Our 501(c)(3) non-profit homeschool support organization would like to award a $1000 college scholarship to a graduating senior in our chapter of the Eta Sigma Alpha home school national honor society. The criteria for receiving the scholarship is the student must be a member of our homeschool honor society chapter and be a graduating senior that will be attending college in the fall. The students will be judged on their accomplishments in areas of scholarship, character, service, and leadership.
The plan is that I would donate the $1000 to our 501(c)(3)non-profit home school support organization, which would in turn award the scholarship to a student in our honor society chapter. The scholarship winner would be determined by an independent panel of judges. I would not be one of the judges and I have no children involved in the program.
Are there any hoops we need to jump through to accomplish this?
Janis H in Texas
You’re to be commended for establishing a scholarship fund and already having good policies in place.
You should look at your organization’s original application for 501c3 status (Form 1023) to see if included Schedule H Scholarships. If your organization included Schedule H, you’re all set. Award away!
If you did not file a Schedule H, then you’ll need to notify the IRS that you are adding a new activity.
According to this IRS webpage, you report changes and additions in your activities on Form 990 or 990EZ.
It would be a very good idea to look at the Form 1023 Schedule H (scroll down to page 28) and it’s instructions. From the questions the IRS asks, you get a very good idea of how they think a scholarship fund should be set up. It sounds as if your organization already has in place many of the IRS’s recommendations. Include a paragraph outlining your policies based on Schedule H questions when fling Form 990 or 990EZ.
If your organization does not typically file Form 990 or 990EZ because you are eligible to file the online e-postcard Form 990N (Annual gross revenues less than $50,000), you should file the longer 990EZ for the year you launch the scholarship program.
I hope that helps.
Carol Topp, CPA