Synopsis: The Basics of Fiscal Sponsorship

Gregory L. Colvin and Stephanie L. Petit

In 1993, the book Fiscal Sponsorship: 6 Ways To Do It Right, was published after a period of controversy in the nonprofit world about an arrangement often called “fiscal agency.” This term actually referred to several different constructs, but the common theme was that some enterprising person or group wished to conduct a charitable program (and attract tax-deductible contributions), but without incorporating or obtaining Internal Revenue Service recognition of the project’s Internal Revenue Code (IRC) Section 501(c)(3) tax exemption. An existing 501(c)(3) “fiscal agent” would be recruited to receive grants and donations to support the project, which would then be disbursed in the form of payments to employees, vendors, contractors, or grantees. 

These arrangements, if not handled carefully, were vulnerable to the criticism that they were mere conduits for the transmission of deductible donations to entities not qualified to receive them. 

Since the publication of the book, the term “fiscal sponsorship” has developed as a more appropriate label for these arrangements. In the last decade, the phenomenon of fiscal sponsorship has become common, widespread, and quite reputable. It has become a popular ancillary activity for public charities involved in human service, environmental, and artistic endeavors. Nonprofit institutions solely devoted to fiscal sponsorship have sprung up across the country, ranging from documentary film sponsors to public health research groups to separate corporations spun off by community foundations. 

A second edition of Fiscal Sponsorship: 6 Ways was published in December 2005 and a third edition in October 2019.