Public Charity Status Denied


Code §501(c)(3) organizations usually prefer to be classified as a public charity and not a private foundation. Private foundations are subject to excise taxes and limitations on donor charitable deductions that public charities do not have to deal with, among other disadvantages.

The usual route to public charity status is to meet certain numerical tests that show the foundation has broad funding. Organizations with a limited number of donors will not pass these tests. All is not lost for such organizations. If they can show they are operating for the benefit of one or more other specific public charities, they can qualify as Code §509(a)(3) “supporting organizations” which are treated as public charities.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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