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PLR 202440013 Proposed Donation Constitutes Unusual Grant
10/4/2024 (7/8/2024)
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.
You were formed to own and maintain for public access and enjoyment, parkland and to operate and maintain community-based programs for the education and improvement of residents of B, one of the largest affording housing projects in C. Your mission has been to provide programs for the benefit of B residents and the surrounding areas known collectively as D.
Several year's ago, B was sold to a joint venture which has E as an affiliate. After this investment, you assembled a new board which represents the community in order to have a greater impact on the area. You also hired a new executive director with extensive experience in providing education, youth development and supportive services to youth, families as well as has multiple advance degrees. Further you have since broadened your' mission to empower individuals to tap into their highest potential through collaboration, supportive services, and an unwavering commitment to growth. In addition, you are dedicated to a long-term investment in the needs and future aspirations of those you serve. To align with this mission, you have created multiple programs and are focused on creating paths for economic opportunity through education and career readiness and awareness.
Recently as a result of the refinancing of B, F required E to invest q dollars in D. It was then determined that the most efficient use of these funds was to make the grant to you so you could provide services immediately to D while also building long term programs for D. The grant will be paid in three installments over three years.
You explained:
The grant substantially exceeds any funding you have received and comes at a time when you are beginning to offer a variety of new programs for the benefit of your local community and represents a truly transformative opportunity. However, upon receipt of the grant from E, your status as a publicly supported organization will be jeopardized.
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:
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:
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.
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 also meets the requirements of Treas. Reg. Section 1.509(a)-3(c)(4) based on the following facts and circumstances:
For all the foregoing reasons, the grant should be characterized as an unusual grant within the meaning of Treas. Reg. Section 1.509(a)-3(c)(4).
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.
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
Scholarship Organization Denied Exemption
Extension to Allocate GSTT Exemption Granted
Employer-Related Scholarship Procedures Approved
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