A Fiscally Sponsored Program is the product of an agreement between an established 501c3 public charity (like United Nonprofits) and a small group of individuals who are interested in soliciting donations and grants but lack their own unique tax-exempt status. Under this agreement, a program manager, or the person responsible for the small group of individuals, works with the non-profit to help achieve their mission.
KEY BENEFITS OF USING A FISCAL SPONSOR
Efficiency: Administrative responsibilities can be burdensome for small groups. Using the infrastructure at United Nonprofits to help with the paperwork and operational reporting can be a huge relief.
Focus: Most program managers and groups start an initiative because they care about the cause, not the paperwork. Having to create and maintain infrastructure takes away from time focused on mission.
Authority: There are some grant-awarding organizations that will not fund start-up organizations. By becoming fiscally sponsored under an established charity, you can avoid this restriction in many cases.
HOW IT WORKS
CHOOSING TO BE FISCALLY SPONSORED
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A few things to consider: If you formed your own nonprofit organization, you’d likely spend between 20-30% of your annual revenue on administrative and overhead expenses alone. FSP fees through United Nonprofits are nominal by comparison, freeing up funds that can now go straight to your charitable cause. For the comprehensive administrative and legal services, capacity-building resources, and back-office support United Nonprofits provides, we charge just 10% of the incoming donations made to the program. The fee for all grant funding from government and foundation sources is just 12%. (This fee is higher due to the increased reporting and auditing services these grants require.)
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Are donations to the Program tax-deductible?
Are gifts of services tax-deductible?
The IRS rules on this are clear; the answer is “no.” For example, if a surgeon who charges $5,000 for a heart valve replacement procedure donates his time to provide ten such procedures for needy patients without health insurance, he or she is not allowed any charitable deduction for the value of his time, even if there is an established “market” to substantiate value. This same rule applies to the time spent by an artist in providing services to or for a charity, or a hotel that donates a room for the night. An artist is limited to a deduction of the actual cost of the materials used to create a work of art, but only if the artist has not “expenses” (or “deducted”) the cost of such materials. Most professional artists deduct as “overhead” the cost of raw materials, paint, supplies, etc. These are deducted under Code section 162 which allows a deduction for “ordinary and usual business expenses.” There is no benefit to the artist in taking a Code section 170 charitable deduction if a Code section 162 business deduction is available. Although you should always check with your tax preparer for tax advice. IRS Publication 526 provides a useful chart that summarizes what is and what is not deductible.