What are the legal requirements for my web based LLC to give scholarships to students?
Full Question:
Answer:
A donation by a corporate entity needs to be authorized
according to its operating agreement or governing bylaws. Scholarship
grants awarded by these private foundations are taxable expenditures
unless the grant programs meet the requirements for individual grants
and receive advance approval from the Internal Revenue Service (IRS). A
request for a ruling must be sent to the IRS to obtain approval.
Under Arizona law, in order for corporate contributions to a scholarship
fund to be eligible for a tax credit, the organization receiving funds
must qualify as a "School tuition organization", which is a charitable
organization in the state that is exempt from federal taxation under
section 501(c)(3) of the internal revenue code and that allocates at
least ninety per cent of its annual revenue for educational scholarships
or tuition grants to children to allow them to attend any qualified
school of their parents' choice. In addition, to qualify as a school
tuition organization the charitable organization must provide
educational scholarships or tuition grants to students without limiting
availability to only students of one school.
I am prohibited from giving legal advice. Due to the complexities of tax
and other matters involved, it is advisable to consult a local attorney
who can review all the facts and documents involved.
