Passing the Public Support Test: Why 33.3% Matters to Your Non-Profit

by Kimberly Zingale, CPA – Senior Accountant

As a requirement for maintaining tax-exempt status, non-profit organizations complete an annual informational return entitled Form 990 that’s available to the public. In addition to the twelve-page core form, the 990 has a number of supporting schedules that provide more detail and disclosure about topics that would interest potential donors, such as lobbying, grant-making, and fundraising activities. Publicly supported organizations that are tax-exempt under section 501(c)(3) of the Internal Revenue Code must complete Schedule A, sometimes referred to as the public charity or public support test. Schedule A has several parts (including a new Part V for 2014), and the focus of this article is Part II, which applies to organizations that “normally receive a substantial part of support from a governmental unit or from the general public.”

The Calculation

In order to maintain public charity status, an organization needs to receive at least 33.3 percent of its support from the government or general public over a five-year period, which is composed of the current year and the prior four years. Organizations are not required to calculate the public support percentage until their sixth year of existence, giving them time to establish broad support. The numerator of the percentage is the total contributions and grants received in the five-year period, less the amount of total contributions received from any one contributor (other than a governmental unit or public charity) that exceeds 2 percent of the total contributions and grants received in the five-year period. The denominator is the total contributions and grants, investment income, unrelated business income, and all other income except program-related income and gain and loss from the sale of capital assets. An organization passes the test if the numerator divided by the denominator is at least 33.3 percent.


For many organizations, passing the test has never been a concern; others, however, may experience test anxiety. If the test is failed two years in a row, the organization automatically reverts to private foundation status, which has more restrictive regulations than a public charity. Fortunately, the IRS offers a second chance for organizations with over 10 percent public support but not more than 33.3 percent, called the “facts and circumstances test.” In this situation, the organization must provide the IRS an explanation of why it should be considered publicly supported and what it is doing to increase its percentage.

Potential Problems

Publicly supported organizations, especially those with a low percentage of public support, need to beware of “tipping.” This occurs when a large foundation grant adversely affects the public support calculation by increasing the denominator more than it increases the numerator. When receiving a grant that causes tipping, the organization can evaluate if the grant is “unusual,” which may allow it to be excluded from both the numerator and denominator. Some factors to be considered include whether the grant was from a first-time donor, whether there is a pre-existing relationship between the donor and the organization, the form of payment of the grant, and whether the organization met the public support test in the year prior to receiving the grant without the benefit of unusual grant exclusions.


Calculating and measuring public support on Schedule A of Form 990 is a complex and nuanced task, yet vitally important to publicly supported tax-exempt organizations. We typically recommend that management understand how public support is calculated and work with us to monitor the percentage throughout the year, especially for those with a low percentage of public support and those who failed this test the prior year.