A foundation is publicly supported if --
- It normally receives a substantial part of its support (other than income from its exempt function) from gov?ernmental units or from direct or indirect contributions from the general public, or
- The foundation both --
- Normally receives more than a third of its support from gov?ernmental units, certain publicly supported charities, and persons other than disqualified persons, in gifts, grants, contributions, member?ship fees, and gross receipts from activities that are not an unrelated trade or business (but only including gross re?ceipts from any person, or bureau or similar agency of a governmental unit, that are not more than the greater of $5,000 or one percent of the foundation’s support for the tax year), and
- Does not normally receive more than a third of its support from gross in?vestment income plus any excess of unrelated business taxable income over the tax on unrelated business income.
For purposes of 1 above, a substantial part of the foundation’s sup?port generally is a third of its total support, based on a five-year computation period that consists of the current tax year and the four years immediately preceding the current year. However, if the founda?tion does not meet this one-third support test, it may still qualify as deriving a substantial part of its support from governmental units and from the general public if it:
- Normally receives at least ten percent of its sup?port from these sources,
- Satisfies the attraction of public support requirement by being organized and oper?ated to attract new and additional public or governmental support on a continuous ba?sis, and
- Satisfies some or all of five public support factors:
- Percentage of financial support
- Sources of support
- Representative governing body
- Availability of public facilities or services
- Additional factors pertinent to membership organizations
"Substantial public support" is discussed in detail in Publication 557, Tax-Exempt Status for Your Organization PDF.