Title

Text Resize
Print
Email
Subsribe to RSS Feed

Saturday September 23, 2017

Private Letter Ruling

Grant to Charity Considered Unusual Grant

GiftLaw Note:
Charity is a tax-exempt nonprofit corporation under Sec. 501(c)(3) and is a public charity under Sec. 509(a)(1) and 170(b)(1)(A)(vi). Charity promotes individual mental, moral, intellectual, artistic and physical improvement in a rural area. Charity runs annual mail campaigns to obtain funding from the general public. Charity also solicits memorial gifts through local funeral homes. Charity regularly meets the public support test. Charity has a large board of directors who have varied careers representative of the community; many of whom are elected. Charity will receive a grant at the death of Donor. Donor previously made a small grant several years ago. The grant is designated as a separate endowment to be used at the discretion of the board of directors to benefit residents of the rural area. Donor is not the creator of Charity and does not have any authority over Charity. Each of the directors on the board has no relationship with Donor, however, Charity's current president is also Donor's attorney. Charity is requesting that the grant be treated as an unusual grant, to protect Charity's publicly supported status.

In order for a charity to retain public charity status under Sec. 509(a), it must receive at least one third of its support from donors who give 2% or less of total support. Large bequests from a single individual can threaten a public charity's status; however, certain donations may be excluded from the public support test. Section 1.170A-9(f)(6)(ii) explains that a contribution can be excluded from the public support test if it is (1) 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 organization's publicly supported status. A facts and circumstances test found in Sec. 1.509(a)-3(c)(4) provides additional considerations when determining if a contribution may be excluded as an unusual grant. Many of the factors relate to the donor's relationship to the organization, the type of contribution made and the amount of public support the charity has historically solicited and received. Here, the Service determined that the bequest satisfies both tests. Therefore, it is an unusual grant and will not adversely affect Charity's publicly supported status.
PLR 201729025 Grant to Charity Considered Unusual Grant

07/21/2017 (04/28/2017)

Dear * * *:

We have considered your January 5, 2017 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 will constitute 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 C in D. You are a nonprofit corporation exempt from taxation under Section 501(c)(3) of the Internal Revenue Code and classified as a public charity under Sections 509(a)(1) and 170(b)(1)(A)(vi) of the Code. Your purpose is to promote the mental, moral, intellectual, artistic, and physical improvement of those in F which is a rural area in C.

You will receive a grant from B for x dollars. The grant will be a distribution of cash or investments from B and will take effect on the death of the grantor. A condition of the receipt of the grant requires that you will hold the funds in a separate endowment known as E. The grant will be used to benefit of residents in F at the discretion of your board of directors. You received one small grant for y dollars from B several years ago. B is not your creator and does not stand in a position of authority over you. You have carried on a successful program of public solicitation to attract public support and have consistently met the public support test. Your program of public solicitation includes conducting an annual mailing campaign to solicit contributions from the general public, and sending letters to the local funeral homes requesting they inform families of your existence so that they can make memorial gifts to you.

Furthermore, you have a large board including an elected county official, an elected member from the local board of education, an officer/employee of a local bank from your community, as well as three directors elected at large. Other than your current president serving as B's attorney, there are no other relationships between you and B.

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. 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 section 4946(b)
    d. directly or indirectly exercised control over the organization, or
    e. 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 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 proposed grant meets the requirements of Treasury Regulations section 1.170A-9(f)(6)(ii) because the grant is from a disinterested party, and:
  • The grant was attracted by reason of your publicly supported nature:
  • The grant is unusual or unexpected with respect to the amount:
  • The grant will adversely affect your status as normally being publicly supported.
The grant meets the requirements of Treasury Regulations section 1.509(a)-3(c)(4) based on the following facts and circumstances.
a) The grant was not made by a person who created you or who previously contributed a substantial amount of your support. The grantor also does not stand in a position of authority with respect to you and does not exercise control over you.
b) The grant is a bequest and is in the form of cash or investments.
c) You have carried on an actual program of public solicitation, have exempt activities, and have attracted a significant amount of public support over the years.
d) You have met the public support test in past years.
e) Because you have relied on public support in the past, it can be assumed that you will be able to maintain that level of public support in the future.
f) You have a large representative governing body.
In addition, no 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.

For all the forgoing reasons, the grant should be characterized as an unusual grant within the meaning of Treasury Regulations section 1.509(a)-3(c)(4).

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

Published August 11, 2017
Print
Email
Subsribe to RSS Feed

Previous Articles

Foundation's Set-Aside of Funds Approved

Commercial Activity Sinks Marine Science Organization's Exemption

No UBTI on Endowment Units to Trust

Foundation's Set-Aside Approved

Pipe Manufacturer Fails to Qualify for Exemption

scriptsknown

Shelby Harder, 2018
Dr. Irving Auld and Dorothy
Roher Auld Scholarship

"Many students take for granted what a university has to offer. However, I am thankful every single day for the opportunity to attend this prestigious school. At Lawrence, you have the ability to engage in Socratic debates about the world we live in at dinner, play recreational or NCAA sports, and talk one on one with brilliant professors. At Lawrence, you don't just 'learn' a subject, you are immersed in it. You dive into the liberal arts and these professors show you the beauty in it all, and how everything is tied together. I am a Biochemistry major with a soft spot for rocket science, philosophy, and evolution. Lawrence is my dream school, and it would have never been possible without the Dr. Irving Auld and Dorothy Roher Auld Scholarship. I am forever grateful for their generosity."

Max Loebl, 2017
Grace Gates Scholarship and Schade Family Scholarship

"Lawrence has been a life changing opportunity. My experience here is made possible by the Grace Gates Scholarship and the Schade Family Scholarship. I will always be grateful for the generosity that made my life at Lawrence a reality. I am incredibly thankful for the amazing education and lifelong connections I have made here. Beyond a doubt, my time at Lawrence has been a multifarious experience; playing varsity soccer, working in the Volunteer and Community Service Center, and now serving as the President of the Lawrence University Community Council. The times spent at Lawrence will be carried with me and cherished for the rest of my life."

Magdalen D'Alessio, 2017
Lillian Seybold Wells Memorial Scholarship

"Hello, my name is Magdalen D'Alessio, I'm majoring in Psychology and minoring in Education Studies and History. I am extremely thankful to be a recipient of the Lillian Seybold Wells Memorial Scholarship as I have been able to further my education and pursue my extracurricular interests, including Dance Team, and participating in the many International programs offered on campus. I'm really glad to be able to attend Lawrence and hope to expand my knowledge of the world even further! In the near future, I plan to conduct an independent study regarding the relationship between the government and school systems and the importance of parental involvement!"

Joe Johnson, 2017
Amy Aplin Larsen Scholarship

"The Amy Aplin Larsen Scholarship has allowed me to pursue tons of opportunities at Lawrence as part of a liberal arts education. I have been able to take classes from close to a dozen different academic departments, perform in ensembles and theatre productions, and take part in shaping the Lawrence community. Regardless of what field I may go into, the connections I have made here at Lawrence with staff, faculty, and friends have been invaluable. Thank you!"

Milwaukee-Downer Scholarships and Professorships

Some of the many recipients of Milwaukee-Downer scholarships gather for a photo with Carolyn King Stephens M-D'62 and Marlene Crupi-Widen M-D'55 in January 2014 at the annual scholarship luncheon.

Rosamund Victoria Bille Adler Scholarship
Dr. Charles E. Albright Scholarship
Helen Daniels Bader Scholarship
James G. and Ethel M. Barber Scholarship
Catharine Beecher Endowed Fund for Downer Women
Bessie A. Bell Scholarship
Berk Scholarship
Frederick C. Best Scholarship
Beta Study Club Scholarship
Lynde Bradley Scholarship
Lucia R. Briggs-Alumnae Scholarship
Edith Lange Brooks Scholarship
Anne Barman Caldwell Scholarship
Alice Miller Chester Scholarship
City of Milwaukee Student Funds Scholarship
Milwaukee-Downer Class of 1940 Fund
Milwaukee-Downer Class of 1942 Fund
College Endowment Association Scholarship
Janet Cope Crawford Scholarship
Jessie Mabbott Daniels Scholarship
F. T. Day Scholarship
Rufus Dodge Scholarship
Julia P. Ely and Hannah R. Vedder Memorial Scholarship
General Endowed Scholarship - M-D College
Dr. Alfred W. and Mrs. Ada F. Gray Scholarship
Berenice E. Hess Scholarship Endowment
Lucille Ray Hibbard Scholarship
Belle Austin Jacobs Scholarship
Helen McDermott Jurack and Ronald J. Mason Scholarship
Marjorie S. Logan Scholarship
Nellie Maxwell Scholarship
S. Annabelle & Paul McGuire Scholarship
Memorial Scholarship Fund - Milwaukee-Downer
Milwaukee-Downer Class of 1953 Scholarship
Milwaukee-Downer Class of 1955 Scholarship
Milwaukee-Downer Class of 1956 Scholarship
Milwaukee-Downer Class of 1957 Scholarship
Milwaukee-Downer Class of 1958 and 1959 50th Reunion Scholarship
Milwaukee-Downer Club Scholarship
Milwaukee-Downer/Lawrence College Consolidation 50th Anniversary Scholarship
Francis Evelyn Kelley Morgan Memorial Scholarship
O'Neill-Anderson Family Scholarship Endowment
Elizabeth A. Olson Scholarship
Gilbert Haven Peirce, Sr. and Emma Elizabeth Manor Peirce Milwaukee-Downer Scholarship
Aleida J. Pieters Scholarship
Matilda Siefert Puelicher Scholarship
Elizabeth Ann Richardson Scholarship
William M. Ross Memorial Scholarship
Elizabeth Rossberg Scholarship
Charles Frederic Sammond Scholarship
Mildred L. Schroeder Scholarship
Sivyer Educational Fund for Women
Marion Merrill Smith Scholarship
Dr. Elizabeth A. Steffen Scholarship
W. Mead and Elizabeth McKone Stillman Scholarship
Strzelczyk Family Scholarship
Clare Scherf Sweetman Scholarship
Raymond H. and Jane K. Taylor Scholarship
Jerline E. Walfoort Memorial Scholarship
Barbara E. Wehr Fund
Harmony Weissbach Scholarship
Martha and Frances Wheelock Scholarship
James G. and Ethel M. Barber Professorship of Theatre and Drama
T. A. Chapman Professorship in Music
Alice G. Chapman Professorship in Physics
Alice G. Chapman Librarianship
Milwaukee-Downer College and College Endowment Association Professorship

Kaitlin Yorde, 2017
Maurine Campbell Endowed Scholarship

"I am so thankful to be a recipient of the Maurine Campbell Scholarship. I am the first person in my family to attend a four-year college, and this would not be possible without the scholarships I receive. At Lawrence there are so many wonderful opportunities and learning experiences available. This summer I was able to participate in research in my field and have also been able to get involved with the Appleton community through ESL tutoring at the Fox Valley Literacy Council. I am sure that the Lawrence education I have received will continue to benefit me for the rest of my life!"

LarryU Facebook Twitter Instagram YouTube

© Copyright 2017 Crescendo Interactive, Inc. All Rights Reserved
PRIVACY STATEMENT
This site is informational and educational in nature. It is not offering professional tax, legal, or accounting advice.
For specific advice about the effect of any planning concept on your tax or financial situation or with your estate, please consult a qualified professional advisor.