What is a 509(a) Tax Status?

What does it mean to have a 509(a) status in the United States? What provision does the law offer, and which government agency grants this distinction and oversees them?

Organizations that are classified as 501(c)(3) tax exemption status are further classified by the government as one of five types under section 509(a) of the Internal Revenue Code. These categories include private foundations and four different types of public charities. According to the IRC, any organization that does not classify as a public charity is designated as a private operating foundation or private non-operating foundation.

While private foundations typically receive money from a small number of donors, public charities are organizations that receive a significant amount of their revenue from the public or government. To remain a public charity, at least one-third of revenue must be from a broad base of public support. When you complete Form 1023 to file for 501(c)(3) status, you’ll be asked questions in Part X that the IRS will use to classify your organization.

509(a) Subdivisions

509(a)(1) 

Public-supported charities that receive funding (cash and others) from donors, parishioners, and others. These include churches, schools, and hospitals.

509(a)(2) 

Must pass two tests: one that determines whether it receives more than one-third of its funding from the general public in the form of gifts, contributions, membership fees, or sums paid for the performance of an exempt function; and the other limiting the amount of funding it receives from gross investment income and certain unrelated trade or business income to no more than one-third of its overall funding.

509(a)(3) 

A “supporting organization” is a charitable organization that carries out its exempt purposes by assisting other exempt organizations, usually public charities.

509(a)(4)

Organizations that operate for testing for public safety.

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