What is the Public Charity Support Test?

As a publicly funded organization, there are many trials and tribulations out there for a tax exempt organizations and nonprofits. We’ve covered how you can get more donations and how to get more volunteers, but what other challenges await you? One such is the Public Support Test from the IRS.

What Does It Mean When You Fail to Meet a Public Support Test?

Let’s establish what the public support test is first. After your organization has been active for five years, the IRS will monitor the organization’s public charity status based on the public support information reported annually on Schedule A. After the first five years, the support test kicks in.

According to the IRS, for an organization to qualify as a publicly supported organization under section 170(b)(1)(A)(vi), either:

• 33% or more of its total support must come from governmental agencies, contributions from the general public, and contributions or grants from other public charities; or 
• 10% or more of its total support must come from governmental agencies, contributions from the general public, and contributions or grants from other public charities and the facts and circumstances indicate it is a publicly supported organization.

The support test is based on a five-year computation period, consisting of the current year and the four years immediately before this one. If your organization meets the public support test for a tax year, it is treated as a publicly supported charity for that year and the succeeding year, regardless of its actual support for the succeeding year.

Losing Tax Exempt Status

There’s a chance an organization may have lost its tax exempt status without knowing. That’s why we suggest you keep track of and monitor your returns, so you don’t unexpectedly lose your status.

An organization will not meet either of these public support tests if almost all of their support comes from gross receipts from related activities. Public charities need to have an insignificant amount of its support come from governmental units and contributions made directly or indirectly by the general public. If a public charity fails the test, it would then be considered a private charity.

The good news is that here at ExpressTaxExempt, we can get you e-filing Form 990 and 990-EZ in no time. Just make sure you have your records of the last 5 years, and we can get you squared away with Schedule A.

If you run into any issues e-filing Form 990, reach out to our dedicated customer service team, who will gladly answer any of your questions. With live chat, 24/7 support email, and phone support at 704.839.2321, our customer service team is ready to help!