendium of Legal Resources

Many businesses set up related charitable organizations for the purpose of engaging in philanthropic endeavors supported by the company. Because the funding for these charitable organizations is derived primarily from contributions from the business, these entities typically are unable to qualify as public charities and instead qualify as private foundations. This chapter explores the special issues faced by corporate foundations as a result of their close relationship with their founding business.

This chapter is divided into five parts. Specifically:

Merits of a Separate Corporate Foundation

Part One explains the value of a separate corporate foundation as compared to direct corporate giving.

Formation of a Corporate Foundation

Part Two reviews the foundation formation process, legal entity status and related issues.

Funding the Corporate Foundation

Part Three discusses options and models for funding a corporate foundation.

Grantmaking and Scholarships by Corporate Foundations

Part Four examines grant making and scholarships by corporate foundations and the legal issues associated with these activities.

Transactions with or Involving the For-Profit Business

Part Five discusses legal issues associated with transactions between the corporation and the foundation and how the self-dealing rules apply.

Accessing this Chapter

As a benefit of Council membership, members can download this chapter for free. Nonmembers of the Council can purchase this chapter of the Legal Compendium in our store for $149.

Members Download for Free

Nonmembers Purchase from Store

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Scholarships & Grants to Individuals

Self-Dealing

Starting & Ending Foundations

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Webinar Recording: Transforming Community Foundation Scholarship Programs from Administrative Burdens to Strategic Assets

gerbk@cof.org — Thu, 28 Sep 2017 14:15:45 +0000

Webinar Recording: Transforming Community Foundation Scholarship Programs from Administrative Burdens to Strategic Assets gerbk@cof.org Thu, 09/28/2017 - 10:15

Webinar Recording: Transforming Community Foundation Scholarship Programs from Administrative Burdens to Strategic Assets

Download the Presentation Slides

With the Stanislaus Community Foundation, National College Access Network (NCAN), and the Council on Foundations' Legal Team and Director of Community Philanthropy, this webinar explores key findings from a recent white paper published by NCAN on the topic of scholarships, discusses in-depth and resourceful approaches to scholarship programs and their administration, and much more. We focus on taking scholarship programs from administrative burdens to strategic assets.

Specifically, this webinar discusses:

Key Findings from the May 2017 white paper, The Surprising Way Community Foundations Can Transform Students' Lives and Delight Donors
Demonstrating measurable impact and attracting new donor dollars to transform scholarship programs as part of a strategic postsecondary attainment initiative
Legal considerations involved with program changes and existing scholarship funds, as well as policies going forward
Practical considerations to streamline your scholarship program, address admin fees and fund minimums, as well as committee practices and scholarship administration
Speakers
- Colette Hadley, Director of Consulting Services, National College Access Network
- Amanda Hughes, Vice President & Program Director, Stanislaus Community Foundation
- Bryan Del Rosario, Staff Counsel, Council on Foundations
- Brad Ward, Director of Community Philanthropy, Council on Foundations
Related Readings
- Scholarships FAQ by the Council on Foundations
- The Surprising Way Community Foundations Can Transform Students' Lives and Delight Donors by the National College Access Network

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Can My Foundation Fund Legal Aid for Individuals?

bryan.delrosario@cof.org — Fri, 26 Jun 2015 14:39:26 +0000

Can My Foundation Fund Legal Aid for Individuals? bryan.delrosar… Fri, 06/26/2015 - 10:39

Can My Foundation Fund Legal Aid for Individuals?

Legal aid provides assistance to people who would otherwise not be able to afford legal representation or access to the court system. While it is an integral part of the American justice system, especially to the most vulnerable in our society, many legal aid programs are unsustainable or have seen their budgets slashed dramatically.

It is uncontroverted that public charities, including community foundations, may fund legal aid programs. Such programs include those sponsored by local bar associations and nonprofit public-interest law firms. These organizations, themselves, are recognized by the IRS as public charities. As such, community foundations may grant to these organizations without the need to exercise due diligence as the foundation can assume monies granted will be used for charitable purposes. Furthermore, funding legal aid programs would likely be considered an activity that lessens the burdens of government.

But can foundations fund legal aid for individuals?

Legal Affairs has analyzed this and believes making a grant to an indigent individual for the purpose of funding his/her legal representation is a charitable purpose. This is especially true in the case of a criminal defendant who, under the Sixth Amendment to the U.S. Constitution, has the right to be represented by an attorney. In this regard, one can argue that funding legal aid for an individual, too, lessens the burden of government.

Similar to “Good Samaritan Fund” programs that many foundations have set up to help community members in need due to unexpected circumstances, the legal team believes foundations may set up funds to assist low-income individuals obtain access to justice. Therein, the Council’s legal team offer the following suggestions:

Ensure that all referrals come from an existing social service agency or other organization accustomed to reviewing individuals' needs. The community foundation should not be assessing income levels and spending requirements.
Ensure that checks can be processed and delivered quickly.
Ensure that no one raises money for the fund by promising that any particular individual or family will be receiving aid.
Consider establishing a rule that payments will only be made for legal services provided to recipients after submission of legal bills.

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Establishing a Scholarship Fund for Corporate Employees

council-webteam — Sat, 16 Nov 2013 20:44:09 +0000

Establishing a Scholarship Fund for Corporate Employees council-webteam Sat, 11/16/2013 - 15:44

Establishing a Scholarship Fund for Corporate Employees

Question: Our corporate foundation is planning to establish a scholarship fund for our employees' children. What do we need to keep in mind and what steps do we need to follow to ensure we are complying with the legal requirements?

Response: The granting of scholarships, fellowships, and internships has long been considered charitable because it promotes and advances education. While these grants are subject to the same rules as any grant to an individual, they must also meet an additional requirement: the procedure and criteria for making the grants must receive advanced IRS approval before grants can be awarded. So, what does the IRS look for?

Grantee pool: the pool of potential grantees must be broad enough to ensure the program's intent is charitable rather than to benefit a small group of individuals.
Selection criteria: the criteria must be related to the purpose of the grant. For example, if the purpose of the grant is to reward academic excellence, the criteria should focus on ability and aptitude; or, if the purpose is providing financial assistance, economic need should be part of the criteria.
Selection committee: those selecting the recipients may not be in a position to benefit personally from their choice, either directly or indirectly.

In addition to these general rules for all scholarships, there are some additional rules where the grantee pool is limited to employees and their children. These rules are designed to ensure that the scholarship program furthers charitable purposes and is not designed as an employee benefit or recruitment tool. First, in establishing the selection criteria, job performance, seniority or other employment-related criteria may not be used. Second, the selection committee must be totally independent and separate from the employer. Finally, the number of scholarships actually awarded may not exceed 10 percent of all eligible candidates or 25 percent of the number of candidates who actually applied.

Beyond the legal considerations, what are some common practices?

Generally, most corporations do not endow a special scholarship fund; rather, they make grants directly from the foundation or giving program. Some corporations use in-house staff to administer the program, but many use an outside intermediary organization to administer all or part of the program. However, you should know that using an intermediary does not free you from the rule covering employee-only scholarships, even if the intermediary independently selects the recipients.

Important issues to consider before you begin include eligibility and selection criteria, the award's duration, and provisions for renewal. Eligibility requirements typically include that the parent or guardian of the applicant be a full-time employee of the company for at least one year, although some companies allow the children of part-time employees to apply. Applicants are usually high school seniors who plan to attend a two- or four-year college or university. Common award criteria include academic performance, participation in school and community activities, future potential, and financial need. Award amounts commonly range from $500 to $5,000 per academic year, and some companies award up to $10,000.

Scholarships & Grants to Individuals

Sample Documents for Scholarship Funds

Sample Documents for Scholarship Funds

Sample Scholarship Fund Documents

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FAQ: Scholarships

FAQ: Scholarships

What are the advantages, disadvantages, and likely costs of scholarship programs?

What do the private foundation rules require, and how should community foundations apply the rules?

What rules or procedures govern community foundation scholarship programs?

Does a community foundation need to notify the IRS before starting a scholarship program?

What are the community foundation's tax reporting requirements in connection with scholarship assistance? What are the tax consequences to the student who receives scholarship aid?

Can a community foundation make scholarship grants to individuals?

May a scholarship fund be established through a donor-advised fund?

What constitutes a charitable class in establishing a scholarship program?

To whom should the community foundation make out the scholarship check, the student or the school?

May a community foundation give a scholarship to a student attending a for-profit school, such as a vocational school?

Questions?

Related Events

Related Resources

Scholarships

Scholarships

Part of Mastering Foundation Law

Accessing this Chapter

Questions?

Related Events

Related Resources

How Community Foundations Can Support Individuals and Small Businesses During the Coronavirus Pandemic

How Community Foundations Can Support Individuals and Small Businesses During the Coronavirus Pandemic

Getting Started

Supporting Individuals

Supporting Small Businesses with Grants

Engage Local Expertise

Review IRS Publication 3833

Make “Recoverable Grants”

Utilize CDFIs

Document Carefully

Charitable Alternatives to Providing Direct Cash for Small Businesses

Remember that Nonprofits are Also Businesses

Questions?

Related Events

Related Resources

Making Grants to Crowdfunding Campaigns During Disasters

Making Grants to Crowdfunding Campaigns During Disasters

How Can Foundations Make Grants to GoFundMe and Other Crowdfunding Platforms?

Questions?

Related Events

Related Resources

Can Corporate Giving Benefit Company Employees? Let's Find Out

Can Corporate Giving Benefit Company Employees? Let's Find Out

Webinar Recording

Questions?

Related Events

Related Resources

Legal Considerations for Corporate Foundations

Legal Considerations for Corporate Foundations

A Chapter in Mastering Foundation Law: The Council on Foundations Compendium of Legal Resources

Merits of a Separate Corporate Foundation

Formation of a Corporate Foundation

Funding the Corporate Foundation

Grantmaking and Scholarships by Corporate Foundations

Transactions with or Involving the For-Profit Business

Accessing this Chapter

Questions?

Related Events

Related Resources

Webinar Recording: Transforming Community Foundation Scholarship Programs from Administrative Burdens to Strategic Assets

Webinar Recording: Transforming Community Foundation Scholarship Programs from Administrative Burdens to Strategic Assets

Speakers

Related Readings

Questions?

Related Events

Related Resources

Can My Foundation Fund Legal Aid for Individuals?

Can My Foundation Fund Legal Aid for Individuals?

Questions?

Related Events

Related Resources

A Chapter in Mastering Foundation Law:
The Council on Foundations Compendium of Legal Resources