FACTS AND CIRCUMSTANCES TEST
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A subjective test that measures both financial and nonfinancial factors. The objective portion of this test mandates that public support must be at least 10% and that the organization be able to attract public support.
Summary
The Facts and Circumstances Test is a comprehensive evaluation used by the IRS to determine if an organization qualifies for tax-exempt status as a publicly supported charity under Section 509(a)(3). Unlike purely mathematical tests, this subjective assessment considers both quantitative financial metrics and qualitative organizational factors. The test requires organizations to meet a minimum threshold of 10% public support while also demonstrating their ability to attract ongoing public financial backing through factors like fundraising activities, board composition, and community involvement.
Usage Context
This term is crucial when studying nonprofit tax law, particularly when learning about the classification differences between public charities and private foundations, and understanding how organizations maintain their tax-exempt status.
Common Confusions
- Students often confuse this with the mechanical 33⅓% support test, not realizing this test allows for more subjective evaluation
- Misunderstanding that the 10% is a minimum threshold, not a target percentage
- Thinking that meeting the 10% automatically qualifies an organization without considering other factors
- Confusing which types of income count toward public support versus total support
