Federal Challenge Grant Program Guidance

Page Updated: September 29, 2025

Federal research grant challenge programs are government-sponsored prize competitions designed to stimulate innovation and solve difficult national and global problems. Rather than using traditional grants that fund a research process, these challenges define a specific, ambitious goal and offer a significant monetary prize to the first to achieve the desired outcome. This approach incentivizes breakthroughs, attracts a wider range of talent, and accelerates development toward a concrete objective.

These Challenge Grant funds are often awarded as “prizes” to PIs. To help PIs avoid tax consequences, the following guidance should be used.

1. If the Dean's Office or RSP is made aware that a PI is submitting to a Challenge Prize:
• Ask whether the PI intends to treat this as an outside activity or plans to use UW-Madison resources (e.g., space, equipment, personnel).
2. If the Dean's Office or RSP is not made aware of the submission:
• We can reasonably assume the PI is treating it as an outside activity and is accepting any tax liability associated with the prize.
3. If the PI confirms it is an outside activity:
• The PI is responsible for accepting the prize directly, even if an institutional signature is required.
• The PI also assumes responsibility for any tax consequences
4. If the PI intends to use UW-Madison resources:
• The prize will be treated as a sponsored program.
• UW-Madison will not assess F&A on the prize.
• The PI should request that the prize be awarded to UW-Madison on their behalf.
• RSP will set up an award in Workday, and standard expenditure processes will apply.

In RAMP, tag the Funding Proposal and Award record with the tag Federal Challenge Grant.