"promotes the general welfare as a Community activity"

That's not made to the IRS. That is why your State issued specific grants (such as covid mediation to health care providers) and that is not the nature of this grant. This was more of a rehab and prevention program. If someone had expenses lower than the grant, the difference would be taxable, not avoiding it due to "welfare of the community."

"have always entered these transactions in Other Income not subject to SE tax with an adjusting entry for the expenses incurred"

Why wouldn't you do it as you've previously done it? What is different, this time? If that is personal yard, sure. Otherwise, it is producing sellable timber or farm land, right? Or in a conservation zone.