The Key to Maintaining Public Charity Status

    In this article, Michael Sorrells explains how 501(c)(3)s maintain their public charity status. Many charities must undergo an annual public support test to maintain their public charity and tax exempt status. The test is completed annually on Schedule A. Organizations like churches, schools, hospitals, etc. must only complete part I of the test, which identifies the type of organization because they are exempt from parts II and III. Other 501(c)(3) organizations must complete one of two support schedules, either part II or part III depending on what type of organization the charity is. Part II organizations normally receive a substantial part of support from a governmental unit or from the general public. Part III organizations normally receive (1) more than 33.33% of its support from contributions, membership fees, and gross receipts, and (2) no more than 33.33% of its support from gross investment income and unrelated business expenses. Each of these tests looks at the cumulative support for the year reported and the prior four years. For more information of how to maintain public charity status, click here: https://www.nonprofitaccountingbasics.org/federal-tax-issues/schedule-key-maintaining-public-charity-status

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