Schedule H. Scholarships, Fellowships, Educational Loans & Grants
Schedule H of the form 1023 is for organizations that provide scholarships, educational loans and educational grants. Complete this schedule if you provide scholarships, fellowships, grants, loans, or other distributions to individuals for educational purposes.
When answering the questions on this schedule, you should demonstrate how these distributions further your exempt purposes.
If you’re a private foundation, you’re subject to the rules under section 4945 and may incur an excise tax if you make grants for the purpose described above without seeking advance approval of your grant-making procedures (see Schedule H–Section II).
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.
Qualified education expenses include tuition and fees; and course-related expenses such as books, supplies, and equipment. Room and board, travel, research, clerical help, and non-required equipment aren’t qualified education expenses. See Pub. 970, Tax Benefits for Education, for additional information.
Selection of individuals using a lottery system generally hasn’t been approved by the IRS.
Form 1023 Schedule H Section I
Form 1023 Schedule H Line 1.
If you conduct more than one grant program, describe each program separately.
If you make educational loans, describe the terms of the loan (for example, the factors you consider in selecting or approving loan recipients, interest rate, duration, forgiveness provision, etc.). Also, describe whether any financial institutions or other lenders are involved in your program.
Explain how you will publicize your program and whether you publicize to the general public or to another group of possible recipients. Include specific information about the geographic area in which your program will be publicized and the means you will use, such as through newspaper advertisements, school district announcements, or community groups.
Form 1023 Schedule H Line 2.
Organizations that make grants to individuals must maintain adequate records and case histories showing the name and address of each recipient, pursuant Rev. Rul. 56-304, 1956-2 C.B. 306 but don’t provide this information as part of your application.
Form 1023 Schedule H Section II
If you requested public charity classification in Part VII, line 1, don’t complete Schedule H – Section II.
Form 1023 Schedule H Line 1.
Answer “Yes,” if you’re a
- Private Foundation and you’re requesting advance approval of your grant-making procedures under section 4945(g).
- Answer “No,” if you’re a private foundation but don’t wish to request advance approval of your grant-making procedures under section 4945(g).
If you answer “No” the amounts you distribute as educational grants provided to individuals may be considered taxable expenditures under section 4945.
Form 1023 Schedule H Line 1a.
Check the box for section “4945(g)(1)” if your award qualifies as a scholarship or fellowship grant that’s awarded on an objective and nondiscriminatory basis and is used for study at a school (see Schedule B for what is considered a school).
Check the box for “4945(g)(3)” if the purpose of your award is to achieve a specific objective, produce a report or other similar product, or improve or enhance a literary, artistic, musical, scientific, teaching, or other similar capacity, skill, or talent of the recipient. Include your educational loan program under this section.
You may check more than one box.
If your award qualifies as a prize or award that is subject to the provisions of section 74(b) and your recipient is selected from the general public, you don’t have to request advance approval of your grant-making procedures since a prize or award isn’t subject to the advance approval procedure requirements because it isn’t a grant for travel, study, or other similar purposes. See Rev. Ruls. 77-380, 1977-2 C.B. 419; 76-460, 1976-2 C.B. 371; and 75-393, 1975-2 C.B. 451.
Form 1023 Schedule H Line 4.
Answer “Yes,” if you award scholarships on a preferential basis because you require, as an initial qualification, that the individual be an employee or be related to an employee of a particular employer.
Form 1023 Schedule H Line 7.
For purposes of this schedule, a program for children of employees of a particular employer includes children and family members of employees.
- Nonprofit Articles of Incorporation,
- Nonprofit Bylaws,
- Nonprofit Conflict of Interest Policy,
- Conflict of Interest Policy Acknowledgment,
- Form 1023 Attachment with all the answers,
- Form 1023 Expedite Letter template,
- and Donor Contribution Form
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