The Public Support Test: Troubleshooting When You’re Close to the Line

What Is the Public Support Test—and Why It Matters

The public support test is an IRS requirement used to determine whether a nonprofit qualifies as a public charity instead of a private foundation. To retain public charity status, most organizations must demonstrate that a substantial portion of their financial support comes from the general public, governmental units, and other public charities, usually at least one‑third (33⅓%) of total support over a rolling five‑year period.

To make the calculation, organizations report contributions, grants, and certain revenue streams on Schedule A of Form 990, which the IRS uses to evaluate the five‑year average. The IRS monitors this annually. An organization that passes the test is treated as a public charity for the current year and the following year.

If the public support percentage slips too low, the IRS may reclassify the organization as a private foundation bringing stricter rules, excise taxes, potential donor hesitation, and reduced operational flexibility. Avoiding that outcome requires early detection, good board oversight, and strategic revenue management.

1. What “Close to the Line” Really Means

You’re in the danger zone if:

• Your public support ratio is hovering near 33⅓%,
• You’ve had a drop in broad‑based fundraising,
• A few donors contribute the majority of your support, or
• You rely heavily on revenue sources that do not count as public support.

Because the test uses a five‑year computation period, even a single unusual year, like a large bequest or an investment windfall, can distort the trend and push you closer to the threshold.

Being at 34% or 35% doesn’t necessarily mean you’re safe. It may simply delay the problem by a year or two.

2. Identify What’s Pulling the Percentage Down

Donor Concentration

If a donor gives more than 2% of your total support during the five‑year period, any amount above that cap cannot be counted as public support. That excess still increases total support which may push your percentage down.

Non‑public revenue streams

Certain revenue sources dilute your public support ratio because they increase total support but don’t qualify as public support. These commonly include:

• Investment earnings
• Unrelated business income
• Large capital gifts
• Certain fee‑for‑service government contracts

Some organizations that qualify under 509(a)(2) must also avoid relying on too much investment or unrelated business income, since those categories have separate caps.

Large, sporadic inflows

Bequests or one‑time major gifts can dramatically shift the denominator of the calculation.

Understanding your revenue mix is essential for diagnosing where the risk lies.

3. Strengthen Public Support Before the Year Ends

If you discover the issue early enough, you may be able to influence the current year’s computation.

Expand donor participation

Small‑dollar contributions across many individuals meaningfully increase public support. The test values breadth, not just dollars.

Prioritize recurring giving

Monthly and quarterly donor programs stabilize both revenue and donor counts.

Host community‑facing events

Ticket sales or small sponsorships from the public generally count as public support.

Encourage workplace giving, matching programs, and donor‑advised fund grants

These sources tend to diversify your donor base.

Three to six months of focused effort can materially impact a close calculation.

4. Review Your Revenue Classifications

Nonprofits sometimes appear to fail the test not due to lack of support but because items are miscoded.

Common classification corrections include:

• Government funding: Many grants are actually treated as contributions rather than program revenue, depending on their structure.
• Membership dues: If benefits are insubstantial, dues may qualify as contributions.
• Restricted major gifts: Only the portion that falls under the 2% cap is public support, but the rest still increases total support.

Re‑evaluating classifications can help uncover public support you actually do have.

5. Use the Facts‑and‑Circumstances Test When Applicable

An organization that fails the 33⅓% test may still qualify as a public charity if:

• It receives at least 10% public support, and
• It demonstrates a bona fide connection to the community.

To qualify under this secondary test, the IRS considers factors such as:

• A representative, independent governing board
• Active and continuous fundraising directed to the public
• Broad community programs
• Transparent operations and public accountability

This test isn’t guaranteed, but for organizations near the threshold, it can serve as a critical safety net.

6. Build a Long‑Term Plan for Stability

Diversify revenue intentionally

Broad support isn’t achieved accidentally, build systems that systematically reach many donors.

Anticipate large transactions

If you expect a major bequest or capital campaign, prepare in advance by strengthening public support in surrounding years.

Monitor the ratio annually

Waiting until the Form 990 is being prepared is too late. Management and the board should monitor the public support ratio as part of regular financial reporting.

Educate your board

Board members should understand the public support test and how their strategic decisions—fundraising, communications, programming—impact compliance.

7. Work with Professional Advisors

Because the details of what qualifies as public support can be nuanced, and because both 509(a)(1) and 509(a)(2) have different rules, it’s wise to work closely with nonprofit tax professionals.

Advisors can help:

• Model five‑year impact scenarios
• Evaluate donor concentration trends
• Analyze classification of revenue streams
• Prepare documentation for the facts‑and‑circumstances test
• Recommend diversification strategies

A proactive approach dramatically reduces the likelihood of reclassification.

The public support test isn’t just an IRS calculation; it’s a reflection of how connected your organization is to the community it serves. Falling close to the line shouldn’t spark panic, but it should spark action.

By regularly monitoring your ratio, understanding what affects it, and strengthening the breadth of your support, you can maintain your public charity status confidently and avoid unwelcome surprises.