Q1. What rules apply with respect to scholarship applications?
Answer: Each Club should establish specific criteria and publish an application on the club’s website. The Club must also advertise the availability of its scholarship in a newspaper or on it’s website to an audience broader than its own Club membership, once again to meet the community benefit and charitable purpose requirements of 501(c)(3) entities.
Q2. Are the scholarships that we award to students taxable to the recipients of the scholarships?
Answer: No, provided your club has followed the IRS rules with respect to awarding the scholarship (i.e., you have broadly advertised to the base of potential recipients and you have used objective criteria uniformly applied with respect to awarding the scholarship).
Q3. How long must you keep scholarship records for IRS purposes?
Answer: Six years.