With a fiscal sponsorship, the Foundation – a 501(c)3 non-profit organization or charity – has an arrangement to allow another group or project (without non-profit status) to use the Foundation’s tax exempt status to accept tax-deductible contributions from donors.
Lile many other community foundations, we use fiscal sponsorships to support “community-benefit projects” that need a place to incubate their ideas without having to become independent nonprofit organizations. The arrangement is intended to be temporary and to last only until the project concludes or the project/group gains its own non-profit status.
Note: The IRS states that a “legitimate fiscal sponsorship” at a Community Foundation “occurs when one or more charities choose to financially support another charity or non-exempt project.” Additionally, per the IRS, the terms “fiscal agent” or a “pass-through relationship” are not good to use as they raise questions with both the IRS and auditors, and they can create misunderstandings among the Foundation’s partners.
Policy on Fiscal Sponsorships at the Foundation
For all new fiscal sponsorships, the fund will be charged a 3% on every dollar received and require that at least $250 in fees be collected over the life of the fiscal sponsorship.
Process for Establishing a Fiscal Sponsorship
Those interested in applying for Fiscal Sponsorship under the Kenosha Community Foundation must work through the following steps:
1. The project or group seeking Fiscal Sponsorship must submit a written request to Foundation describing the specific program to be conducted. This should include a fully developed budget and timeline for project completion.
2. The Foundation’s Finance Committee will evaluate the request to determine whether the purpose of the project or group’s activities is charitable and carries outs a purpose that conforms with the Foundation’s mission.
3. If the proposal furthers the Foundation’s tax-exempt purpose, the Board of Directors will issue a resolution stating the proposal for the sponsorship is approved and will be funded with contributions from the public, businesses and other government agencies. The Foundation may contribute to the fund.
4. If approved by the Board of Directors, the Foundation will issue a written agreement setting forth all the terms and conditions that apply to the project’s use of the sponsorship.
5. After successfully completing all of the steps, the project may solicit donations to the sponsorship fund. Foundation bylaws provide that such solicitations should be made only on the condition that the Foundation retains complete control and discretion over the use of all contributions received. This element of Foundation control and discretion must be fully disclosed, in writing, when applying for funding.
6. As donations and contributions are received for the specific project/group, the funds received will be income to the Foundation and then distributed as a grant to the project/group, subject to the terms of the fiscal sponsorship agreement between KCF and the project/group.
7. Project organizers/group leaders must submit written requests for funds from the Foundation, showing actual expenditures of funds and what the funds were/will be used for (they should go for expenses that accomplish the stated purpose of the project or group).