Fiscal sponsorship provides access to restricted funding, grants, tax-deductible donations, and other valuable project management benefits.

Getting incorporated and tax exempt takes money, time & energy, and may distract people from the program they are creating. As an alternative, people who have a new project, or an idea for one, often turn to a Fiscal Sponsor to get it off the ground.

A Fiscal Sponsor is a non-profit organization with 501(c)(3) tax-exempt status from the Internal Revenue Service that acts as a guardian of grants and donations for a Project that does not have 501(c)(3) designation.

A Fiscal Sponsor is necessary for one good reason: funders rarely (if ever) make donations to anyone without 501(c)(3) status. That’s because tax-exempt status, like incorporation, bylaws and other formal designations, inspires confidence in potential donors & funders. It demonstrates that the organization has a legitimate charitable purpose, has a structure for accomplishing its goals, and is accountable to the public.

Foundations, and sometimes governments simply cannot give grants to projects without a 501(c)(3). Individuals often prefer to give to 501(c)(3) organizations so they can deduct the charitable donation on their annual tax return.

Who Needs a Fiscal Sponsor?

Situations that could call for a Fiscal Sponsor include:

• Organizations or projects that can deliver programs effectively, but don’t have support staff
• Projects that are short term, or temporary, that wish to avoid the time and expense of applying for a 501(c)(3)
• Pilot projects, that haven’t demonstrated long term viability
• Organizations that are awaiting, but have not received 501(c)3 status
• Social Enterprises & Creative Community Projects which would like to apply for grants requiring 501(c)(3) status

Step 1

Complete the general application & choose ‘Fiscal Sponsorship (access to foundation grants & donations)’

Step 2

Within 3 business days, you will receive a brief email either:

• Inviting you to submit a full application
• Explaining why we won’t be able to be your fiscal sponsor

Step 3

Full applications are due by the end of the month on a rolling basis. If you meet this deadline, you will hear back from the Director of Fiscal Sponsor, or you will receive a decision by the 20th of each month.

Step 4

Once accepted, you will receive an agreement and policy manual to sign and return, an invoice for a monthly membership ($9.50- Insurance fee extra), a New Sun Rising Logo file, an onboarding meeting invitation, a donation and project page, and a resource guide.

Step 5

You will have access to the resource guide, open office hours, reduced-rate/sliding scale consultation*, MODE programming*, payroll services*, general liability insurance*, and more.

*requires additional application/fees

At the least, Fiscal Sponsors manage specific grants and donations made to a sponsored Project, while compiling and submitting year end tax reporting to the IRS for Projects who are not yet incorporated at the State level.

Restrictions on Activities

501(c)(3) organizations are highly regulated entities. Strict rules apply to both the activities and the governance of these organizations. Qualifying under Section 501(c)(3) offers significant benefits:

• Exemption from payment of federal income tax (for non-for profit entities)
• Exemption from payment of federal unemployment tax (for non-for profit entities)
• Reduced postal rates
• Tax deductions to contributors for their donations

Perhaps most important, most foundations and other grant makers will only give grants to 501(c)(3) non-profits. Federal tax exempt status provides them with some assurance that the organization serves a legitimate charitable purpose, is not organized for someone’s personal benefit, and has at least a basic level of accountability. Tax-exempt status under Section 501(c)(3) also imposes significant responsibilities:

Limits the organization’s purpose and activities

Must be organized and operated exclusively for the exempt purpose. New Sun Rising is a charitable organization.

Limits lobbying activities

May not include lobbying (influencing legislation) as a substantial part of its activities

Prohibits political activities

Cannot be directly or indirectly participating or intervening in, any political campaigns for public office. Contributions or public statements of position made on behalf of an organization in favor or against any candidate is clearly a restricted activity.

Prohibits excessive financial benefits to its directors and employees

No part of the activities or the net earnings can unfairly benefit any director, officer, or any private individual, and no officer or private individual can share in the distribution of any of the corporate assets in the event the organization shuts down

Requires tax returns

Requires many records be open to public scrutiny

Restricts certain distribution of assets if the organization is dissolved

Fiscal Sponsorship Resources

• About Fiscal Sponsorship Tides.org
• National Council of Nonprofits Fiscal Sponsors
• Wikipedia – Fiscal Sponsorship