Frequently Asked Questions about Fiscal Sponsorship
What is a fiscal sponsor?
A fiscal sponsor is an organization that agrees to accept, and be responsible for, tax-deductible contributions and 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 take advantage of a lot of the benefits of a tax exempt nonprofit organization.
Who are fiscal sponsorships for?
Fiscal Sponsorship is a good solution for organizations (or certain individual projects or events) that only want to do a few small projects over a specified period of time, those who don’t have the time or staff for a lot of organizational administration, or those who need to be able to receive tax-deductible donations while they wait for 501(c)(3) nonprofit status approval from the IRS.
What does a fiscal sponsor do? Why are they valuable?
A fiscal sponsor:
Accepts and safeguards charitable donations on behalf of a project
Takes on legal liability for those funds
Creates and maintains some accounting records for the project
Qualifies the project for some grants and funding that would otherwise be inaccessible
Brings experience to the project and may provide such additional aids such as administrative services and/or strategic planning assistance
Who can be a fiscal sponsor?
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 which you have a good relationship, and/or one that has an existing fiscal sponsorship program.
Who is eligible for Springboard’s Incubator program?
Springboard’s program is designed for artist-led groups and projects. Our sponsored projects must have a nonprofit purpose, and the arts product or process must be based in Minnesota.
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.”
Springboard can sponsor sole proprietorships, nonprofit corporations, or single-member LLCs that are non-profit in purpose and meet all other eligibility requirements. Springboard cannot manage funds meant for for-profit purposes and will not manage funds on behalf of for-profit corporations (S and C corps) or S, C, or P classification LLCs.
Eventually I want to get my own nonprofit status but I’m not sure what I need to do. Can Springboard help?
Yes. We’ve helped a lot of new organizations through the start-up process. Fiscal sponsorship is a good testing ground, and we have legal 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 Springboard?
Yes. Springboard sponsors 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?
Absolutely for Springboard’s purposes, though you likely will need to compromise in order to meet IRS tax requirements.
Tax requirements depend on your business structure. Most nonprofits start as a sole proprietorship, single-member LLC, 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 that 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.
What are my tax responsibilities under fiscal sponsorship with Springboard?
All of Springboard’s fiscally sponsored projects and organizations are self-managed, which means that they are responsible for filing their own tax return.
If your project is a sole proprietorship, single-member LLC, or unincorporated association, you will need to account for your project on your personal tax return(s). This mean you will need to:
– Fill out a 1099-MISC form for any individual(s) you pay a total of $600 or more during the calendar year.
– Claim all income from Springboard on your tax return and deduct project expenses by filling out a Schedule C.
If you are a corporation in Minnesota that has yet to file their application for 501(c)(3) or is waiting on the IRS is as a sole proprietor, then you may need to complete a 990, depending on yourbudget size. Consult a tax professional for more information.
Is the Incubator Program free?
Sponsoring organizations nearly always charge fees to cover administration costs. Ours include a $95 application fee, a $95 annual fee to maintain membership in the program after the first 12 months, and 7% of any funds that are deposited with us. We also charge rush fees if we need to accommodate requests for materials on short notice.
Springboard offers fiscal sponsorship because it is an important part of our non-profit mission; the fees do not cover the full cost 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 Springboard also offers several services and 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 are also available
Your project’s money held in a separate account and available to you as needed (given adequate notice)
Weekly deposit and check processing
Automated weekly account statements via email
Letters of agreement for grant applications available as needed (you must inform Springboard of your intent to apply at least five business days before a proposal is due)
Donors who give $250.00 or more to your project (individual and corporation/foundation) are sent acknowledgements from Springboard to document tax deductions
Your project’s own online fundraising page available through GiveMN.org
Access to other low-cost Springboard services, including organizational consulting as well as discounts on meeting room rental and certain workshops
How does the application process work?
Potential projects can determine their eligibility with a short online questionnaire. Eligible candidates can continue to the online application form.
If you still have specific questions, you can [email protected]
Applications are reviewed by a selection committee once a month. Project are then notified of their admittance or receive follow-up questions for further review.
How long does it take for my application to be reviewed?
We receive applications on an ongoing basis, and the process from receipt of application to acceptance usually takes about 4-6 weeks.
My application for the Incubator Program was approved! Now what?
Congratulations! We’ll send you a contract to review, sign, and return to us.
Once we have a signed contract on file, we’ll send you information about how to set up an online fundraising campaign and 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 know your materials are legally acceptable, and grantors will almost always need some paperwork from us before you turn in proposals.
How long does the sponsorship last?
Sponsorships can remain active so long as a member is current with an annual renewal, and 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 Springboard decides to end a contract for any reason, we must give the project 30 days notice. Once a fiscal sponsorship relationship with Springboard ends, we will keep your records on file for five years.
We got the grant but the check is made out to Springboard. 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 Springboard for deposit. We will deposit your funds and hold them for you in a separate checking account. To get those funds back from us, fill out a secure online funds request form, and we will send you a check. We process deposits and cut checks once a week.
Our first project is done but we have more ideas! Do we need to reapply for Springboard to sponsor our next project?
Not necessarily. As long as your subsequent project fits with our mission and is consistent with our program and tax-exempt guidelines, then we can transition your account into your new organization/project.
Do people donating to my project get a tax deduction?
Yes. Checks from individual donors, like grants, must be made out to Springboard in order for them to be tax deductible. Make sure they write the name of your project in the memo line so we don’t mistake the donation as ours instead. We cannot accept checks that are made out to your 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 Springboard a check for the same amount).
Can my friends and family donate money to my project online?
Yes. Our sponsored projects can create fundraising pages through Give MN. A directory of projects using GiveMN is here. Instructions detailing how to set up a GiveMN page are sent once an approved project returns their signed contract.
My application to Springboard’s Incubator Program was approved but I didn’t get the grant I applied for. What happens now?
You might not win them all, but don’t give up. Not receiving funding doesn’t affect your contract with us. Check out our workshop schedule 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.
How many organizations does Springboard sponsor?
We sponsor about 200 small organizations and artist projects.
As a newly sponsored project, how can I make this fiscal sponsorship run smoothly?
Be aware of your deadlines – it makes things easier for everyone (and avoids rush fees). Many of our sponsored projects apply for the same grants, so our plate gets filled up fast for popular deadlines.
Make sure your donors make checks out to Springboard and not to your organization, and write your project’s name in the memo field.
Keep track of your records. It’s always good to be prepared.
Keep Springboard 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 here to help you.