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Nonprofit Law/Hardship scholarships


In connection with my previous question about scholarships, which I now understand are grants.
Is it up to the current board members to look at the financials of an applicant and decide whether they are elgible for the grant?  And do the board members decide exactly what would be considered a hardship? As strictly an example, could the board vote that recipients of the grant must show that their income justifies a grant or that it is not merely a choice in income allocation that puts the hardship on the family.
What if the person is a board member who is making the request for a grant?

The board members do not need to engage in the process.  It could be an executive or executive committee.  Anyway, the IRS does not have any regulation that grants need to go to the poorest family.  The organization may not use factors in their decision that are prohibited, such as membership in the booster organization, work for the booster organization, fundraising for the organization or a position in the organization.  Board members may request a grant but then they would need to recuse themselves from the decision voting.

See California Corporations code section 5233, which applied to Nonprofit Public Benefit Corporations which I assume the organization is:
..."a self-dealing transaction means a transaction to
which the corporation is a party and in which one or more of its
directors has a material financial interest..." and further down we
see an element that, if not present, could cause concern with the
Attorney General of California, "Prior to consummating the
transaction or any part thereof the board authorized or approved
the transaction in good faith by a vote of a majority of the
directors then in office without counting the vote of the
interested director or directors, and with knowledge of the
material facts concerning the transaction and the director's
interest in the transaction."

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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