Grants to individuals must be made in accordance with procedures approved in advance by the Internal Revenue Service. To secure such approval, a private foundation must demonstrate in its request for advance approval that:
Its procedure awards grants on an objective and non-discriminatory basis;
The procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance; and
The foundation will supervise grants to determine whether grantees have fulfilled the grant terms.
No single procedure or set of procedures is required. Procedures may vary depending upon such factors as the size of the foundation, the amount and purpose of the grants, and number of recipients.
Approval is based on an evaluation of a foundation’s entire system of standards, procedures, and follow-up. Hence, separate approval for each grant program is not required. Once obtained, such approval applies to any subsequent grant program of the foundation if the procedures under which it is conducted do not differ materially from those described in the original request for approval.
DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.