Donors may only take a tax deduction for contributions to charitable organizations that are exempt under Section 501(c)(3) of the Internal Revenue Code. Even if an organization was founded for exempt purposes, donors cannot be sure their contributions will be tax deductible until the IRS issues a determination letter recognizing the organization’s exempt status. That’s where fiscal sponsors come in.

Fiscal sponsorship allows an organization that is already recognized as a 501(c)(3) public charity to support a new organization’s activities by establishing a program designed to advance that new organization’s mission, provided it falls within the scope of the fiscal sponsor’s mission. The fiscal sponsor then contracts with the sponsored organization to manage the program on the fiscal sponsor’s behalf, and donors may make tax deductible contributions to the fiscal sponsor and designate the funds for use in supporting the new organization’s approved program.

During the term of the fiscal sponsorship, the sponsor provides fiduciary oversight and monitors how the new organization is managing the program. The sponsor also ensures that donated funds are spent only for program expenses that are deemed allowable for tax-exempt purposes. If the fiscal sponsor finds that the new organization is not operating the program as required or is in some way jeopardizing the fiscal sponsor’s tax-exempt status, the sponsor has the sole discretion to replace the sponsored organization with a different manger, or it can manage the program directly. If the sponsored organization receives its IRS determination letter and can receive tax deductible contributions directly, the fiscal sponsorship ends.

Over the years, DonorsTrust and Donors Capital Fund have been fiscal sponsors for more than two dozen different start-up organizations, most of which have gone on to receive 501(c)(3) status. You can see the list of our current fiscal sponsorships below.