A donor advised fund (“DAF”) is generally defined in Section 4966(d)(2)(A) of the Internal Revenue Code as a fund or account On November 13, 2023, the Internal Revenue Service and Treasury Department released proposed regulations on DAFs (the “Proposed Regs”) which has attracted a number of comments and criticisms, including with...
FISCAL SPONSORSHIP
Fiscal sponsorship describes a number of varying contractual relationships that have through custom and practice developed between “sponsors” and “projects,” allowing charitable projects to receive deductible contributions. Having a charitable project fiscally sponsored by a sound and reputable fiscal sponsor may be an attractive alternative to starting a nonprofit, especially when an idea is being tested or incubated. There are several ways to properly structure such relationships, and it is important to get it right from the start. There are also a number of traps that can leave a project’s leaders vulnerable to losing typical rights associated with fiscal sponsorship, including the right to transfer the project to another 501(c)(3) entity, and/or losing funds raised for the project’s mission.
Fiscal Sponsorship and Board Governance
On July 11, 2023, Fiscal Sponsor Conversations (“the weekly form for fiscal sponsors”) focused its discussion on governance for fiscal sponsors. What role does your Board of Directors play in your organization’s fiscal sponsorship work? How is it working? What could be improved? As with most things in fiscal...
Two Vehicles, One Home: Fiscal Sponsorship and Donor Advised Funds
On June 1, Social Impact Commons hosted a great practitioner conversation on the intersectionality between fiscal sponsorship and donor advised funds (“DAFs”). The following is a description of the event: We increasingly see fiscal sponsors accidentally or intentionally developing Donor Advised Fund (DAF) programs and, likewise, organizations running DAFs...
How to Make Grants to Fiscally Sponsored Projects
Many private foundations and government agencies have become comfortable making grants to support fiscally sponsored projects (FSPs). Over the past decade, fiscal sponsorship has become an increasingly familiar structure and more widely recognized as a legitimate option for supporting charitable projects. But there are still many misconceptions about how...
Is Fiscal Sponsorship a Service Provided for a Fee? Why it isn’t and why it matters.
By Erin Bradrick and Josh Sattely Fiscal sponsorship is a growing part of the nonprofit sector and, when done properly, is an important and impactful tool for furthering public benefitting work and activities. However, because fiscal sponsorship is not a relationship that is explicitly defined anywhere in the law...
Entering into a Fiscal Sponsorship Agreement
Fiscal sponsorship can be an effective and efficient alternative to starting and operating a new nonprofit organization. But there are great variations in how fiscal sponsorship relationships are established and memorialized in a written agreement. One of the first areas of confusion is who enters into the agreement with...
Article on Fiscal Sponsor Legal Obligations
In March 2022, NEO Law Group Principal Erin Bradrick presented on the topic of the legal obligations of fiscal sponsors to Fiscal Sponsor Conversations: The Weekly Forum for Fiscal Sponsors hosted on the Schulman Consulting website. The Fiscal Sponsor Directory published excerpts from Erin’s presentation in an excellent article...
Fiscal Sponsorship Exits: Not Always Easy – Part 2
This post on fiscal sponsorship exits follows our first post focused on the selection of a successor and absence of an agreement regarding termination of the relationship between the fiscal sponsor and a Model A project’s leadership. Here, we focus on reasons for the termination that create problems. Poor...
Fiscal Sponsorship Exits: Not Always Easy – Part 1
Fiscal sponsorship exits can be very complex and at times contentious. In this series of posts, we’ll identify issues that may provide some guidance in structuring the initial fiscal sponsorship agreement, terminating that agreement, and transferring a project’s assets and liabilities to a successor fiscal sponsor or other nonprofit....
Alternatives to Starting a Nonprofit
Many well-intended individuals who want to work on addressing public, social, and environmental needs think about starting a charitable nonprofit. Founding and leading a nonprofit may be viewed as a badge of significance and honor. But before moving forward, founders of a charitable venture should first consider the alternatives....