A section 501(c)(3) charitable organization may operate as either a public charity or a private foundation. Public charities include organizations that:
- Conduct specific charitable activities, such as schools, churches, medical research centers, hospitals and others;
- Receive more than a third of their revenue from public sources or from the performance of their charitable activities, such as museums, symphonies, ballet companies and theaters; or
- Have a close relationship with another public charity such that they support that public charity.
There are numerous advantages to being a public charity versus a private foundation including a larger charitable deduction for donors and less onerous operational rules. However, public charities must meet very specific rules under the federal tax laws.
Relevant considerations for public charities are:
- Fundraising activities
- Charitable programs and the revenues they generate
- Community leaders’ participation as board members
- Endowment and investment goals
- Charitable solicitation and registration requirements