"There is a right
way and a wrong way to go about the use of fiscal sponsorship.
Mr. Colvin’s book brings
much-needed sunshine and clarity to those who want to do it correctly.”
— John A. Edie, Director, Exempt Organizations Tax Services,
PricewaterhouseCoopers
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ABOUT GREG COLVIN
a. For answers
to frequent questions, see the article "Not
a Nonprofit? When to Use a Fiscal Sponsor,"
a site maintained by Community Resource Center in Colorado. The answers
were written by David Barlow, CPA.
b. For individuals
and organizations seeking a fiscal sponsor, The Foundation Center
is a great resource. Headquartered
in New York, it has field offices in Atlanta, Cleveland, San Francisco,
and Washington, D.C. with coorperating collections in libraries across
the country. For locations, click
here. On line, The Foundation Center has information directed
to individuals here. The
FAQ refers to fiscal agents rather than using the correct term "fiscal
sponsor" because inquiries are often posed in that way.
c. For a synopsis of Mr. Colvin's presentation on
fiscal sponsorship, delivered to the Western Conference on Tax Exempt Organizations, November 2006, in Los Angeles
(with chart and diagrams), click here.
d. For fiscal sponsorship agreement forms, click here.
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2006 Law Change May Affect Some Projects
Analysis of New Donor-Advised Fund Definition
September 2009
Occasionally, a fiscal sponsor may have a project with all or almost all of its funding from one source -- and that source (a foundation or an individual) plays a continuing role in the project, advising on how funds are disbursed or even acting as the project director. The project account may come within the new Internal Revenue Code definition of a donor-advised fund (DAF), subject to new disclosures, reporting, and restrictions.
Here is a memo that begins to analyze how the new DAF rules may affect fiscal sponsors. We are waiting for IRS regulations to clarify the breadth of the new law, so stay tuned for further updates.
Looking for a Fiscal Sponsor?
New Nationwide Directory Launched
November 2008
At long last, there is a place to go to find those public charities across America that are acting as fiscal sponsors for community projects, artists, filmmakers, international programs, environmental initiatives, and many other good works. The San Francisco Study Center, publisher of Fiscal Sponsorship: 6 Ways To Do It Right, has created a central repository of useful data on 140 practicing sponsors, with an online form so that others wishing to be listed can also join.
The website, fiscalsponsordirectory.org, adds to our understanding of fiscal sponsorship by including clear definitions, a chronology of pertinent legal rulings and important events and developments in the field, and Facts & Stats about the directory participants that helps put each fiscal sponsor into perspective.
Congratulations, and let's hope this will build the recognition of more and more upstanding fiscal sponsors!
Deciding Whether to Form a New Nonprofit or Use a Fiscal Sponsor
April 2008
Book Page 70 (Model A, Common Uses)
At speaking events in Los Angeles, Denver and elsewhere lately, and in my law practice, people ask me whether they should create a new 501(c)(3) organization or find a fiscal sponsor. Or do both--incorporate now but "incubate" using a fiscal sponsor to receive and spend donated income until they receive their recognition letter from the IRS.
The book does not describe how to form a new tax-exempt corporation; there are many government and private "how to" guides for that. Nevertheless, I thought it would be useful to compare the pros and cons of starting an independent 501(c)(3) entity versus using a fiscal sponsor, and the chart linked below is the result.
Take a look at the chart, "Comparison of Starting a New 501(c)(3) Organization with Using a Fiscal Sponsor (Model A)," which describes the pros and cons of setting up your own tax-exempt entity versus fiscal sponsorship.
Project Intake Checklist
January 2006
Book Page 71 (Transfers of Projects, In and Out)
If you are a fiscal sponsor, how much do you need to know about
a new project before you decide to take it on? Obviously, you will
want a written application stating its purpose, proposed activities,
budget, personnel and advisory committee or board. There might
be more to find out, to determine whether it will be a Model A,
B, or C project and whether it has a history with another sponsor
or a founder that you need to address in the fiscal sponsorship
agreement. Click here for a checklist of 15 questions to ask about
the new project.
IRS Promotes Disaster Relief Sponsorship
September 2005
Book Page 71 (Model A, Common Uses, Sudden Needs)
In a bulletin issued on 9/6/05, the Internal
Revenue Service provided guidance to those interested in forming
new organizations for relief of Hurricand Katrina victims. IR-2005-93,
found here.
The IRS also promoted the concept of fiscal sponsorship of relief
projects through charities already in place, saying: Use of existing
charitable organizations is encouraged because such organizations,
including churches, are frequently able to administer relief programs
more efficiently than newly formed organizations, because they
already have fund-raising and distribution infrastructures in place.
Further, the IRS provided answers to 8 FAQs on use of existing
charities here.
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