Key Term

What is Fiscal Sponsorship?

Definition

Fiscal sponsorship is a formal arrangement in which an established 501(c)(3) nonprofit organization provides tax-exempt status and administrative support to another project, group, or initiative that does not have its own tax-exempt status. The sponsor accepts tax-deductible donations on behalf of the sponsored project and assumes legal and financial responsibility for its activities, while providing oversight and management of funds.

Significance

Fiscal sponsorship plays a crucial role in the charitable sector by enabling new and emerging charitable projects to begin operations without the immediate need to establish their own nonprofit organization. This arrangement reduces administrative burden, saves time and money, and allows innovative charitable initiatives to test their ideas and build capacity before deciding whether to form an independent nonprofit. For donors, fiscal sponsorship provides assurance that their contributions are tax-deductible and properly managed, while allowing them to support nascent projects that align with their charitable interests.