This information is located in our software for artists. Some references within the text will be software related.

Overview
Fiscal sponsorship is an affiliation between a 501(c)3 tax-exempt organization and a nonexempt project that renders the latter eligible grants from government agencies, private foundations, corporations, and individuals. Fiscal sponsors may also provide services such as accounting and administrative support, and usually charge an administrative fee for such services. Artists and nonexempt organizations must apply for fiscal sponsorship in order to receive any charitable contributions.

Example
Lets say you have a rich uncle who supports the arts and wants to help fund your next project. (We should all be so lucky!) He will not be eligible for a tax deduction if he gives you money directly, and you would be liable for taxes on the gift.

The solution is to find a fiscal receiver. Start by trying to find a local arts organization whose mission statement supports the kind of project you are doing. Send them a well-crafted letter asking them if they would be willing to receive the gift from your uncle. If planned properly, this can be a win-win situation.

Usually, fiscal receivers ask you to send in a description of your project, your resume and any visuals and supporting documentation. They may require a budget as well. They will usually present your proposal at their next board meeting. Your project must fit within their mission in order to be a legal transaction.

They may require a flat fee or percentage of your gift in order to pay for legal, accounting fees, and staff labor. The typical percentage for a fiscal receivership is between three and ten percent. You can usually negotiate to pay more for additional services that you could not otherwise obtain. You should never begrudge this percentage because being a fiscal sponsor requires a large amount of work on the part of the host institution. The fiscal sponsor is both financially and legally responsible for projects to which it administers funds. For example, the fiscal sponsor could be liable to its board and funders if you do not complete the project.

It is advisable to sign a contract with a fiscal sponsor. Be sure to keep a copy of all correspondence between the donor and the fiscal sponsor, as well as your own paperwork.

RESOURCES

New York Foundation for the Arts

Lawyers for the Arts

Fiscal Sponsorship: 6 Ways to Do It Right
By Gregory L. Colvin
Colvin describes the six forms of fiscal sponsorship recognized by the IRS.