Fiscal Sponsorship
A legal arrangement where an established nonprofit holds funds and manages grants on behalf of a project or organization that lacks its own tax-exempt status.
A relationship in which an established nonprofit organization with tax-exempt status receives and administers funds, grants, or donations on behalf of a project, initiative, or unincorporated group. The sponsor provides legal and financial oversight, allowing the sponsored entity to access nonprofit benefits without forming its own separate organization. Common in arts, activism, and community projects.
What this means in real life
A grassroots community garden run by volunteers partners with a local established nonprofit to receive donations and grants. Donors get tax deductions, the nonprofit handles compliance, and the garden keeps day-to-day control—without needing its own nonprofit paperwork.
What it isn’t
It is not a donation or grant to the sponsor itself. The sponsor is a custodian, not the beneficiary; funds must be used for the sponsored project's stated mission, and the sponsor cannot redirect money to its own programs without explicit agreement.
Commonly misused online
Often conflated with 'nonprofit partnership' or 'fiscal agent'—people assume any nonprofit holding money for another group is fiscal sponsorship, when the relationship may be simpler (e.g., a one-time grant pass-through) or more complex (e.g., a subsidiary).