Public Charity Status

Worldwide University has 501(c)(3) approval with Public Charity Status 509(a)(2).

The basic principle

A publicly supported public charity has to show that it gets its support from lots of places, that it, that it has "public support." For example, its finances may not depend heavily on investments, its own board members, or a few big donors.

The details

1. In any one year, income from investments may not be more that one-third of the organization’s total support.
2. In any one year, at least one-third of the organization’s total support must come from one or more of the following sources:
   1. Gifts, grants, contributions and membership dues from nondisqualified persons.* These may be government grants, membership fees and/or contributions made directly or indirectly by the general public (including from other publicly supported organizations)
   2. Admission fees to exempt function facilities or performances (e.g. attendance at seminars and conferences)
   3. Fees for the performance of exempt function services (e.g. student fees)
   4. Sales of goods related to the organization’s activities (e.g. sale of books to students and staff)

*"Disqualified persons" are:
    • officers, directors, trustees, etc.
    • substantial contributors, that is any one person or organization that contributes more that USD$5,000 or 1 percent of the support for the year.

The organization can still accept income from disqualified persons, but it doesn't count in the "at least one third."

"Disqualified persons" do not include contributions from other publicly supported organizations.

Implications

1. In the first year, it is easy for any contributor to go over the 1% limit.
2. WU must be able to monitor its risk of falling short of the 33% minimum.
3. WU must be able to track its donations by donor. One classified as a "substantial contributor," it is difficult for that donor to lose that status.
4. The principle of "at least 33%" might affects the business model.

Actual text of 509(a)(2)

• (2) an organization which—
• (A) normally receives more than one-third of its support in each taxable year from any combination of—
• (i) gifts, grants, contributions, or membership fees, and
• (ii) gross receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in an activity which is not an unrelated trade or business (within the meaning of section 513), not including such receipts from any person, or from any bureau or similar agency of a governmental unit (as described in section 170(c)(1)), in any taxable year to the extent such receipts exceed the greater of $5,000 or 1 percent of the organization’s support in such taxable year,
   
  from persons other than disqualified persons (as defined in section 4946) with respect to the organization, from governmental units described in section 170(c)(1), or from organizations described in section 170(b)(1)(A) (other than in clauses (vii) and (viii)), and
• (B) normally receives not more than one-third of its support in each taxable year from the sum of—
• (i) gross investment income (as defined in subsection (e)) and
• (ii) the excess (if any) of the amount of the unrelated business taxable income (as defined in section 512) over the amount of the tax imposed by section 511;