Tax Planning and Compliance for Tax-Exempt Organizations, 6th Edition

CHAPTER 11Public Charities

• § 11.2 “Inherently Public Activity” and Broad Public Support: § 509(a)(1)
  • (h) Unusual Grants
• § 11.5 Difference Between § 509(a)(1) and § 509(a)(2)
  • (e) Change of Public Charity Category
• § 11.9 Supporting Organization: § 509(a)(3)

§ 11.2 “Inherently Public Activity” and Broad Public Support: § 509(a)(1)

(h) Unusual Grants

p. 259. Add new factor after first paragraph:

A non-operating private foundation C plans to terminate its existence and distribute all of its assets in a series of grants to D, a public charity. D does not control C or vice versa. There are no other relationships between them. This conclusion could be questioned due to C's prior “large pooled grant” to D. The grant agreement provides that D will continue to support other public charities C has supported quarterly over the past years, including grantees D has supported for years from the large grant from C. The significant amount of the distribution in relation to D's normal recurring public support could cause D to fail the one-third public support test in the future. Instead, the series of grants can be considered unusual and eligible to be excluded from the public support calculation, and D could retain its public charity status.

To be unusual, the grants must come from a disinterested party and (1) be attracted by reason of the publicly supported nature of the organization, (2) is unusual or unexpected in size, and (3) would, by reason of its size, adversely affect the ...