WHO CAN BE A FISCAL SPONSOR?
Legally, any existing tax exempt nonprofit organization can act as a fiscal sponsor (including a church or library) but, because of the legal complexity and administration required, not all non profits will do so. If you’re looking for a fiscal sponsor, it’s best to partner with an organization with which you have a good relationship, and/or one that has an existing fiscal sponsorship program.
WHO ARE FISCAL SPONSORSHIPS FOR?
Fiscal Sponsorship is a good solution for organizations (or certain individual projects or events) that only want to do a few small projects over a specified period of time or those who need to be able to receive tax-deductible donations while they wait for 501(c)(3) nonprofit status approval from the IRS.
WHAT DOES A FISCAL SPONSOR DO? WHY ARE THEY VALUABLE?
A fiscal sponsor:
– Accepts and safeguards charitable donations on behalf of a project
– Takes on legal liability for those funds
– Creates and maintains some accounting records for the project
– Qualifies the project for some grants and funding that would otherwise be inaccessible
– Brings experience to the project and may provide additional aids such as administrative services and/or strategic planning assistance
WHAT IS A FISCAL SPONSOR?
A fiscal sponsor is an organization that agrees to accept, and be responsible for, tax-deductible contributions and charitable gifts on behalf of a project that does not have its own tax exemption. Using a fiscal sponsor, a non-exempt individual, project, event, or organization can take advantage of a lot of the benefits of a tax exempt nonprofit organization.
I’M A MEMBER OF AN ARTISTIC PARTNERSHIP, TRIO, OR COLLABORATIVE, AND WE WOULD ALL LIKE TO SHARE THE ADMINISTRATIVE BURDEN EQUALLY. IS THAT POSSIBLE?
Yes – for Fresh Arts’ purposes, though you likely will need to compromise in order to meet IRS tax requirements.
Tax requirements depend on your business structure. Most nonprofits start as a sole proprietorship, single-member LLC, or an unincorporated association, and so the finances must be associated with one person’s name and social security or tax ID number. It would be up to that person to claim income and expenses on their taxes in Schedule C. That’s not to say that funds raised by the group can’t help offset that burden. Your group can decide to hire a professional to do that individual’s taxes, for example.
WHAT ARE MY TAX RESPONSIBILITIES UNDER FISCAL SPONSORSHIP WITH FRESH ARTS?
All of Fresh Arts’ fiscally sponsored projects and organizations are self-managed, which means that they are responsible for filing their own tax return. Fresh Arts treats you like an independent contractor.
If your project is a sole proprietorship, single-member LLC, or unincorporated association, you will need to account for your project on your personal tax return(s). This means you will need to:
– Fill out a 1099-MISC form for any individual(s) you pay a total of $600 or more during the calendar year.
– Claim all income from Fresh Arts on your tax return and deduct project expenses by filling out a Schedule C.
WHO IS ELIGIBLE TO BE FISCALLY SPONSORED THROUGH FRESH ARTS?
Fresh Arts’ fiscal sponsorship program is designed for artist-led groups and projects. Our sponsored projects must have a nonprofit purpose, and the arts product or process must be based in Houston, TX.
A “nonprofit purpose” means that the organization or project’s mission comes before any individual’s advancement or profit motive. That mission must also be in service of some aspect of the “public good.”
Fresh Arts can, in some cases, sponsor sole proprietorships, nonprofit corporations, or single-member LLCs that are non-profit in purpose and meet all other eligibility requirements.
WHAT DO I GET FOR MY MONTHLY COST-SHARE MEMBERSHIP?
The primary benefit of fiscal sponsorship is the ability to receive tax-deductible donations for nonprofit work.
Additional program benefits include:
– Access to other low-cost Fresh Arts programming and services
– Your project’s money held in a separate account and available to you as needed (through a disbursement request process)
– Letters of agreement for grant applications available as needed (you must inform Fresh Arts of your intent to apply before a proposal is due)
– Donors (individual and corporation/foundation) are sent acknowledgements from Fresh Arts to document tax deductions
– Your project’s own online fundraising page on Fresh Arts’ website
IS THE FISCAL SPONSORSHIP PROGRAM FREE?
Sponsoring organizations nearly always share some administrative costs with projects. Our cost-share includes a $25 application fee, a one-time $75 account set-up fee, a $100 annual renewal fee to remain active in the program after the first 12 months, and 8% (+ any additional credit card processing fees that may apply) of any funds that are deposited with us.
Fresh Arts offers fiscal sponsorship because it is an important part of our non-profit mission; the cost-share does not cover the full cost of administering the program.
I DO NOT LIVE IN HOUSTON; CAN I STILL APPLY FOR SPONSORSHIP?
Yes – if you live within a 50-mile radius of Houston. For our purposes, we only require that the arts product (i.e. the festival or performance) and/or process (i.e. the creation of the art work) be based in Houston. Note that many popular funders (like Houston Arts Alliance) do require proof of City of Houston residency to be awarded grant funding – do your due diligence in knowing all the requirements funders set.
HOW DOES THE APPLICATION PROCESS WORK?
First, make sure you meet all of Fresh Arts’ eligibility requirements. If you still have specific questions, you can email firstname.lastname@example.org.
Applications are reviewed by a selection committee that meets quarterly. Projects are then notified of their admittance or receive follow-up questions for further review.
HOW LONG DOES IT TAKE FOR MY APPLICATION TO BE REVIEWED?
We accept and review applications on a quarterly basis. Applications are due on the 1st of February, May, August, and November. Applications are then reviewed by the fiscal sponsorship committee on the second Wednesday of those months. Typically, the process from receipt of application to acceptance usually takes about 4 weeks.
MY APPLICATION FOR FISCAL SPONSORSHIP WAS APPROVED! NOW WHAT?
Congratulations! We’ll send you our program manual and contract to review, sign, and return to us. Read the program manual! While we set things up on our end, please begin your $10/month cost-share membership and sign up for a free account with Bill.com.
Once we have your signed contract, we’ll create a page on our website where you can receive online (tax-deductible!) donations. We’ll also hook you up with helpful information/tools to start your sponsorship on the right foot. Then, let us know when you’re getting your grant proposal or other fundraisers together (we require 30 days notice). We want to know your materials are legally acceptable, and grantors will almost always need some paperwork from us before you turn in proposals.
WE GOT THE GRANT BUT THE CHECK IS MADE OUT TO FRESH ARTS. HOW DO WE GET OUR MONEY?
Grants and donations MUST be made out to or processed by a fiscal sponsor organization to be tax deductible. Send checks, with your project name in the memo, to Fresh Arts for deposit. We will deposit your funds and hold them for you in a separate checking account. To use those funds, fill out a disbursement request online (attaching valid receipts and/or invoices), and we will send funds to the project manager via Bill.com within 10 days of approval. Part of the approval process for disbursement requests is validating that the submitted receipts fit with the non-profit purpose of the project and any spending rules specific to your grant funders. Fresh Arts reserves the right to reject requests that do not meet these guidelines and ask for other expense documentation.
DOES FRESH ARTS HAVE CONTROL OF MY CREATIVE CONTENT AND INTELLECTUAL PROPERTY?
Fresh Arts does not influence the content or creative aspects of sponsored projects. Copyright and ownership of intellectual property remain with the artists. As long as your work is in compliance with our federal tax-exempt status, your work is your work. Fresh Arts does reserve the right to refuse sponsorship of projects that condone hate speech or harm to others. Fresh Arts will not tolerate any form of discrimination, harassment, or intimidation and is committed to providing a safe and welcoming experience for all.
HOW LONG DOES THE SPONSORSHIP LAST?
Sponsorships can remain active so long as a member is current with an annual renewal, and can be terminated by the project at any time. (If, for example, a sponsored project obtains their own federal tax exempt status, the project would no longer need a fiscal sponsor.) If Fresh Arts decides to end a contract for any reason, we must give the project 30 days notice.
MY APPLICATION FOR FISCAL SPONSORSHIP WAS APPROVED BUT THEN I DIDN’T GET THE GRANT I APPLIED FOR. WHAT HAPPENS NOW?
Don’t give up. Not receiving funding doesn’t affect your contract with us. Check out our workshop schedule for grant writing classes or schedule a consultation if you could use more help with your fundraising strategies – and let us know when you’re prepared to start your next proposal.
CAN MY FRIENDS AND FAMILY DONATE MONEY TO MY PROJECT ONLINE?
Yes, through your page on the Fresh Arts website. Remember, Fresh Arts receives an 8% cost-share on all donations made. Additionally, any credit card processing fees (typically between 2-3%) are passed to the project.
DO PEOPLE DONATING TO MY PROJECT GET A TAX DEDUCTION?
Yes. Checks from individual donors, like grants, must be made out to Fresh Arts in order for them to be tax deductible. Make sure donors write the name of your project in the memo line so we don’t mistake the donation as ours instead. We cannot accept checks that are made out to your organization, and we cannot accept donations from someone else through you (i.e., if you were to deposit a donation check into your own account and then write Fresh Arts a check for the same amount).
HOW CAN I MAKE THIS FISCAL SPONSORSHIP RUN SMOOTHLY?
Be aware of your deadlines. Many of our sponsored projects apply for the same grants, so our plate gets filled up fast for popular deadlines.
Make sure your donors make checks out to Fresh Arts and not to your organization, and write your project’s name in the memo field.
Keep track of your records. That means: hold on to all of your receipts and invoices and keep your project’s budget current. Communicate!! Keep Fresh Arts aware of what’s going on. If you’re exploring new funding, making changes, or have new projects coming up, let us know. We’re here to help you.