Public Charity
A public charity is a 501(c)(3) nonprofit that receives a substantial portion of its support from the general public or government, as opposed to a private foundation.
A public charity is a type of 501(c)(3) tax-exempt organization that derives a substantial portion of its funding from the general public, government grants, or other public sources. Most nonprofits that fundraise — schools, hospitals, social service agencies, arts organizations — are classified as public charities.
Why It Matters for Fundraising
The distinction between public charities and private foundations matters for several reasons. Public charities face fewer restrictions on their activities, receive more favorable tax treatment for donors (higher deduction limits), and don't have to distribute a minimum percentage of assets annually. To maintain public charity status, organizations must pass a public support test — demonstrating that their funding comes from a broad base, not just one or two donors.
Public Support Test
The IRS requires public charities to show that at least one-third of their support comes from public sources (or that they meet a facts-and-circumstances test). Organizations that fail this test risk reclassification as private foundations, which face stricter rules and oversight. This is why donor diversification matters beyond just financial risk.