What are unusual grants?

Unusual grants are generally substantial contributions and bequests. They come from disinterested persons. They are attracted because of the organization's publicly supported nature. They are unusual and unexpected because of the amount. They are large enough to endanger the organization's status, as they normally meet the public support tests. For organizations claiming status under section 170(b)(1)(A)(vi) (Part II), this means potentially endangering the 33 1/3% public support test or the 10%-facts-and-circumstances test. For organizations claiming status under section 509(a)(2) (Part III), this means potentially endangering the 33 1/3% public support test. Other factors are considered when determining if a grant is unusual.

Treatment in Public Support Tests:

Unusual grants are generally excluded from the support calculations in Part II (for section 170(b)(1)(A)(iv) and 170(b)(1)(A)(vi) organizations) and Part III (for section 509(a)(2) organizations) of Schedule A.

They are excluded even if the organization receives or accrues the funds over a period of years.

Gross investment income items should not be reported as unusual grants; investment income is reported separately.

Reporting and Recordkeeping:

You must include in Part VI of Schedule A a list showing the amount, but not the grantor, of each unusual grant actually received (if using the cash method) or accrued (if using the accrual method) each year. This is because Part VI is made available for public inspection, and donor names should not be included.

Organizations that received any unusual grants during the 5-year period should also keep a separate list for their records showing the name of the contributor, the date, the amount of the grant, and a brief description. This list is not filed with Form 990 or 990-EZ.

In essence, unusual grants are substantial, unexpected contributions from disinterested parties that are large enough that, if included in the regular support calculation, they could skew the organization's public support percentage and potentially cause it to fail the public support test. By excluding them, the IRS allows these organizations to receive large, one-time gifts without automatically losing their public charity status.