On July 16, 2026, a new bill, the Fiscal Sponsorship Transparency Act of 2026 (HR 9721), was introduced in the House and referred to the House Committee on Ways and Means. Generally, the Act requires more specific reporting by fiscal sponsors of the principal officers and activities of their projects, including in most cases:

• the aggregate amounts made available during the taxable year under such arrangement for the specifically identified project;
• a description of the project activities;
• the name of an individual designated as the principal officer managing such fiscal sponsorship arrangement on behalf of the fiscal sponsor; and
• the date on which the arrangement began and, if applicable, ended.

I included below some of my immediate thoughts about the bill, which I expect may evolve as I and all of us learn more about it. We’ll update this post accordingly, as necessary.

Fiscal Sponsorship Arrangements

A major issue in other attempts to regulate fiscal sponsorship has been the poor understanding of legislators and regulators regarding fiscal sponsorship and the lack of legal definitions in part because the term is used colloquially to cover a number of different relationships. HR 9721 provides its own definition of “fiscal sponsorship arrangement” in the context of an “applicable organization” (which explicitly excludes private foundations and donor advised funds), which we’ll simply refer to as the “fiscal sponsor.”

A fiscal sponsorship arrangement with a fiscal sponsor is an arrangement between a fiscal sponsor and another person that is not exempt under IRC Section 501(a) (e.g., natural persons and 501(c)(4), 501(c)(5), 501(c)(6 organizations, which we’ll simply refer to as “non-exempt organizations”) and meets either of the following two requirements.

1. The fiscal sponsor agrees for consideration to receive and administer amounts on behalf of such other person/entity. – This not represent a properly set up Model A or Model C fiscal sponsorship since, under these arrangements, the fiscal sponsor receives amounts on its own behalf and not on behalf of another person/entity. While an argument might be made that a Model C fiscal sponsor that is providing additional management services to the other person/entity is administering amounts on behalf of its grantee (something I’d generally discourage) the Model C fiscal sponsor should not be receiving amounts on behalf of its grantee since this is a decision made by the fiscal sponsor and not by any donor or funder.
2. All three of the following elements are met:
   • The fiscal sponsor publicly solicits amounts for carrying on a specifically identified project that is represented as a means to further an exempt purpose of the organization. – This would also cover all public charities publicly soliciting amounts for a specific project which is part of an arrangement between a fiscal sponsor and a person or non-exempt organization.
   • The fiscal sponsor agrees to receive and administer amounts directed to such project and make such amounts available for the fiscal sponsor to carry out the project (less an amount specified in the arrangement to be used by the fiscal sponsor for other purposes). – This might cover all public charities using project-related, purpose-restricted funds to operate an internal project which is part of an arrangement between a fiscal sponsor and a person or non-exempt organization, assuming that the parenthetical is optional and not required. However, it likely means a Model C arrangement does not meet this element which requires the fiscal sponsor to carry out the project.
   • Either the fiscal sponsor or such other person/entity may terminate the arrangement. – This is a key provision of a typical fiscal sponsorship agreement, though it’s unclear whether the arrangement must provide that either party may terminate the arrangement or may alternatively provide that only one of these parties may terminate the agreement.

Additionally, a fiscal sponsorship arrangement must provide the fiscal sponsor with discretion and control over such amounts to ensure such amounts are used to further an exempt purpose of the fiscal sponsor. – This seems to conflict with requirement #1 above, which appears to describe fiscal agency and an organization (not a fiscal sponsor in such context) that is the agent of the other person/entity in the arrangement.

Requirement #2 appears to cover a Model A fiscal sponsorship arrangement. But it appears to also cover a public charity with a particular project for which the charity allows a donor or funder to make a restricted gift for the project’s purposes pursuant to some form of gift/grant agreement that the donor/funder may terminate.

Improper Conduit Arrangements

Fiscal sponsorship structured and operated properly should not involve a conduit arrangement. Fiscal sponsors are not conduits. Fundraising for fiscally sponsored projects, including Model C projects, must not frame their solicitations and grant proposals for contributions to the fiscal sponsor as contributions to the fiscal sponsor’s grantees.

HR 9721 defines an improper conduit arrangement, with respect to a specified tax-exempt organization (perhaps a fiscal sponsor or an organization believing itself to be a fiscal sponsor), as an arrangement (express or implied) with another person (or entity) under which—

(A) contributions are solicited or received to be transferred to a specifically identified person not exempt from tax under section 501(a), and

(B) the organization fails to exercise discretion and control over the use of the funds.

The excise/penalty tax on the ‘fiscal sponsor’ for an improper conduit arrangement:

• First tier: 20 percent of the amount improperly transferred
• Second tier (if not timely corrected by recovering part or all of the amount transferred or taking other corrective action prescribed by regulation): 100 percent of the amount improperly transferred

The excise/penalty tax on organization managers (including board members and officers and individuals having similar powers or responsibilities) for the making of such improper transfer, knowing such arrangement is an improper conduit arrangement (unless such agreement is not willful and is due to reasonable cause):

• First tier: 5 percent of the amount improperly transferred
• Second tier (if the ‘fiscal sponsor’ is hit by the second tier tax for not timely correcting the improper transfer and if an organization manager refused to agree to part or all of the correction,): 50 percent of the amount improperly transferred

Special Rule for Otherwise Disregarded Entities

A typical disregarded entity for federal tax purposes is a limited liability company that does not file a separate federal tax return from its sole member. Without a special rule, a fiscal sponsor’s relationship with its disregarded entity could not be a fiscal sponsor arrangement subject to the bill’s provisions. That would shield Model L fiscal sponsorship relationships from the bill’s purview.

HR 9721 addresses such arrangements by providing that the otherwise disregarded entity shall, for purposes of application of the bill, be treated as an entity that is separate from its owner and that is not exempt from tax under section 501(a).

Initial Thoughts

The bill attempts to require disclosures of each and every internal project of a fiscal sponsor but may also encompass the disclosure obligations on tax-exempt organizations that are not fiscal sponsors. They would arguably need to disclose details of every internal program that may be subject to an arrangement related to a specifically identified project (including a funding agreement) that could be terminated by the other party. Such level of disclosure, even if the bill is modified to better limit application to fiscal sponsors, would be unnecessary, enormously costly and burdensome to the charity and the IRS (meaning less money would go to further charitable purposes or to regulate actual diversions of charitable assets), and could threaten the practice of fiscal sponsorship, which provides substantial benefit to the charitable sector and all those served by the charitable sector. The bill also seems politically motivated with the intent to target only a few dozen organizations at the expense of tens of thousands (ore more) of charitable organizations providing food, shelter, emergency relief, arts, religion, education, science, democratic safeguards, and a vast array of public goods to our communities.

Follow-up & Resources

A Conversation About H.R.9721 – Fiscal Sponsorship Transparency Act of 2026 – Thursday, July 23rd, 3pm ET/2pm CT/1pm MT/noon PT – Social Impact Commons

Policy Primer: Fiscal Sponsorships – Philanthropy Roundtable [Ed. I don’t agree with the article’s description of fiscal sponsorship as a conduit, but it represents a conservative viewpoint of the benefits of fiscal sponsorship and the unnecessary measures of trying to identify, regulate, and monitor fiscal sponsorship relationships.]