Large cash contribution qualifies as an unusual grant

Plain-English summary

A publicly supported charity promoting a sport sought advance recognition that a large cash contribution would be an unusual grant. The charity served youth, veterans, wheelchair participants, and other groups and had an ongoing public fundraising program. A third party requested the grant without the charity's knowledge, and neither that person nor the prospective grantor had a connection to the charity or related sports organizations. The contribution was unexpected, came from a disinterested party, and was large enough to distort the charity's normal public-support calculation. Based on those facts and the charity's history and governing structure, the IRS ruled that the contribution could be excluded as an unusual grant under the public-support regulations.

Ruling snapshot

• Question: Could the charity exclude the prospective large cash contribution as an unusual grant when measuring public support?
• Outcome: Approved.
• Key authorities: IRC §§ 170, 509, and 4946; Treas. Reg. §§ 1.170A-9(f)(6), 1.509(a)-3(c)(4), and 1.507-2(a)(7).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
P. O. Box 2508
Cincinnati, OH 45201

Release Number: 201952009

Release Date: 12/27/2019

Date: October 2, 2019
Employer Identification Number:

Person to Contact - ID#:

Contact Telephone Numbers:

LEGEND: UIL: 170.07-06
B = State

C = Date

D = Sport

E = Estate

x dollars = $

Dear

We have considered your June 25, 2019, request for recognition of an unusual grant under
Treasury Regulations Section 1.170A-9(f)(6)(ii) and related provisions.

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

Facts:

You were formed in the State of B on C. You are classified as a public charity under Sections
509(a)(1) and 170(b)(1)(A)(vi) of the Code. You were formed for the purpose of promoting the
sport of D for youth, especially those in need of financial assistance. You have expanded your
programs to include programs for all ages, including youth, and programs for veterans’
wheelchair D programs, under-served youth, and major D events. You provide grants for youth
players in need of financial assistance. You have a continuous program to solicit contributions
from the general public.

You are asking for advance approval of an unusual grant in the amount of $x. The grant will
come from E in the form of cash.

The grant request made to E was made by a third party without your knowledge. Neither the
grant requestor nor E has any connection to you, any organizations related to you, nor to any of
the D organizations that are the governing bodies for the sport of D. Further, the person who
made the grant request to E has authority over decisions made by E.

Letter 4787 (2-2012)
Catalog Number 58230Y

Law:

Treasury Regulations Sections 1.170A-9(f)(6)(ii) and 1.509(a)-3(c)(4) set forth the criteria for an

unusual grant.

Treasury Regulations Section 1.170A-9(f)(6)(ii) states that, for purposes of applying the 2-percent
limitation to determine whether the 33 1/3 percent-of-support test is satisfied, 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 Regulations Section 1.509(a)-3(c)(4) 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.
b.
c.

d.
e.

created the organization

previously contributed a substantial part of its support or endowment

stood in a position of authority with respect to the organization, such as a
foundation manager within the meaning of Section 4946(b)

directly or indirectly exercised control over the organization, or

was in a relationship described in Internal Revenue Code 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 a. - 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

Letter 4787 (2-2012)
Catalog Number 58230Y

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 Section 1.509(a)-3(a)(2)
without the benefit of any exclusions of unusual grants pursuant to Section 1.509-
3(c)(3);

• Whether the organization has a representative governing body as described in
Treasury Regulations Section 1.509(a)-3(d)(3)(i); and

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

Application of Law:

Based on the information provided, the grant meets the requirements of Treas. Reg. Section 1.
170A-9(f)(6)(ii) because the grant is from a disinterested party, and:

• was attracted by reason of the publicly supported nature of the organization;

• was 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.

Based on the information provided, the grant meets the requirements of Treas. Reg. Section
1.509(a)-3(c)(4) based on the following facts and circumstances:

• The prospective grant is not originating from a person who has not created you, nor
has any prior business, nor relationship;

• The prospective grant will be an inter vivos transfer;
• The prospective grant will be in the form of cash;

• You have a long history of carrying on programs of public solicitation and exempt
activities, and you have been able to attract a significant amount of public support;

• You plan to continue to attract a significant amount of public support after the
particular contribution, and in fact, to increase your public support;

• You have not prior applied for exclusions of unusual grants;

• You have a representative governing body as described in Treas. Reg. Section
1.509(a)-3(d)(3)(i); and

• No material restrictions or conditions within the meaning of Treasury Regulations
Section 1.507-2(a)(7) have been imposed by the prospective grantor upon you,
regarding the disposition of this grant.

For all the foregoing reasons, the prospective grant should be characterized as an unusual
grant within the meaning of Treas. Reg. Section 1.509(a)-3(c)(4).

Letter 4787 (2-2012)
Catalog Number 58230Y

We have sent a copy of this letter to your representative as indicated in your power of attorney.

If you have any questions, please contact the person listed in the heading of this letter.

Sincerely,

Stephen A. Martin

Director, Exempt Organizations
Rulings and Agreements

Letter 4787 (2-2012)
Catalog Number 58230Y