NEW CASTLE —
The test of a charity
According to the test developed by the courts, charities:
•Advance a charitable purpose
•Donate or render gratuitously a substantial portion of its services
•Benefit a substantial and indefinite class of persons who are legitimate subjects of charity
•Relieve the government of some of its burden
•Operate entirely free from private profit motive.
As for the private profit motive, the Institutions of Purely Public Charity Act states that even if an institution’s revenue exceeds expenses, it can satisfy the prohibition against a profit motive by:
•Showing there are no shareholders who profit
•That director compensation is not based primarily on financial performance
•And revenue above expenses is reinvested into operations.