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How much can donor give?

Your Legal Questions Answered

How much can donor give?

What is the maximum contribution as a percentage of total support that an individual can give without tipping a 501(3)(c) public charity into being declared a private foundation?

It must be nice to have such concerns.  The principles are clear but the precise answer isn’t easy.  If you are not a church, school, or hospital (which are automatically deemed to be public charities) or a supporting organization, you have to meet a public support test based on your total support and the various sources of income over a moving five-year period.  Although the basic requirement is to have one-third public support over the period, for those organizations qualifying on the basis of contributions (and not counting fees from charitable services), the percentage can dip as low as 10% under the “facts and circumstances” test.  Therefore, depending on how the rest of your support is diversified, a single donor might be able to give up to 66% of all support over the five years without going into the facts and circumstances test and might be able to give nearly 90% of the total support under the facts and circumstances test without tipping the organization.  Plug your actual numbers into Schedule A of the Form 990 tax information return and you can figure out the approximate size of the gift that will cause you to tip. 

Even if you tip over five years, you have another year to raise sufficient other income to avoid the reclassification.  And if you tip because the big donor made a single big gift, you may be able to exclude it from the calculation altogether as an “unusual grant.”  (See Ready Reference Pages: “Calculating Public Support” and “New Schedule A Reflects Change in Public Support Rules”)

The bottom line generally is: take the money and figure out how to deal with it later.

Tuesday, April 2, 2013

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