What's the difference between a public charity and a non-exempt charitable trust?

Every organization exempt under section 501(c)(3) falls into one of two classes: public charity or private foundation. A non-exempt charitable trust sits outside that split. It isn't exempt under section 501(c)(3), but the tax code still applies some private foundation rules to it.

Public charities

An organization is generally a public charity if it meets any one of the following:

• It's a church, a hospital, a qualified medical research organization affiliated with a hospital, or a school, college, or university
• It runs an active fundraising program and receives contributions from many sources, including the general public, government agencies, corporations, private foundations, or other public charities
• It receives income from activities that further its exempt purposes
• It functions in an active supporting relationship to one or more existing public charities

Private foundations

A private foundation usually has a single major source of funding, such as gifts from one family or one corporation, rather than support from many donors. Most private foundations exist mainly to make grants to other charitable organizations and to individuals rather than to run charitable programs directly.

Non-exempt charitable trusts

The Internal Revenue Code applies some of the same requirements and restrictions to non-exempt charitable trusts that it applies to private foundations. Those rules apply when the trust's unexpired interests are devoted to charitable purposes and a charitable deduction was allowed for them. The aim is to keep a trust of this kind from being used to avoid the rules private foundations have to follow.