So let’s say you have a really good idea for a tax-exempt organization, and hooray it’s charitable activities so you’re all set to ask the IRS for recognition! You even have some potential funding sources, and you’re ready to go. But oh that pesky IRS recognition process – until recently Form 1023s could take up to a year or more to process! Sure you can wait, but you can also find an existing (c)(3) to be your fiscal sponsor and get going much more quickly. On this episode, we chat about how fiscal sponsorships work.
Attorneys for this episodeLeslie Barnes Tim Mooney Quyen Tu
1. What is a Fiscal Sponsorship?
Orgs that let you borrow their nonprofit designation. Mostly (c)(3), but (c)(4) can be a fiscal sponsor. File Notice of Intent to Operate as (c)(4) with IRS Form 8768
Their nonprofit rules = your nonprofit rules.
Employment policies (compensation, benefits, hiring/firing, anti-discrimination, etc)
Benefits = operational support for your project – HR, Legal, Accounting, Tax – allowing you to focus on your programs.
2. Types of Fiscal Sponsorships
Two different ways this is done. IRS has various models. Money does to the FS, there’s an agreement between the parties (sponsor and project)
Examples: Tides Center sponsors Lift Louisiana, a project focused on improving health outcomes for Louisiana women, families, and their communities
Examples: Burning Man Project own Black Rock City, LLC (a single member limited liability company) under a Model L sponsorship, BRC hosts an annual art and culture event, based on self-reliance.
3. To Fiscal Sponsorship or not?
Project Perspective: Quickest way to “get up and running” for funders. Provides many of the traditional markers of established orgs.
Is your org staffed to meet admin and compliance independently?
Do you want to seek GOS grants
Their rules = your rules: Will your project involve lobbying, voter registration drives, or other types of
nonpartisan civic engagement?
Fiscal sponsor perspective
Fiscal sponsor must maintain control over project, assets, and liabilities
4. Spinning Off or Exiting the Fiscal Sponsorship
Sponsorship agreement should include an off ramp
Provisions for transferring assets, including IP
Example from Tim – X-PAC fiscally sponsored by Portland League of Women Voters
5. Seek Legal Advice
Resources
Bolder Advocacy’s Project Grant Rule Hub – complete with explainer videos, sample budgets, and factsheets for funders and projects. Private foundations that award grants to sponsored projects must do so using a specific project grant
The Ultimate Resource List for Fiscal Sponsorship Seekers – most comprehensive list of resources on the web for understanding what fiscal sponsorship is, if it’s right for your charitable project and how to go about finding and vetting potential fiscal sponsors. Need we say more??
Fiscal Sponsorship: 6 Ways To Do It Right by Gregory Colvin
Fiscal Sponsor Conversations – weekly conversation focused on the needs, challenges and goals of fiscal sponsors.
Cooperative Impact Lab – running the Fiscal Sponsorship Cooperative to provide support and capacity for fiscally sponsored projects to form and run their own nonprofits
From Fiscal Sponsorship to Autonomous Operation – an interview with Mariana Ruiz Firmat