General Fiscal Sponsor Questions
Fiscal sponsorship, at its core, is when a non-profit organization extends its tax-exempt status to select groups engaged in activities related to the organization’s mission. According to the National Network of Fiscal Sponsors, fiscal sponsorship has evolved as an effective and efficient mode of starting new non-profits, seeding social movements, and delivering public services. Fiscal sponsorship generally entails a non-profit organization (the “fiscal sponsor” and, in this case, Future Coalition) agreeing to provide administrative services, oversight to, and assume some or all of the legal and financial responsibility for the activities of groups or individuals engaged in work that relates to the fiscal sponsor’s mission (the “fiscal project”).
Using a fiscal sponsor is an excellent option for a group or organization that needs to manage financial donations, grants, and transactions but is not quite ready to become an independent organization, such as a 501(c)(3) or 501(c)(4) non-profit. The fiscal project has autonomy over its programming; they are the experts in their work. Fiscal sponsors offer financial oversight and support at baseline, although Future Incubator provides additional support for fiscal projects.
501(c)(3) funding is exclusively used for charitable and educational purposes. Virtually no political work (e.g., lobbying, candidate support work) is allowed. Donations to a 501(c)(3) organization are tax-exempt by the IRS, so the rules are strict. In comparison, donations to a 501(c)(4) organization are *not* tax-exempt. C4 organizations are allowed to engage in political work. To learn more about the distinctions between 501(c)(3) and 501(c)(4) funding, visit the Donorbox Nonprofit blog post linked here or review our Glossary for more information.
Informative infographic by Donorbox Nonprofit comparing 501(c)(3) and 501(c)(4) organizations.
When you enter a fiscal sponsorship relationship as a project, you come under the umbrella of that organization, and you will have the same tax status as your fiscal sponsor. If you enter a fiscal sponsorship agreement with Future Coalition, you will have the same status it has: a 501(c)(4) organization with the ability to fundraise 501(c)(3) funds.
Non-profit organizations in the United States do not pay taxes. However, organizations are legally required to file detailed tax returns annually with the IRS – Form 990. Fiscal sponsors are responsible for these filings. Fiscal projects do not need to file their own or separate tax returns. The fiscal project’s activities are reported as part of the fiscal sponsor’s Form 990.
Simply stated, fiscal sponsors place responsibility for implementing programs in the hands of project leaders while ensuring appropriate fiduciary oversight.
As a fiscal project, your responsibility is to ensure you keep track of your spending and your activities in an organized way and keep your fiscal sponsor up to date on financial and operational matters so that your fiscal sponsor can report it appropriately as part of completing Form 990.
Future Incubator Programming Questions
As is the basic role of a fiscal sponsor, Future Incubator provides financial oversight and management for fiscal projects. These services include:
- Financial oversight
- Audited financial services
- Self bill paying
- Receiving stock donations
- Tax reporting
- Expense cards
- ActBlue and online fundraising
- Airtable accounts and support
- Affiliate Program (data and tools)
- General management
- Human resource guidance
- Referrals for legal services
- Organizational development
- Spanish translation service
Because of Future Incubator’s organizational structure, fiscal projects sign an agreement and join the 501(c)(4) organization while also being able to leverage our organizational fiscal sponsorship with March On Foundation on the 501(c)(3) side.
In addition to these services, Future Incubator also creates space for community and learning. The program hosts regular interactive training sessions on various topics, including coalition building and grant applications. There are also weekly office hours as an additional resource for ongoing support and communication.
Each fiscal project is also assigned a Project Advocate (PA), a full-time Future Incubator team member dedicated to supporting project needs.
Future Incubator offers two different tracks for fiscal sponsorship.
- Model M is a full-service fiscal sponsorship program for promising groups ready to learn and be trained to run their campaigns, projects, and, ultimately, their non-profit and social advocacy organizations. This track is well suited for projects/groups with at least six months of experience interested in learning how to manage and grow their non-profit operations.
- Turnkey is a plug-and-play fiscal sponsorship service where Future Incubator handles all the tracking, organization, financial, and administrative details so project leaders can focus on the mission. This track is well suited for groups needing “back office” services and wanting to focus primarily on organizing rather than building up operational infrastructure.
If Model M and Turnkey tracks do not seem like a good fit for your organization, March On Foundation also offers a Model C fiscal sponsorship. If you are interested in this program, please contact email@example.com
Future Incubator (FI) asks fiscal projects to commit to incubation for at least one year for the Model M track. There is no expected time commitment for the Turnkey track.
Yes! Future Incubator (FI) is uniquely set up to receive both C4 funding via Future Coalition (FC) and C3 via March On Foundation (MOF).
The fiscal sponsorship fee is 8% for fiscal projects with employees or contractors and 5% for all other projects.
Unless you plan to employ team members, there are no fees beyond the standard fiscal sponsorship fee. If you employ individuals, additional payroll and worker compensation fees will be associated with their payment. We will work with you to assess and budget for these fees.
Applications are now open! You can apply through this link. The application asks questions about your work and needs as an organization to assess whether your project aligns with our mission and determine if we can provide the appropriate level of support for your project needs.
- 501(c)(3) organization: A 501(c)(3) organization is typically known as a charitable organization. 501(c)(3) organizations can receive contributions that are tax-deductible. To qualify, these organizations must not be run for private interests, and none of their net earnings can go to private shareholders or individuals. For more in-depth information, you can visit the IRS website.
- 501(c)(4) organization: The term 501(c)(4) refers to a specific section of the U.S. federal income tax code that relates to social welfare organizations. Corporations recognized by the IRS as 501(c)(4) are exempt from paying federal income taxes. However, unlike 501(c)(3) charitable organizations, contributions made to 501(c)(4) groups are not tax-deductible for the person or corporation making the donation. These organizations are permitted to engage in political activities, including lobbying and participating in campaigns. This also includes donating to political committees involved in political efforts like ballot measures or referendums. For further information, Ballotpedia provides a comprehensive overview.
- Fiduciary oversight: According to Finance Strategists, fiduciary oversight entails overseeing and managing the conduct of individuals or entities tasked with managing assets or resources entrusted to them for others.
- Fiscal sponsorship fee: A fiscal sponsor charges a monthly or yearly administrative fee based on the donations received by the sponsored project. This fee is calculated as a percentage of donations a project receives. For Future Incubator projects, the sponsorship fee is 8% for fiscal projects with employees or contractors and 5% for all other projects.
- Form 990: Form 990 is a tax form that all 501(c)(3) tax-exempt charitable and nonprofit organizations in the United States must file annually with the Internal Revenue Service (IRS). Form 990 aims to increase financial transparency by including details on revenue, expenditure, and income, alongside information used to evaluate if a nonprofit meets the federal requirements for-exempt status. For more information, visit the Library of Congress Resource Guide.
- Tax-deductible: Tax-deductible refers to certain expenses or items that can lower the amount of tax you need to pay. These deductions are taken away from your total taxable income, which can significantly decrease the taxes you owe. A common example is charitable donations. However, what you’re allowed to deduct and how much can differ based on the tax rules of the area and whether the deductions are for an individual or a business. For more detailed information, you can visit Cornell Law School’s website.
- Tax-exempt: A tax exemption means that certain types of income, earnings, or even specific people or organizations don’t have to pay taxes. For instance, non-profit organizations that meet certain criteria don’t have to pay income tax, thanks to a special status given by the IRS. For more information, visit Tax Foundation.
- The Internal Revenue Service: The Internal Revenue Service (IRS) is a part of the U.S. Department of the Treasury. Its main duties include enforcing and managing federal tax laws, handling tax returns, conducting audits, and assisting American taxpayers.