Public Charity

A public charity is the most common type of 501(c)(3) tax-exempt organization. The IRS distinguishes public charities from private foundations based on their funding sources and public support levels. To qualify as a public charity, an organization must pass one of several "public support tests" demonstrating that it receives a meaningful portion of its revenue from a broad base of donors, government grants, or program service fees rather than from a single donor or small group. The two main tests are the one-third support test (at least one-third of revenue comes from public sources) and the facts-and-circumstances test (at least 10% from public sources plus other favorable factors). Public charities enjoy several advantages over private foundations: they face less restrictive rules on self-dealing, are subject to lower excise taxes, and donations to them qualify for higher deduction limits (up to 60% of adjusted gross income for cash donations, compared to 30% for private foundation gifts). Most hospitals, universities, social service agencies, arts organizations, and community foundations are classified as public charities. The majority of nonprofits analyzed on NonprofitTruth are public charities, and their financial data from Form 990 forms the basis of our Efficiency Score calculations.