The public support test is a provision of IRS tax code that requires most public charities to meet to maintain their tax-exempt status. The test ensures that a nonprofit’s income comes from a diverse set of donors or payors for charitable services, rather than from a single source. If your public charity fails the public support test, the IRS could change your status to that of a private foundation. This effect is commonly known as “tipping.”
IRS Pub. 557: Tax-Exempt Status for Your Organization has a section on qualifying as publicly support that describes how to look at where your organization’s funding comes from and calculate your level of public support.
To calculate the public support of a nonprofit, divide the amount of public support by the total support received. If the nonprofit receives 33.33% or more of its total support from public support, then it qualifies as a public charity.
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