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Fiscal Sponsorships

Podcast

Leslie Barnes, Tim Mooney, Quyen Tu

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. 

Our Attorneys for This Episode:

Leslie Barnes Tim Mooney Quyen Tu

Background:

What is a Fiscal Sponsorship?

Organizations 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. 

Types of Fiscal Sponsorships

There are two different ways this is done. IRS has various models. Money goes to the FS, there’s an agreement between the parties (sponsor and project). 

  • Example: Tides Center sponsors Lift Louisiana, a project focused on improving health outcomes for Louisiana women, families, and their communities
  • Example: 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. 

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. 

Things to consider:

  • Is your organization 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 

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 

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