Jonathan Skurnik and Kathy Leichter
Photo from A Day's Work, Day's Pay
Q: What is fiscal sponsorship and why is it needed?
A: Fiscal Sponsorship occurs when an artist or organization benefits through an affiliation with a tax-exempt 501(c)(3) organization, principally by getting access to funding opportunities and other resources available only to 501(c)(3) non-profit organizations.
Individual artists and new arts organizations face genuine obstacles when seeking the funding necessary to continue and complete their work. Often they are hindered by the legal status of the project, as most foundations or corporate funders restrict grants to 501(c)(3) tax-exempt organizations. Similarly, potential individual donors need the tax incentive of a charitable contribution before they will support an arts project. Individual artists and new arts organizations may also face a funder’s concerns about the project’s viability: Will the funds be used properly? Can the recipient properly document and report use of grant money? Does the organization have the administrative capacity to manage a grant? Will the project be able to attract other funds?
The Fiscal Sponsorship program helps address these concerns by providing the necessary organizational infrastructure and experience through technical assistance and financial services.
Q: What does 501(c)(3) mean?
A: 501(c)(3) is the tax determination given to a non-profit charitable organization at the federal level.
Q: What is the difference between corporate sponsorship and fiscal sponsorship?
A: Corporate sponsorship generally consists of support-usually in the form of money or materials- given directly to the project. Often the corporate sponsor expects something in return for their investment in the project, such as advertising or use of the project for publicity purposes.
Fiscal sponsorship enables artists to gain access to funding opportunities and materials that are only available to 501(c)(3) tax-exempt organizations. However, many corporations also have philanthropic programs that donate to tax-exempt charitable organizations. In order for a non-exempt project to gain access to this funding the project would need to have a fiscal sponsor.
Q: Does NYFA’s Fiscal Sponsorship program provide direct funding?
A: No. The Fiscal Sponsorship program is not a grant-making program. However, having a fiscal sponsor allows an individual to apply to many funders who do not accept applications from individuals.
Q: Why does the Fiscal Sponsorship program have an application process?
A: NYFA must insure that sponsored project activities are conducted according to IRS regulations. For Fiscal Sponsorship to comply with these regulations NYFA must establish discretion and control over the project. The program accomplishes this through an application process and internal policies and procedures regarding grants and contributions to sponsored projects. In addition, a Letter of Agreement—which each accepted project must sign to commence sponsorship—governs the relationship between NYFA and the sponsored project in order to meet the needs of all the parties involved.
Q: Why does NYFA need to establish discretion and control over a sponsored project?
A: NYFA is legally responsible for the funds received on behalf of a sponsored project and must insure that the project uses the funds for charitable activities and that donor reporting requirements are met by the project.
Q: In addition to fiscal sponsorship, what other services does NYFA’s Fiscal Sponsorship program provide to projects?
A: NYFA’s Fiscal Sponsorship program provides technical assistance and financial services to sponsored projects. Technical assistance takes the form of consultations via phone, fax, email and in-person on a range of subjects, including, but not limited to: fundraising, proposal writing, budgeting, strategic planning and Board development. Financial services range from check-writing services to acting as the bank and bookkeeper, depending on the type of project.
Q: Does the project retain its own legal identity if it has a fiscal sponsor?
A: Every organization that provides fiscal sponsorship practices it differently. Projects that are fiscally sponsored by NYFA are considered independent contractors and they retain their own identity and are not part of NYFA. In this way, projects retain creative control and ownership of their project. However, the project is also responsible for tax reporting and liability issues.
Q: What administrative fees does NYFA charge Artists' Projects and Emerging Organizations that are accepted into the Fiscal Sponsorship program?
A:
Artists' Projects
- No fee to apply
- If accepted, one-time contract fee of $100
- Annual contract renewal fee of $50
- 8% flat fee on all funds raised for the project
- NYFA will also charge the Project directly for any liabilities or direct expenses it may incur on behalf of the Project, including but not limited to bank charges and postage fees.
- Note that for Artists' Projects, the only funds that go to NYFA are contributed funds that are required to go to a 501(c)(3).
Emerging Organizations
- No fee to apply
- If accepted, one-time contract fee of $100
- Annual contract renewal fee of $100
- Quarterly account maintenance fee of $45
- 8% flat fee on all funds raised for the organization
- NYFA will also charge the organization directly for any liabilities or direct expenses it may incur on behalf of the organization, including but not limited to bank charges and postage fees.
- Note that for Emerging Organizations, all funds related to the organization, including all contributed and earned income, go to the NYFA fiscal sponsorship account. Fiscally sponsored Emerging Organizations must close any existing outside bank accounts if accepted.
Q: Does fiscal sponsorship allow the project to be absolved from tax reporting?
A: No. Projects that raise funding through NYFA are legally responsible for reporting that funding as income to the IRS. At the end of each year NYFA sends out 1099’s to all project directors that are unincorporated. Incorporated projects do not receive a 1099 but are responsible for reporting charitable funding to the IRS. Funds received through a fiscal sponsor are considered income and are potentially subject to taxes.
Q: How quickly can I be accepted for sponsorship?
A: Applications are normally reviewed four times a year: please see the current application form and guidelines for application deadlines. The application is reviewed by a specialist in your discipline and by a panel of NYFA staff. Final recommendations are submitted to the Executive Director for approval. The review process takes approximately eight weeks.
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Additional Information
For upcoming application seminars, see our Information Seminars page.
For email updates, join Fiscal Sponsorship's email list!
Questions?
For additional information, please contact Rachel Gourvitz by email at sponsor@nyfa.org.
We Thank Our Funders!
NYFA's Fiscal Sponsorship program is made possible by public funds from the New York State Council on the Arts, a State agency, the New York City Department of Cultural Affairs, and New York Community Trust.
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