Similar to private foundations, public charities also have sub-categories, which dictate how they’re funded and which category they fall under in the tax code.
Statutory public charities – these public charities use donations for their own activities rather than issue grants for other causes. These include hospitals, research institutes, schools and churches.
Public charities supported by donations – these charities get a minimum percentage of funding from several donors that come from various sectors, rather than just one benefactor. To be categorized under this, a foundation must pass a public support test which will prove that a fraction of their total funding comes from the general public. Examples of charities under this category include the YMCA, and the Red Cross.
Public charities receiving exempt function income – these charities get their funding from the money they get from the services they offer. Public charities can earn money for their own activities selling tickets, food, admission and other services. While these charities can be self-sufficient, their investment income must not go over one-third of total funding support. Examples of charities under this category include museums and theaters.
Supporting charities – charities under this category don’t have their own activities; instead, they raise funds or manpower to support other charitable foundations. They can support more than one foundation at a time. Supporting charities can make grants, but should follow strict guidelines.