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Fiscal Sponsorship: 6 Ways to Do It Right (second edition)
by Gregory L. Colvin


Many individuals and groups wish to pursue a nonprofit mission, but lack the organizational infrastructure to establish or maintain a nonprofit corporation. Fiscal Sponsorship is a good primer for established nonprofit organizations that might provide this support.

Mr. Colvin originally wrote this book in 1993 to present ethical and legal alternatives to the concept of “fiscal agency.” Some nonprofits asked to be “fiscal agents” were being used as conduits or pass-through agencies for individuals or groups to receive tax-deductible contributions to fund activities that were of questionable public benefit. As a result, the terms “fiscal agency” and “fiscal agent,” as applied to nonprofits, have become suspect. “Fiscal sponsorship” is the preferred term for proper arrangements between nonprofits and those seeking the benefits of nonprofit incorporation for public benefit purposes.

The book outlines three scenarios: two artists seeking charitable support for their artistic production and teaching activities; a church with an AIDS hospice program that has outgrown the church's capacity to manage it effectively; and a US environmental group with significant lobbying activities seeking to purchase Brazilian rainforest to protect it from development. Each scenario is then applied to six fiscal sponsorship models in ascending order of independence and autonomy. A handy two-page reference chart compares and contrasts the six models, supplementing the book's narrative. A seventh model, derived from a 1990 US Supreme Court decision, specific to Mormon (LDS Church) parents providing tax-deductible support for their children's mission activities, is explored but noted to be as yet untested.

My own ethical antennae were alerted when the AIDS hospice scenario included a desire by friends and relatives to make tax-deductible gifts to support a specific patient's medication needs. I would have been more comfortable had Mr. Colvin handled this potentially dangerous issue more regularly and consistently throughout the book's application of each sponsorship model to the scenarios. He alludes to the IRS requirement for a tax-deductible gift to benefit an indefinite, open-ended “charitable class” when discussing a preapproved grantor-grantee relationship, but doesn't address the issue equally well when discussing the other five models.

A web site, www.fiscalsponsorship.com, has been set up in conjunction with the second edition of the book. Unfortunately, the web site only seeks to sell the book and provides links to two other web sites with sponsorship-related information - far from the promise of posting new developments in fiscal sponsorship.

One should pick up this book with a definite interest in the subject - it's not for the casual reader. Most people and groups in need of fiscal sponsorship will likely not know how to articulate that need, and will be less sophisticated in evaluating the legal and operational considerations. However, representatives of organizations seeking brief, solid advice on options for supporting nonprofit activities of smaller groups and individuals will find it very helpful.

Sumption & Wyland

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