Fiscal Sponsorship
In the simplest terms, "fiscal sponsorship" is one entity accepting and managing funds for another. The fiscal sponsor commits to supporting the charitable activities of individuals or groups by extending its tax-exempt status, thus enabling donors to make tax-exempt contributions to support their work. The fiscal sponsor accepts financial and legal LIABILITY for the charitable work being done by the group or individuals.
Fiscal sponsorship is commonly used when an emerging program or an individual, like an artist wants to secure funding from sources that give only to nonprofit organizations with IRS tax-exempt status. These can include foundations, government agencies, corporations, or individual donors who wish to receive tax deductions in return for their contributions. To be considered exempt, an organization must hold a current 501(c)(3) certificate from the IRS.
According to standard principals and law, the charitable activities of the programs and projects sponsored by a fiscal cal sponsor must be consistent with the fiscal sponsor's charitable purposes and activities. Having a nonprofit fiscal sponsor does not make sponsored program "nonprofit" or "tax-exempt" – ONLY the IRS can make a tax-exempt ruling. It is important to note that the sponsor must exercise control over the funds that it receives on behalf of the project. In fact, the sponsor may lose its tax- exempt status for failure to exercise sufficient control, permitting those funds to be used in a non-charitable manner.
At this time, there are only a handful of organizations in the country that have a dedicated practice of providing fiscal sponsorship services to charitable efforts. However, small organizations that prefer not to attempt the involved and costly process of securing tax-exempt status themselves may decide instead to contract with a nonprofit fiscal sponsor to extend tax-exempt status to their project.
Fiscal sponsorship offers a great advantage for those who are launching new endeavors, where the long-term viability of the project is yet to be determined. Operating under a fiscal sponsor allows community leaders to begin programs and services for a trial or incubation period prior to deciding to file for independent incorporation. Similarly, programs who have been operating informally for some time and are beginning the process of incorporation, may want to apply for charitable funds through a fiscal sponsor while that incorporation process is under way. Others choose to remain fiscally sponsored for a longer period of time, making use of the nonprofit's infrastructure to support their projects and focus on their mission.
If you are interested in applying to Fusion for Fiscal Sponsorship, please see our website for a Program Application.
For more information,
Greg Colvin’s book:, Fiscal Sponsorship: Six Ways to Do It Right
www.tidescenter.org and check out the link to National Network of Fiscal Sponsors
www.fiscalsponsordirectory.org
others fiscal sponsors: www.tsne.org