Tipping.

A development director called me thrilled. A private foundation had offered a single grant larger than a third of last year's total revenue. She wanted help reviewing the agreement. I asked her what her public support percentage was on Schedule A last year. There was a long pause, and then she said she would have to ask the accountant.

That pause is the reason I am writing this.

Most public charities hold their status under section 509(a)(1), which requires that at least one third of total support over a rolling measuring period come from public sources. It is reported every year on Schedule A of the Form 990. Nearly every executive director I work with knows the form exists. Very few could tell me their number.

Here is the part that catches people. In that calculation, a contribution from any single source generally counts toward the public support numerator only up to two percent of total support over the period. Grants from other public charities are not subject to that cap and count in full. Grants from private foundations are.

Read that twice, because the arithmetic is unkind. A very large private foundation grant lands in your denominator whole and in your numerator clipped. Your revenue goes up. Your public support percentage goes down. You have never been better funded or closer to failing the test.

Fail it for two consecutive years and the IRS can reclassify you as a private foundation. That reclassification brings an excise tax on net investment income, a mandatory annual distribution requirement, stricter self dealing rules, and a set of filings you are not staffed for. It also carries a quieter cost. A meaningful number of institutional funders restrict giving to public charities, so the moment your status changes, part of your prospect list closes.

The field has a name for this. It is called tipping, and in twenty years of grant writing literature you will find it discussed almost exclusively by tax attorneys and accountants, writing for other tax attorneys and accountants. It is not in the proposal templates. It is not in the certification courses. It is not in the conversation your grant writer has with you.

There is a second path if you fall below the threshold. The regulations allow a facts and circumstances test at a lower percentage, but it requires you to demonstrate the actual characteristics of a publicly supported organization: a genuinely representative board, real community support, a program open to the public. It is available. It is not automatic, and it is not something you want to be assembling under deadline pressure in the year you already failed.

What I do about this is unglamorous and takes about twenty minutes.

Before an organization accepts an unusually large private foundation grant, I ask three questions. What is our current public support percentage, and what was it the two years prior. What does this award do to that number if it lands in a single tax year. And will the funder structure the same total across three years instead of one.

That last question is the whole solution, and most funders say yes without hesitation. A program officer would far rather stage payments than watch a grantee lose the status that made them eligible in the first place. But you have to ask before the agreement is signed, not after, and you have to ask knowing why you are asking.

The best time to raise it is earlier still. I raise it at the letter of inquiry stage, in the conversation about what we are requesting and over what period. By the time an award letter arrives, you are negotiating. At the LOI stage you are simply designing the request well, which is what you were supposed to be doing anyway.

None of this is a reason to fear a large grant. It is a reason to know your own number before someone hands you one. Ask your accountant for your Schedule A public support percentage for the last three years, write it on the same page where you keep your funding pipeline, and look at it every time an unusually large request goes out the door.

If you do not know the number, that is the finding. Start there.