Fiscal Sponsorships & Incubation
Fiscal SponsorshipWhat is a fiscal sponsor?
A fiscal sponsor (previously called a fiscal agent) is a 501(c)(3) tax-exempt organization that can and will receive tax-deductible contributions and be responsible for 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 benefit from the experience, oversight, and special privileges of the tax-exempt nonprofit agency acting as its fiscal sponsor.
There are various models for fiscal sponsorship, but the two most utilized are Model A (a.k.a., “Comprehensive Sponsorship,” where a project or program is incubated inside the sponsoring agency) and Model C (where a single project or program remains autonomous from the fiscal sponsor). You can learn more about these types of sponsorship here.
Who might be best suited for fiscal sponsorship?
Fiscal Sponsorship is a good solution for organizations, groups, or individuals who 1.) only want to do a single project or a few small projects over a specified period of time; 2.) don’t have the time or staff to fully develop organizational administration and infrastructure while launching a program or project; 3.) wish to develop projects that fulfill the sponsoring agency’s mission while benefiting from its knowledge, structure, and affiliation; or 4.) need the ability to receive tax-deductible donations while they await 501(c)(3) nonprofit status approval from the IRS.
What does a fiscal sponsor do? Why are they valuable?
Depending on the arrangement, a fiscal sponsor may:
- Accept and safeguard charitable donations on behalf of a project.
Nonprofit 501(c)(3) organizations such as The Writer’s Garret are able to accept contributed funds without tax liability. In contrast, a grant or gift made to an individual is generally considered taxable income by the IRS.
- Take on legal liability for the possession and / or distribution of those funds.
- Create and /or maintain accounting records for the project.
- Prepare legal, financial, and tax reports as required for donors and funders (Filing grant reports almost always remains the responsibility of the project organizers.)
- Bring experience, resources, and connections to the project and provide such additional aids such as administrative services, marketing and technical resources, and/or strategic planning assistance.
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 whom you have a good relationship; one that shares your discipline, area of expertise, and / or values; or one that has an existing fiscal sponsorship program.
Who is eligible for The Writer’s Garret’s Incubator program through the Community and Mentorship Project (CAMP)?
Our CAMP Incubation program is designed for artist-led groups and projects that intend to become part of The Writer’s Garret by enriching its programs. These sponsored projects must have a nonprofit purpose that directly ties in with our literary arts mission. “Incubation” mostly falls under the Model A form of Fiscal Sponsorship. This area is one in which we are by far the most selective, as “Incubation” means that we will be ultimately responsible for the quality of programming and its adherence to our mission.
What is meant by “mission” and “nonprofit purpose”?
The mission of The Writer’s Garret or of the sponsored project must be the declared, in writing, raison d’etre that must align with the tenets of charities as determined under section 501(c)(3) of the IRS. 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.” We cannot manage funds meant for individual gain, for-profit, uncharitable, or non-literary purposes.
Eventually I want to get my own nonprofit status, but I’m not sure what I need to do. Can The Writer’s Garret help?
Yes. We can and will help through the start-up process. Fiscal sponsorship is a good testing ground, and we have connections with legal, accounting, and consulting resources that can help you figure out your next steps.
I only have a few projects, and I’m not interested in forming a separate nonprofit. Can I still be sponsored by The Writer’s Garret?
Yes. The Writer’s Garret can sponsor organizations of various sizes and stages.
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, although you will likely need to compromise in order to meet IRS tax requirements, which depend on your business structure.
Many nonprofits start as a sole proprietorship 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 any 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.
You may also be incorporated in the state of Texas as a nonprofit and apply for sponsorship. You do not need to go on to become a nonprofit with the Federal Government, and but can decide to stay in this stage of institutional development.
What are my tax responsibilities under fiscal sponsorship with The Writer’s Garret?
All of The Writer’s Garret’s fiscally sponsored projects and organizations are self-managed, which means that they are responsible for filing their own tax return and collecting all reliable data for required reports.
If your project is a sole proprietorship 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) for which you pay a total of $600 or more during the calendar year.
– Claim all income paid through The Writer’s Garret on your tax return and deduct project expenses by filling out a Schedule C.
If you are a corporation in Texas that has yet to file their application for 501(c)(3) or is waiting on the IRS as a sole proprietor, then it’s best to continue to file taxes as you have in previous years in order to avoid confusion.
Is the CAMP Fiscal Sponsorship free?
Sponsoring organizations nearly always charge fees to cover administration costs. Sending us the Pre-Application is FREE. If you are then given a green light for the full application, we charge a $45 application fee per project. If you have a full program or organization applying for incubation as part of The Writer’s Garret, we require a $95 application fee, renewable annually at the time of review after the first 12 months. Depending on your budget, location, and / or conditions of the arrangement, we also require 6%-15% of any funds that are deposited with us upon payment to the sponsored project or organization. We will charge rush fees if we need to accommodate requests for materials on short notice or if funds need to be withdrawn ahead of need (e.g., because of termination of the the sponsorship relationship).
The Writer’s Garret offers fiscal sponsorship because it is an important part of our non-profit mission by creating and developing readers, writers, and audiences in communities, especially where the literary arts lack infrastructure and opportunities to make an impact. Generally, these fees do not cover the full extent of the program’s costs.What do I get for my fees?
The primary benefit of fiscal sponsorship is the ability to receive tax-deductible donations for nonprofit work, but depending upon the arrangement, The Writer’s Garret may also provide several services and / or discounts to our sponsored projects.
Program benefits include:
- Access to pro bono bylaw and articles of incorporation review; other pro bono or low-cost legal services may also be available
- Your project’s money held in a separate account and available to you as needed (given adequate notice)
- Bi-weekly deposit and check processing
- Monthly account statements via email
- Letters of agreement for grant applications available as needed (you must inform The Writer’s Garret of your intent to apply at least two weeks before a proposal is due)
- Donors who give $100.00 or more to your project (individual and corporation/foundation) are
sent acknowledgements from The Writer’s Garret to document tax deductions
- Your project’s own online fundraising page available
- Access to other low-cost services, including organizational consulting as well as discounts on meeting room rental and certain workshops.
- Potential projects can submit the pre-application here.
- If you have questions about eligibility, you can check out the information here – if you still have specific questions, you can email us here.
- We will require payment of the application fees in full prior to reviewing your application.
- Applications are reviewed by a selection committee or task force prior to meetings of The Board of Trustees.
- The Board must approve the recommendation.
We receive applications on an ongoing basis, and the process from receipt of application to acceptance usually takes about 2-6 weeks. Occasionally, during very busy times, the decision may take two months or longer.
My application for CAMP was approved! Now what?
Congratulations! We’ll send you a MOU (Memorandum of Understanding) to review, sign, and return to us.
Once we have a signed MOU on file, we’ll discuss with you how to set up an online fundraising campaign, with links to forms and tools to help manage your account with us online. Then, let us know when you’re getting your grant proposal or other fundraisers together! We want to make sure that your materials are legally acceptable, and grantors usually need some paperwork from us before you turn in proposals.
How long is the contract?
Contracts can remain active so long as a member is current with an annual fee, but 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 The Writer’s Garret decides to end a contract for any reason, we will give the project 30-days notice. Once a fiscal sponsorship relationship with The Writer’s Garret ends, we will keep your records on file for a minimum of five years.
We got the donation but the check is made out to The Writer’s Garret. 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 The Writer’s Garret for deposit, along with full contact information for the donor so that we can respond and maintain accurate records. We will deposit your funds and hold them for you in a separate checking account from our regular operations. To get those funds back from us, you will need to invoice us as per the arrangements of your MOU with us. We usually process deposits upon arrival and cut checks every two weeks.
Our first project is done, but we want to do more. Do we need to reapply for The Writer’s Garret to sponsor our next project?
That will depend upon the type of sponsorship you have been awarded. The Model A, for instance, would be approved to incubate organizational or programmatic development, and, so, as long as your annual membership with us remains in good standing, you’re good to go; however, your subsequent projects must still fit within our mission and be consistent with our program and tax-exempt guidelines. If you have been sponsored as a Model C project, you will need to reapply, but will not need to send another pre-application. Upon approval, we can transition your account into your new organization/project.
Do people donating to my project get a tax deduction?
Yes, however, checks from individual donors, grantors, corporations, and other sponsors, MUST be made out to The Writer’s Garret in order to be tax deductible. Make sure the name of your project is written in the memo line so that we don’t mistake the donation as ours instead. We cannot accept checks that are made out to your individuals, group, or 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 The Writer’s Garret a check for the same amount).
Can my friends and family donate money to my project online?
My application for Fiscal Sponsorship was approved but I didn’t get the grant I applied for. What happens now?
Not receiving funding doesn’t affect your contract with us. You can still raise individual funds, apply for other grants, and / or learn more about grantwriting. We are happy to help. Check out our workshop schedule or that of our affiliates 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.
As a newly sponsored project, how can I make this fiscal sponsorship run smoothly?
- Be aware of your timeline and its deadlines–it makes things easier for everyone (and will avoid rush fees). Sponsored projects may apply for the same grants, and so our plate may get filled up during deadline times.
- Make sure your donors make checks out to The Writer’s Garret and not to your organization, and write your project’s name in the memo field. If we have to return the check and facilitate the writing of a new one, we will charge your account a $25 service fee.
- Track ALL information listed in your MOU for your records–and for ours. We may need figures and amounts for our own reports that will enable us to remain above board to insure our longevity as your sponsor. It’s also always good to be prepared. The more you know about your own results, the better you will be able to address the questions and needs of your donors.
- Keep The Writer’s Garret 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 eager to help you be successful.