The organization meets the public support test for 501c3 tax exempt status, i.e. at least 1/3 (33.3%) of donations are given by donors who give less than 2% of the nonprofit’s overall receipts.

November 1, 2021

By Megan Pierce, Donor Services Director

private foundations vs. public charities.  Both organizational types are considered tax-exempt 501(c)(3) nonprofits, but the requirements regarding donor support are quite different.  Private foundations are typically closely-governed nonprofits, and the purpose of most private foundations is to fund the work of public charities.  In addition to being allowed to have close control, private foundations also can be closely funded, even by just one individual.  Many family foundations are governed and funded by members of a single family.

Public charities, on the other hand, the preferred organizational choice of most 501(c)(3)s, are expected to have both diverse control and diverse funding.  On the control side, the IRS expects charity boards to have a majority of members who are unrelated by blood, marriage, and outside business ownership.  As for funding sources, charities are required to have a broad base of public support, which is where the public support test comes in. The simplest definition of the IRS public support test states that at least 1/3 (33.3%) of donations must be given by donors who give less than 2% of the nonprofit’s overall receipts.  Exceptions include any gifts received from other donative public charities and/or a government source, such as a state or federal grant.