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"Publicly Supported" - Exempt Operating Foundation

A foundation is publicly supported if--
  1. It normally receives a substantial part of its support (other than income from its exempt function) from gov­ernmental units or from direct or indirect contributions from the general public, or

  2. The foundation both--

    a.  Normally receives more than a third of its support from gov­ernmental units, certain publicly supported charities, and persons other than disqualified persons, in gifts, grants, contributions, member­ship fees, and gross receipts from activities that are not an unrelated trade or business (but only including gross re­ceipts from any person, or bureau or similar agency of a governmental unit, that are not more than the greater of $5,000 or one percent of the foundation’s support for the tax year), and

b.  Does not normally receive more than a third of its support from gross in­vestment income plus any excess of unrelated business taxable income over the tax on unrelated business income.

For purposes of (1) above, a substantial part of the foundation’s sup­port generally is a third of its total support, based on a five year computation period that consists of the current tax year and the four years immediately preceding the current year.  However, if the founda­tion does not meet this one-third support test, it may still qualify as deriving a substantial part of its support from governmental units and from the general public if it:

  1. Normally receives at least ten percent of its sup­port from these sources,

  2. Satisfies the attraction of public support requirement by being organized and oper­ated to attract new and additional public or governmental support on a continuous ba­sis, and

  3. Satisfies some or all of five public support factors:
    • Percentage of financial support
    • Sources of support
    • Representative governing body
    • Availability of public facilities or services
    • Additional factors pertinent to membership organizations

"Substantial public support" is discussed in detail in Publication 557, Tax-Exempt Status for Your Organization.


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