Large health-care grant classified as unusual

Plain-English summary

A publicly supported charity expected a large grant from an unrelated section 501(c)(6) organization to create a program for patient-centered care and innovative practices serving mothers and young children in underserved communities. The donor had not previously supported, formed, controlled, or held authority over the charity. Excluding the pending grant, the charity had an established program of public solicitation and significant public support, and it expected continued support afterward. The IRS concluded that the contribution was unusual in amount, came from a disinterested party, and would otherwise jeopardize the charity's public-support status because of its size. The grant therefore could be excluded from the applicable public-support fraction under the unusual-grant regulations.

Ruling snapshot

• Question: Could the charity exclude the large one-time contribution as an unusual grant when measuring public support?
• Outcome: Approved
• Key authorities: IRC §§ 170(b)(1)(A)(vi), 501(c)(3), 509(a)(1), 4946; Treas. Reg. §§ 1.170A-9(f)(6)(ii), 1.509(a)-3(c)(4)

Full text (IRS public release)

Department of the Treasury                                      Date: 08/07/2023
Internal Revenue Service
Tax Exempt and Government Entities
P.O. Box 2508
Cincinnati, OH 45201

Employer ID number:

Person to contact:

Release Number: 202344020
Release Date: 11/3/2023

LEGEND UIL: 509.02-01
B = Organization
C = Program

x dollars = Amount
y percent = Percentage

Dear

We have considered your request for recognition of an unusual grant under Treasury Regulation
Section 1.170A-9(f)(6)(ii) and related provisions.

Based on the information provided, we concluded that the proposed grant constitutes an unusual grant under
Treas. Reg. Section 1.170A-9(f)(6)(ii) and related provisions of the regulations. The basis for our conclusion
is discussed below.

Facts:

You are tax exempt under Internal Revenue Code (IRC) Section 501(c)(3). You are currently classified as a
public charity described in Sections 509(a)(1) and 170(b)(1)(A)(vi). You will receive a grant from B, which is
an unrelated organization exempt under IRC Section 501(c)(6) for x dollars. Upon receipt of the grant from B,
your status as a publicly supported organization will be jeopardized.

B has not provided funds to you prior to this grant. B was not involved in your formation, nor have you ever had
a relationship with B. Furthermore, B does not directly or indirectly exercise any control over you. You will
have ultimate responsibility for the proper management and administration of the funds from the grant and plan
to use the funds to establish C that will develop true patient-centered care and innovative practices for mothers
and young children in underserved communities, such as minority and rural populations.

You have carried on an actual program of public solicitation and exempt activities and have been able to attract
a significant amount of public support. Your public support percentage is approximately y percent if the
pending grant is excluded. You are publicly supported because you have met the facts and circumstances test
described in Treas. Reg. Section 1.170A-9(f)(3) without the benefit of any exclusions of unusual grants
pursuant to Treas. Reg. Section 1.509(a)-3(c)(3). In addition, you are actively soliciting contributions from the
general public and reasonably expect to attract a significant amount of public support after the particular grant is
received.

Letter 4787 (Rev. 11-2021)
Catalog Number 58230Y

Law:

Two sections of the Treasury Regulations set forth the criteria for an unusual grant. They are:

Treasury Regulation Section 1.170A-9(f)(6)(ii)
This section states that, for purposes of applying the 2% limitation to determine whether the 33 1/3% of-support

test is satisfied or the 10 % support limitation is met, one or more contributions may be excluded from both the
numerator and the denominator of the applicable percent-of-support fraction. The exclusion is generally intended
to apply to substantial contributions or bequests from disinterested parties which:

* are attracted by reason of the publicly supported nature of the organization;
* are unusual or unexpected with respect to the amount thereof; and
* would, by reason of their size, adversely affect the status of the organization as normally being publicly
supported.

Treasury Regulation Section 1.509(a)-3(c)(4)
This section states that all pertinent facts and circumstances will be taken into consideration to determine

whether a particular contribution may be excluded. No single factor will necessarily be determinative. Such
factors may include:

* Whether the contribution was made by a person who;
a. created the organization;
b. previously contributed a substantial part of its support or endowment;

c. stood in a position of authority with respect to the organization, such as a foundation manager within
the meaning of Internal Revenue Code (IRC) Section 4946(b);

d. directly or indirectly exercised control over the organization, or;

e. was in a relationship described in IRC Section 4946(a)(1)(C) through 4946(a)(1) (G) with someone
listed in bullets a, b, c, or d above.

A contribution made by a person described in bullets a through e is ordinarily given less favorable consideration
than a contribution made by others not described above.

* Whether the contribution was a bequest or an inter vivos transfer. A bequest will ordinarily be given more
favorable consideration than an inter vivos transfer.

* Whether the contribution was in the form of cash, readily marketable securities, or assets which further the
exempt purposes of the organization, such as a gift of a painting to a museum.

* Whether (except in the case of a new organization) prior to the receipt of the particular contribution, the
organization (a) has carried on an actual program of public solicitation and exempt activities and
(b) has been able to attract a significant amount of public support.

* Whether the organization may reasonably be expected to attract a significant amount of public support after
the particular contribution. Continued reliance on unusual grants to fund an organization's current operating
expenses (as opposed to providing new endowment funds) may be evidence that the organization cannot
reasonably be expected to attract future public support.

* Whether, prior to the year in which the particular contribution was received, the organization met the
one-third support test described in Treas. Reg. Section 1.509(a)-3(a)(2) without the benefit of any
exclusions of unusual grants pursuant to Treas. Reg. Section 1.509-3(c)(3);

* Whether the organization has a representative governing body as described in in Treas. Reg. Section
1.509(a)-3(d)(3)(i); and

* Whether material restrictions or conditions within the meaning of Treas. Reg. Section 1.507-2(a)(7) have
been imposed by the transferor upon the transferee in connection with such transfer.

Application of Law:
Letter 4787 (Rev. 11-2021)

Catalog Number 58230Y

Based on the information provided, the proposed grant meets the requirements of Treas. Reg. Section 1.170A-9
(f)(6)(ii) because the grant is from a disinterested party and:

* The grant was attracted by reason of the publicly supported nature of your organization.

* The grant is unusual or unexpected with respect to the amount.

* The grants would by reason of their size adversely affect your organization as normally being publicly
supported.

The grant meets the requirements of Treas. Reg. Section 1.509(a)-3(c)(4) based on the following facts and
circumstances.

* The grant is not being made by a person who created you.
* B has not previously contributed a substantial part or endowment to you. B has not
stood in a position of authority such as a foundation manager within the meaning of IRC Section 4946(b).
* B does not directly or indirectly exercise control over you nor was is in a relationship
described in IRC Section 4946(a)(1)(C) through 4946(a)(1)(G)
* The transfer of assets will further your exempt purpose and be used to fund your programs in the future
* You carry on a program to solicit funds to support your activities and reasonably expect to attract public

support after this transfer

* No material restrictions or conditions within the meaning of Treas. Reg. Section 1.507-2(a)(7) have been
imposed by the donor

We'll make this determination letter available for public inspection after deleting personally identifiable information,
as required by IRC Section 6110. We've enclosed Letter 437, Notice of Intention to Disclose - Rulings, and a
copy of the letter that shows our proposed deletions.

* If you disagree with our proposed deletions, follow the instructions in the Letter 437 on how to notify us.
* If you agree with our deletions, you don't need to take any further action.

We've sent a copy of this letter to your representative as indicated in your power of attorney.
If you have questions, please contact the person listed at the top of this letter.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:
Redacted Letter 4787
Letter 437

Letter 4787 (Rev. 11-2021)
Catalog Number 58230Y