Fiscal sponsors face new disclosure proposals in Washington

Two separate efforts in Washington would, for the first time, require charities that act as fiscal sponsors to publicly identify the projects they sponsor. Neither is in force, but both are moving, and accountants and nonprofit lawyers spent September advising sponsors to get their records in order.

Fiscal sponsorship lets an established 501(c)(3) accept tax-deductible gifts for a project that has no exemption of its own, while keeping control over how the money is spent. It is a common start for community efforts, coalitions, and documentary films. We explained the arrangement in Before you incorporate, consider a fiscal sponsor.

What Treasury announced

In April, the Treasury Department said the IRS plans to revise Form 990 to get clearer reporting from 501(c)(3) organizations on government grants, government contracts, and fiscal sponsorship arrangements. Treasury said congressional oversight had raised concerns that some sponsorships obscure who runs a project and who controls its money. It said proposed regulations and a public comment period would come before any change is final, and that it would weigh the reporting burden.

What the House bill would do

H.R. 9721, the Fiscal Sponsorship Transparency Act of 2026, was introduced in July by Representative Lloyd Smucker of Pennsylvania and approved by the House Ways and Means Committee, 23 to 15. As summarized by the nonprofit law firm Perlman & Perlman, it would require a sponsoring public charity to disclose, for each arrangement, the organizations involved, the amount provided each year, the activities funded, the officer managing it, and its start and end dates.

The bill would also tax what it calls improper conduit arrangements, in which a charity passes along earmarked money without exercising real discretion and control. The tax would start at 20 percent of the amount transferred and rise to 100 percent if the problem is not corrected, with separate taxes on managers who knowingly approved it. Those provisions would apply to tax years beginning after December 31, 2027. The bill has not become law.

Supporters point to a case in which a group later sanctioned by Treasury received donations through a sponsor. Critics, including Independent Sector, say the definition could reach arrangements that are not traditional sponsorships, and that the cost of compliance would fall hardest on small sponsors.

What sponsors can do now

Keep a current list of every sponsored project, with a signed agreement, a named contact, and annual totals. Record how staff or the board actually exercises control over spending, not only that the agreement allows it. If you receive government grants, check that the way they appear on your Form 990 matches your audited statements.