Like other suddenly emerging social change initiatives, Occupy Wall Street presents the situation of a grass roots movement rapidly seeking to educate the public and advocate for reforms, in this case calling attention to economic inequalities in our country. Many people are eager to support the movement financially, and the New York group has found a fiscal sponsor.
Date: November 2011
I just posted a blog on www.nonprofitlawmatters.com, hosted by Adler & Colvin. There you'll find details appearing recently in the press about the charitable sponsor for Occupy Wall Street, and the options and challenges facing Occupy groups in other cities and locations.
Handouts available from COF Community Foundations Conference in San Francisco, September 20, 2011
Over 100 attended, from Delaware, Iowa, Alaska, the Outer Banks, San Diego, everywhere. Even the Ocean (Foundation).
Date: September 2011
Sorry we ran out of handouts with the large unexpected audience. Here are
(1) the basic PowerPoint on fiscal sponsorship, especially Models A and C,
(2) 6 Ways That Community Foundations Can Relate to Fiscal Sponsorship, PLUS
(3) lessons learned and posted by Jessica Janssen, executive director of Fremont Area Community Foundation.
New article discusses pros and cons of housing a fiscally sponsored project in a limited liability company (LLC)
Steven Chiodini and Greg Colvin have published an article in Taxation of Exempts this summer that explores a possible new "Model L" for fiscal sponsorship.
Date: August 2011
This article is available on the website of the law firm Adler & Colvin at http://www.adlercolvin.com/resources/public-charities.php, entitled "The Use of LLCs in Fiscal Sponsorship -- A New Model," in the Thomson Reuters journal Taxation of Exempts, May/June 2011.
Some 501(c)(3) public charities that use the Model A direct project approach have been concerned about their exposure to liabilities created by operation of the project--use of automobiles, disgruntled employees, programs involving children, outdoor sports, and the like. There is a way to contain those risks while maintaining the tax advantages of fiscal sponsorship: place the project in a limited liability company (LLC) created under state law, controlled by the sponsor as the single member of the LLC, and treated for federal tax purposes as an integral part of the sponsoring charity. But wait: that means operating the project as a separate company out of a separate bank account in the LLC's name and potential state tax law compliance issues, so this is not a solution in every case. However, if the risks and the volume of financial activity justify the additional administrative burdens, it's worth a look.
Colvin to lead workshop session on fiscal sponsorship at Fall Conference For Community Foundations
The Council on Foundations is holding its Fall Conference for Community Foundations this September in San Francisco, with a session on fiscal sponsorship that Greg Colvin will lead. The details are:
Session Date: September 20, 2011, 4 p.m.
To register: http://www.cof.org/events/conferences/2011fall/index.cfm
Location: San Francisco Marriot Marquis
Tentative Session Title: Fiscal Sponsorship: The Legal Rules
Tentative Session Description: A great idea of a donor or community group often translates into legal questions for the community foundation. Can the community foundation receive charitable contributions that it will re-grant for a community health fair if the fair is not run by a charity? Accept contributions from a golf tournament for a new charity that has not yet received recognition of its public charity status? Every community foundation has been asked such questions. What do you need to know before you respond? This session will walk through fiscal sponsorship models and legal rules you need to consider before serving as a fiscal sponsor. The speaker, Greg Colvin, author of Fiscal Sponsorship: Six Ways To Do It Right, will also touch on considerations when making a grant to a fiscal sponsor.
HOW SHOULD A MODEL C PROJECT APPLY TO A FOUNDATION FOR A GRANT VIA ITS FISCAL SPONSOR?
Use a Protocol That Makes Clear the 501(c)(3) Sponsor Is the Applicant
Project can prepare the application, but Sponsor must ensure its role is properly documented
November 2010
On October 22nd, I gave a talk on fiscal sponsorship to the Private Foundation Summit in Seattle, convened by PESI and Clark Nuber. Here is the handout I used, entitled " How to Process a Grant from a Project with a Fiscal Sponsor (Model C Regrant)," listing the steps that a foundation could expect an applicant to take when a project proposal is submitted via its 501(c)(3) sponsor.
This situation involves a Model C "regrant" arrangement, where the project is a separate legal entity (could be an artist, an author, a 501(c)(4), a dance group -- any non-(c)(3) organization or individual) that has been "adopted" by a fiscal sponsor. The sponsor receives the outside funding and then exercises its discretion and control to regrant funds to the project with proper documentation. The grant process occurs twice -- (1) from the funder to the sponsor and (2) from the sponsor to the project.
Many times, projects, sponsors, and foundations are confused about how a sponsored project should present its application to a funder. Of course, the project director usually makes initial contact with the prospective funder and finds out if they are interested in making a grant. If so, the project prepares the grant proposal, application, budget, etc. Then what? Follow the steps on the protocol....
It is not enough just to slip a copy of the fiscal sponsor's IRS letter in the back of the package. The proposal should be presented to the funder with a cover letter from the sponsor on top. The handout includes a good example.
Click here for the handout, and good luck.
2006 Law Change May Affect Some Projects
Analysis of New Donor-Advised Fund Definition
September 2009
Occasionally, a fiscal sponsor may have a project with all or almost all of its funding from one source -- and that source (a foundation or an individual) plays a continuing role in the project, advising on how funds are disbursed or even acting as the project director. The project account may come within the new Internal Revenue Code definition of a donor-advised fund (DAF), subject to new disclosures, reporting, and restrictions.
Here is a memo that begins to analyze how the new DAF rules may affect fiscal sponsors. We are waiting for IRS regulations to clarify the breadth of the new law, so stay tuned for further updates.
Looking for a Fiscal Sponsor?
New Nationwide Directory Launched
November 2008
At long last, there is a place to go to find those public charities across America that are acting as fiscal sponsors for community projects, artists, filmmakers, international programs, environmental initiatives, and many other good works. The San Francisco Study Center, publisher of Fiscal Sponsorship: 6 Ways To Do It Right, has created a central repository of useful data on 140 practicing sponsors, with an online form so that others wishing to be listed can also join.
The website, fiscalsponsordirectory.org, adds to our understanding of fiscal sponsorship by including clear definitions, a chronology of pertinent legal rulings and important events and developments in the field, and Facts & Stats about the directory participants that helps put each fiscal sponsor into perspective.
Congratulations, and let's hope this will build the recognition of more and more upstanding fiscal sponsors!
Deciding Whether to Form a New Nonprofit or Use a Fiscal Sponsor
April 2008
Book Page 70 (Model A, Common Uses)
At speaking events in Los Angeles, Denver and elsewhere lately, and in my law practice, people ask me whether they should create a new 501(c)(3) organization or find a fiscal sponsor. Or do both--incorporate now but "incubate" using a fiscal sponsor to receive and spend donated income until they receive their recognition letter from the IRS.
The book does not describe how to form a new tax-exempt corporation; there are many government and private "how to" guides for that. Nevertheless, I thought it would be useful to compare the pros and cons of starting an independent 501(c)(3) entity versus using a fiscal sponsor, and the chart linked below is the result.
Take a look at the chart, "Comparison of Starting a New 501(c)(3) Organization with Using a Fiscal Sponsor (Model A)," which describes the pros and cons of setting up your own tax-exempt entity versus fiscal sponsorship.
Project Intake Checklist
January 2006
Book Page 71 (Transfers of Projects, In and Out)
If you are a fiscal sponsor, how much do you need to know about
a new project before you decide to take it on? Obviously, you will
want a written application stating its purpose, proposed activities,
budget, personnel and advisory committee or board. There might
be more to find out, to determine whether it will be a Model A,
B, or C project and whether it has a history with another sponsor
or a founder that you need to address in the fiscal sponsorship
agreement. Click here for a checklist of 15 questions to ask about
the new project.
IRS Promotes Disaster Relief Sponsorship
September 2005
Book Page 71 (Model A, Common Uses, Sudden Needs)
In a bulletin issued on 9/6/05, the Internal
Revenue Service provided guidance to those interested in forming
new organizations for relief of Hurricand Katrina victims. IR-2005-93,
found here.
The IRS also promoted the concept of fiscal sponsorship of relief
projects through charities already in place, saying: Use of existing
charitable organizations is encouraged because such organizations,
including churches, are frequently able to administer relief programs
more efficiently than newly formed organizations, because they
already have fund-raising and distribution infrastructures in place.
Further, the IRS provided answers to 8 FAQs on use of existing
charities here.
