Internal Revenue Service Department of the Treasury 

Washington, DC 20224 

The Infinity Foundation  
 
 

Dear Applicant: 

This is in response to the ruling request submitted with your cover letter dated July 31, 1997, wherein you requested advance approval of your grant making procedures pursuant to section 4945(g) of the Internal Revenue Code. You have previously been recognized by the Service as exempt from federal income tax under section 501(c)(3) of the Code and you were also classified as a private foundation under section 509(a). 

You state that your mission is "to enhance the understanding of the spiritual dimension of life by creating, disseminating, and expanding a body of knowledge which clarifies or integrates philosophy, religion, science, psychology, and non-traditional mystical disciplines; and bridging Eastern philosophies with Western thought." You refer to this body of knowledge as the "Topic". 

One of your programs will be the awarding of grants to individuals for travel, study, fellowships or scholarships or for the production of a product which supports the Topic. A grantee's activities in pursuit of the Topic might involve study, research, writing, teaching, lecturing, attending an educational institution as a visiting scholar, developing or speaking at a symposium, publishing a treatise in either print or electronic media, or engaging in any other activity which would serve to improve the skills or talents or broaden the understanding of the grantee in the Topic area, and which would make a contribution to the body of knowledge in the Topic area. 

In the grant application the prospective grantee will describe his or her project in support of the Topic. You will select grantees under procedures described below, monitor their projects, and evaluate their work to assure that grant funds are properly utilized. 

You describe your grant-making procedures as follows:

1. Grant recipients will not be chosen from any particular  educational or scientific institution, or from any  particular geographic location.
2. The key criterion will be a demonstrated commitment to  the Topic area
3. A grant recipient must either be an individual whose   activities will make a contribution to the Topic, or  whose funded project(s) will enhance the knowledge, or  improve the skills and talents of the grantee in the Topic area. A grantee must be either (i) a scholar,  teacher, visionary, or spiritual leader whose work would be enhanced by a grant from you, or (ii) a  student attending an educational institution described in Code section 151(c)(4), in which case the grant  would be utilized for the grantee's tuition and related expenses at such educational institution as long as the  course of study pursued by the student would further  the purposes of the grant.
4. Your Board of Directors will contact both traditional  and nontraditional educational, scientific,  cultural,and religious institutions to make known the availability of the grants. You will also publicize the grant program in various publications and make the  grant applications generally available to the public.
5. Your Board of Directors will select grant recipients  from among the individuals who submit completed applications.
6. You will pay the grant funds directly to the grant  recipient, except where the grant will be used to cover  tuition at an educational institution, in which  instance you will make payment to the school.
7. Each grant recipient must agree in writing to use the  grant funds to defray the expenses associated with the approved project or to apply the funds to enrollment in  an educational institution.

   You intend to award grants on an objective and nondiscriminatory basis. 

8. You will not use grant funds to compensate recipients for performing personal services for you.
9. You will not award any grants to your creator, founder, officers, or directors, or to members of the founder's family, or to any disqualified person with respect to you, or for a purpose that is inconsistent with the purposes set forth in Code section 170(c) (2)(B).

With respect to the monitoring of grants, you provide the following information: you require a written progress report from each grantee at least once a year. This report must include a summary of the use of the funds awarded, and how such use fulfilled grant purposes. If the grantee is enrolled at an educational institution, the report must be verified by the institution. You also require a final report. 

A condition of each grant made to support the enrollment of a grantee at an educational institution is that the grant will be used only for qualified tuition and related expenses within the meaning of Code section 117(b)(2) and for room and board. 

In those instances where the reports submitted, or other information (including the failure to submit reports) indicate that all or any part of a grant is not being used for intended purposes, you will investigate and will withhold further payments to the extent possible until you receive delinquent reports. 

If you learn that all or any part of a grant is being diverted from the intended purposes, you will take all reasonable and appropriate steps to recover the grant funds and/or to ensure restoration of the diverted funds to the purposes of the grant. This would include legal action if deemed appropriate under the circumstances. 

You shall retain complete records with respect to all grants awarded. These records shall include all information obtained by you to evaluate the qualifications of potential grantees, the identification of grantees (including any relationship of any grantee to you or to any of your directors or officers), the completed application of each grantee, the amount of each grant, the date(s) of each grant payment, evaluation reports from grantees, and any additional information that you may secure in the course of the grant administration process. 

Section 4945(a)(1) of the Code imposes an initial tax on a private foundation for each taxable expenditure it makes. If such expenditure is not corrected within the taxable period, then additional taxes are imposed under section 4945(b)(1). 

Section 4945(d)(3) of the Code provides that a "taxable expenditure" includes any amount paid or incurred by a private foundation as a grant to an individual for travel, study, or other similar purposes by such individual, unless such grant satisfies the requirements of subsection (g). 

Section 4945(g) of the Code provides, in part, that subsection (d)(3) shall not apply to an individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the Service, if it is demonstrated to the satisfaction of the Service that (1) the grant constitutes a scholarship or fellowship grant which would be subject to the provisions of section l17(a) (as in effect on the day before the date of the enactment of the Tax Reform Act of 1986) and is to be used for study at an educational organization described in section 170(b) (1) (A)(ii), or (2) the purpose of the grant 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 grantee. 

Section 53.4945-4(b) (1) of the Foundation and similar Excise Taxes Regulations provides that in order for a private foundation to establish that its grants to individuals are made on an objective and nondiscriminatory basis, it must demonstrate that its grant program is consistent with: 

1.     the existence of the foundation's exempt status under section 501(c)(3);
2.     the allowance of deductions to individuals under section 170 for contributions to the granting
       foundation; and 
3.     the requirements of subparagraphs (2), (3), and (4) of this paragraph.

Section 53.4945-(4)(b)(2) of the regulations provides that the group from which grantees are to be selected must be sufficiently broad so that the awarding of grants to members of such group would fulfill a purpose described in section 170(c)(2)((B). However, the foundation may impose reasonable restrictions on the group of potential grantees. For example, selection of a qualified research scientist to work on a particular project does not violate the requirements of section 4945(d)(3) merely because the foundation selects him from a group of three scientists who are experts in that field. 

Section 53.4945-4(b) (3) of the regulations states that the criteria used in selecting grant recipients from the potential grantees should be related to the purpose of the grant. 

Section 53.4945-4(b)(4) of the regulations provides that the person or group of persons who select recipients of grants should not be in a position to derive a private benefit, directly or indirectly, if certain potential grantees are selected over others. 

Section 53.4945-4(c)(3) of the regulations provides that with respect to a grant made under section 4945(g)(3), the private foundation shall require reports on the use of the funds and the progress made by the grantee toward achieving the purposes for which the grant was made. Such reports must be made at least once a year. Upon completion of the undertaking for which the grant was made, a final report must be made. 

Section 53.4945-4(c)(4) of the regulations sets forth procedures for the investigation of jeopardized grants. Briefly, where the private foundation has evidence that funds are being diverted from intended purpose, then the foundation is required to either recover the funds or to ensure their restoration to proper grant purposes. The foundation must also cut off all further payments until it has received the grantee's assurance that future diversions will not occur. 

The information furnished by you in your ruling request indicates that your procedures for awarding grants satisfy the fundamental requirements of objectively and nondiscrimination and otherwise conform to the requirements of sections 4945(g) (1) and (3) and corresponding regulations. Accordingly, we rule that grants made in accordance with procedures described herein will not be taxable expenditures under Code 4945(d) (3). We have not considered whether grants made under your procedures are excludable from the gross income of recipients under section 117 of the Code. 

This ruling is conditioned on the understanding that there will be no material change in the facts upon which it is based. It is further conditioned on the premise that no grants or loans will be awarded to your organization's creators, officers, directors, trustees, or members of the selection committee, or for a purpose that is inconsistent with the purposes described in section 170(c) (2) (B). 

The approval of your grant-making procedures is a one time approval of your system of standards and procedures for selecting recipients of grants that meet the requirements of section 4945(g). Thus, approval will apply to succeeding grant programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request. 

We are sending a copy of this ruling to your key District Director for exempt organizations matters. Because this letter could resolve any questions about your exempt status, you should keep it with your permanent records. 

If you have any question, please contact the person whose name and telephone number are shown in the heading of this letter. 

This ruling is directed only to the organization that requested it. Section 6110(j) (3) of the Internal Revenue Code provides that it may not be used or cited as precedent. 

Thank you for your cooperation.

Sincerely,

Gerald V. Sack

Chief, Exempt Organisations