Section 509 A 2

The test to classify an organization as a 509 a 2 public charity is strictly a mechanical test.

Section 509 a 2. Subsection a 1 includes churches schools hospitals and other charities that are publicly supported by a broad range of donors including those described in section 170 b 1 a vi as your organization is. By an organization described in paragraph 1 or 2 of section 509 a of such code shall be treated as related to the purpose or function constituting the basis for such organization s exemption under section 501 of such code if such payments are made in good faith using a reasonable and objective formula which is consistently applied. Section 509 a 2 limits investment income september 10 2015 tgccpa the irs has four categories under sec.

See ready reference page. 509 that allow an organization to be a public charity but the two most common are 509 a 1 and 509 a 2. This investment income test can be difficult for some organizations to pass such as those having a large endowment that generates a lot of investment income.

Section 509 a has four subdivisions. Section 509 a 2 covers organizations that receive their support from a combination of gifts grants and contributions and fees for their exempt services. The methods of calculating these public support levels can be tricky.

A publicly supported charity described under section 509 a 2 must pass a public support test demonstrating that it is primarily supported through income earned from conducting activities in furtherance of its charitable purposes. Subsection a 2 includes charities that are broadly publicly supported primarily through fees for services like a nursing home. 509 a 2 organizations that receive support from a combination of gifts and fees for their exempt services.

A 35 percent controlled entity as defined in section 4958 f 3 by substituting persons described in clause i or ii of section 509 f 2 b for persons described in subparagraph a or b of paragraph 1 in subparagraph a i thereof. In order to qualify as a public charity under section 509 a 2 an organization 1 must normally receive more than one third of its support from any combination of gifts grants contributions membership fees and gross receipts from certain permitted sources described below and 2 must not receive more than one third of its support from gross investment income and unrelated business income less tax. The characteristics of an a 1 public charity were discussed in previous articles.