Part VII. Foundation Classification

Organizations that are exempt under section 501(c)(3) are private foundations unless they are:

• Churches, schools, hospitals, governmental units, entities that undertake testing for public safety, organizations that have broad financial support from the general public; or

• Organizations that support one or more organization(s) that are themselves classified as public charities.

Section 501(c)(3) organizations excepted from private foundation classification are public charities . Unless you meet one of the exceptions above, you’re a private foundation.

TIP

You can only select one foundation classification.

Line 1. Select the foundation classification you’re requesting from the list below. The form will then take you to additional lines or parts of the application that you must complete based on your response.

509(a)(1) and 170(b)(1)(A)(vi). Select this classification if you normally receive a substantial part of your support from grants from governmental units or from contributions from the general public, or a combination of these sources. Typically, you would show a substantial part of your income on Part VI-A. Statement of Revenue and Expenses, lines 1 and 2.

Under this public charity classification, you must meet the one-third public support test or 10% facts and circumstances test. See Pub. 557 for more information.

Public support test. An organization must receive either:

1. At least one-third of its total support from governmental agencies, contributions from the general public, and contributions or grants from other public charities; or

2. At least 10% of its total support from governmental agencies, contributions from the general public, and contributions or grants from other public charities; and also satisfy a facts and circumstances test.

Facts and circumstances test. Facts and circumstances include:

1. The amount of support you received from the general public, governmental units, or public charities;

2. Whether you have a continuous and bona fide program for solicitation of funds from the general public, governmental units, or public charities, or carry on activities designed to attract support from organizations or other governmental units, and

3. All other facts and circumstances, including the public nature of your governing board, the extent to which your facilities or programs are publicly available, the extent to which nature your dues encourage membership, and whether your activities are likely to appeal to persons having a broad common interest or purpose. For additional information about the 10% facts and circumstances test, see Pub. 557 and Reg. 1.170A-9(f)(3).

509(a)(2). Select this classification if you normally receive more than one-third of your support from contributions, membership fees, and gross receipts from activities related to your exempt functions, or a combination of these sources, and not more than one-third of your support from gross investment income and net unrelated business income . Typically, you would show a substantial part of your income on Part VI-A. Statement of Revenues and Expenses, lines 1, 2, and 9.

Under this public charity classification, you must meet both the “one-third public support test ” and the “not-more-than-one-third investment income and net unrelated business income test,” lines 1 through 13. See Pub. 557 for additional information about these tests.

509(a)(1) and 170(b)(1)(A)(i). Select this classification if your primary purpose is operating a church or convention or association of churches. The term “church” includes mosques, temples, synagogues, etc. If you select this box, complete Schedule A.

509(a)(1) and 170(b)(1)(A)(ii). Select this classification if your primary purpose is operating a school . If you select this box, complete Schedule B.

If you operate a school but it isn’t your primary purpose, don’t select this classification. However, you must still complete Schedule B. See Part IV, line 12.

509(a)(1) and 170(b)(1)(A)(iii). Select this classification if your primary purpose is providing medical or hospital care or medical eduction or research (performed in association with a hospital). If you select this box, complete Schedule C.

A hospital includes a rehabilitation institute, outpatient clinic, community mental health clinic, drug treatment center, or skilled nursing facility. A hospital doesn’t include convalescent homes, homes for

14 Instructions for Form 1023

(1) and 170(b)(1)(A)(vi) or 509(a)(2)) for you.

Private foundation. Select this classification if you don’t meet one of the exceptions listed above.

Line 1a. Section 508(e) provides that a private foundation isn’t tax exempt unless its organizing document contains specific provisions. These specific provisions require that you operate to avoid liability for excise taxes under sections 4941(d), 4942, 4943(c), 4944, and 4945(d). You can also meet these provisions by reliance on state law.

See Pub. 557 for samples of provisions that will meet section 508(e). Also, see Appendix B for a list of states that have enacted statutory provisions that satisfy the requirement of section 508(e), subject to notations. Appendix B is based on Rev. Rul. 75-38, 1975-1 C.B. 161.

Line 1c. Some private foundations are private operating foundations . Private operating foundations make qualifying distributions directly for the active conduct of their educational, charitable, and religious purposes. “Directly for the active conduct” means that you use the distributions yourself to carry out the programs for which you’re organized and operated. Grants made to assist other organizations or individuals are normally considered indirect.

Line 1d. If you have existed for 1 year or more, you must provide information that demonstrates you meet the requirements to be classified as a private operating foundation, including the income test and either the endowment test, the assets test, or the support test. If you have existed for less than 1 year, you must sufficiently describe how you’re likely to meet these requirements and tests. You may also submit an affidavit or opinion of counsel giving enough facts about your operations and support to enable us to determine that you’re likely to meet these requirements.

See Pub. 557 for additional information about private operating foundations.

Line 2. Confirmation of public support status. If you have been in existence for more than 5 years, and you requested classification as a public charity described in sections 509(a)(1) and 170(b)(1)(A)(vi), you must confirm that you meet the public support test.

To show that you meet the required public charity support test, complete lines 2(i) and 2(ii). Calculate your public support based on the accounting method you used to complete Part VI-A, Statement of Revenues and Expenses.

Line 2(i). 509(a)(1) and 170(b)(1)(A) (vi). Check “Yes,” if you received contributions from any person, company, or organization (other than a governmental

unit described in section 170(c)(1) or a publicly supported organization under section 170(b)(1)(A)(vi)), whose gifts totaled more than 2% of the amount on the total of amounts entered on line 8 of Part VI-A, Statement of Revenue and Expenses, and identify those contributors by letter (A, B, C, etc.) and list the amount(s) contributed by each. Keep, but don’t submit, a list of the names of your donors with the associated letter designations.

Line 2(ii). Use Schedule A (Form 990 or 990-EZ) Public Charity Status and Public Support, Part II, Support Schedule for Organizations Described in Sections 170(b)(1)(A)(iv) and 170(b)(1)(A)(vi), and its instructions to determine if you met the public support test for your most recent 5-year period.

Line 2a(i). 509(a)(2). Check “Yes,” if you received amounts listed on lines 1, 2, and 9 of Part VI-A, Statement of Revenue and Expenses, from any disqualified persons and identify those disqualified persons by letter (A, B, C, etc.) and list the amounts contributed by each. Keep, but don’t submit, a list of the names of your donors with the associated letter designations.

Line 2a(ii). Check “Yes,” if you received amounts paid by an individual or organization greater than the larger of 1% of line 10, of Part VI-A, Statement of Revenues and Expenses, or $5,000 for any completed tax year, and identify those individuals or organizations by letter and list the amount(s) received from each. Keep, but don’t submit, a list of the names of your donors with the associated letter designations.

Don’t include disqualified persons