Legal Definitions - fiscal sponsor

A fiscal sponsor is an established, tax-exemptcharitable organization (recognized by the IRS under section 501(c)(3) of the Internal Revenue Code) that lends its legal and tax status to a project, group, or individual that does not yet have its own non-profit designation. Through a formal contractual agreement, the fiscal sponsor manages the financial and administrative responsibilities for the sponsored project. This arrangement allows the project to receive tax-deductible donations and apply for grants typically reserved for registered charities, while the sponsor ensures legal compliance and proper financial oversight.

Here are some examples to illustrate how fiscal sponsorship works:

• Imagine a group of passionate local historians who want to restore an old community landmark. They need to raise significant funds from individual donors and apply for grants from historical preservation foundations. However, forming their own 501(c)(3) non-profit organization can be a lengthy and complex process. Instead, they could partner with an existing, established historical society that agrees to act as their fiscal sponsor. This means donors can make tax-deductible contributions directly to the historical society, earmarked for the landmark restoration project. The society then disburses funds to the project, handles financial reporting, and ensures the project adheres to charitable guidelines, allowing the historians to focus on the restoration work itself.

• Consider a budding documentary filmmaker who wants to create a film highlighting an important social issue. To fund the production, the filmmaker needs to secure grants from arts foundations and solicit donations from individuals who want to support the cause. Many foundations and donors prefer to give to tax-exempt organizations. By finding an arts-focused non-profit to serve as a fiscal sponsor, the filmmaker can accept tax-deductible donations and apply for grants under the sponsor's 501(c)(3) status. The sponsor would manage the financial accounts for the film project, ensuring all funds are used appropriately and reported correctly, while the filmmaker concentrates on the creative and production aspects.

• A group of community activists identifies a critical need for a new after-school tutoring program in their neighborhood. They have a strong plan and dedicated volunteers but lack the resources and legal structure to immediately form their own non-profit. They could approach a larger, established educational non-profit in the area to become their fiscal sponsor. This arrangement would enable the new tutoring program to solicit and receive donations from individuals and apply for educational grants, all under the umbrella of the sponsor's tax-exempt status. The fiscal sponsor would handle the financial administration, allowing the activists to launch their program quickly and efficiently without the initial burden of setting up and maintaining a separate non-profit entity.