Operational Requirements for Exempt Organizations FAQ # 4 |
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What is an advance ruling period and what are the requirements?
A section 501(c)(3) organization may be classified as a public charity (rather than as a private foundation) on the basis that it is publicly supported. An organization is considered publicly supported if:
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It normally receives a substantial part of its support from a governmental unit or from contributions from the general public; or,
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It normally receives more than one-third of its support from gifts, grants, contributions, or gross receipts from activities related to its exempt purposes, and not more than one-third of its support from gross investment income.
In addition, the organization must meet the requirements of detailed support tests.
Generally, an organization computes its support over a four-year period. A new organization, however, may request on its application an advance ruling that it will be treated as a publicly-supported organization for its first five taxable years. At the end of the five-year advance ruling period, the organization must submit information to the IRS to establish that it met one of the public support tests for its advance ruling period. If the organization fails to provide such information, it will be reclassified as a private foundation.
An organization that wishes to continue to be treated as a public charity after the end of its advance ruling period should submit Form 8734, Support Schedule for Advance Ruling Period, within ninety days after the end of the advance ruling period. Failure to submit Form 8734 results in your organization automatically being reclassified as a private foundation required to file Form 990-PF.
NOTE: New regulations change the requirements for rulings and determinations that organizations are publicly supported. See Elimination of the Advance Ruling Process, for the latest information, including changes to filing requirements for organizations that have received advance rulings of their status as publicly supported organizations.
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Page Last Reviewed or Updated: January 07, 2009