Retain Your Organization’s Public Charity Status Using the 10%Facts-and-Circumstances Test

For many public charities, the Schedule A support test is arguably one of the most important parts of Form 990—which is how the IRS provides the public with information on a not-for-profit’s revenue sources. That’s because any organization that doesn’t meet the public support test risks losing its status as a public charity.

In this scenario, the organization would still be tax exempt, but converted to a private foundation. For organizations described in Internal Revenue Code Section 170(b)(1)(a)(iv) or 170(b)(1)(a)(vi) that complete the support test on Part II of Schedule A, there are two chances to pass it.

To maintain their status, organizations must normally first pass the 33 1/3% support test by demonstrating at least a third of their total financial support comes from the public. That threshold is crucial because it provides a bright-line standard for an organization to meet. If an entity fails to meet that test, however, it can still retain its public charity status through the more subjective 10%-facts-and-circumstances test.

How It Works

To fulfill the 10%-facts-and-circumstances test, an organization must explain how it meets the various criteria on Part VI of Schedule A of Form 990. The requirements to pass the test are detailed in Treasury Regulation 1.170A-9(f)(3). Read more here

Join us Thursday, February 13th for our "Understanding Schedule A on Form 990" training  facilitated by Pamela Alexanderson, CPA Tax Director and Steven Talbot, CPA Tax Senior Accountant.

Share This