A grant by a private foundation to fund a specific project of a public charity is not a taxable expenditure, even if the public charity engages in lobbying activities as part of the project, if each of the following requirements are met:
- The grant is not earmarked to be used in an attempt to influence legislation; and
- The sum of all grants made by the foundation for the same project for the same year does not exceed the amount budgeted, for the year of the grant, by the grantee organization for activities of the project that are not attempts to influence legislation.
If the grant is for more than one year, the rule applies to each year of the grant with the amount of the grant measured by the amount actually disbursed by the foundation in each year or divided equally between the years, at the foundation's option. The same method of measuring the annual amount must be used in all years of a grant.