Connections for Success



Has COVID-19 Hurt Your Public Support Test Percentage?
Alison Fetzer

Not-for-profit organizations that qualify as public charities are required to pass a public support test annually to maintain their tax-exempt status. For many organizations, this test has been more of a formality than a hurdle. However, with the COVID-19 pandemic, which started in March of 2020, many not-for-profit organizations have had to cancel or change the format of their major fundraisers. As a result, organizations have seen a shift in their donor base, which could have a negative impact on the public support test.

What is the Public Support Test?

The purpose of the public support test is to ensure that public charities are funded by a variety of donors rather than just a few. The calculation required to pass the public support test is reported on Schedule A of Form 990. Public support revenue divided by total support revenue must be at least 33 1/3 % based on a rolling 5-year average. Public support consists of contributions from the public or governmental units as well as contributions from other sources, as long as the cumulative donations by a single donor are not in excess of 2% of an organization’s total support over the last five years. 

For example, NFP A has total support of $100,000 for the last 5 years. Donor B contributed $10,000 during the 5-year period. $2,000 of Donor B’s contributions count toward the public support test while the other $8,000 is considered to be an excess contribution and is not considered public support. While there is nothing to prevent donors from contributing more, it is important to recognize that these donations will be included in total support, not in public support, reducing your percentage.

Impact of COVID-19

Now that you are familiar with how the test works, let us look at how the last two years may have had an impact on a not-for-profit organization’s ability to pass the public support test.

Many not-for-profit organizations rely on in-person fundraisers for support. These events typically bring in a significant amount of public support and often a large number of donors. As these events were canceled or changed in response to COVID-19, some organizations saw a drop in donor numbers and dollars. 

This has been particularly problematic for organizations that were formed in recent years. It is very common to see a concentration in donors when an organization is first getting established. Fortunately, an organization does not have to pass the public support test for the first five years that it exists. By year six, many organizations have built a diverse donor base and can comfortably pass the 33 1/3% requirement.  Unfortunately, due to COVID-19, some organizations lost two years of cultivating their donor base.

Organizations should review their public support calculation to make sure that there are no surprises. Because the calculation is done on a rolling 5-year basis, it is possible that an organization could be fine one year, but at a risk of not passing the next. Fortunately, the IRS provides an exception for these situations. Organizations do not need to pass each year but need to pass either in the current year or the preceding year. Organizations that do not pass for two consecutive years are at risk of losing their public charity status and instead, will have to operate as a private foundation moving forward. Private foundations are subject to a variety of strict rules that most organizations will want to avoid.

This calculation can be tricky and has a lot of rules. If you have concerns about your organization’s ability to pass the public support test, please reach out to your ORBA CPA.

Related Read: Navigating the New Normal: Things To Consider To Ensure That Your Not-for-Profit Organization Survives in This Uncertain Time

For more information, contact Alison Fetzer at [email protected] or 312.670.7444. Visit to learn more about our Not-For-Profit Group.

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