FREQUENTLY ASKED QUESTIONS
Fiscal sponsorship is a common means by which individuals and organizations can start new, nonprofit programs without establishing a separate 501(c)(3) organization. Fiscally sponsored projects are able to get their charitable, tax-exempt status from their fiscal sponsor. There are several forms of fiscal sponsorship, but in every case, the fiscal sponsor is required to ensure that all funding received on behalf of the project will be used for tax-exempt, charitable purposes as defined in the Internal Revenue Code.
The Shawna E. Shea Memorial Foundation, Inc. (Shawna Foundation) offers the Model C form of fiscal sponsorship.
How does the Model C Fiscal Sponsorship relationship work?
In the case of a Pre-approved Grant Project (“Model C”), the Shawna Foundation re-grants funds received from a donor to the Project. The Shawna Foundation is NOT responsible for the Project's programmatic operations. Instead, these operations, as well as incurred liabilities to third parties, are the ultimate responsibility of the Project. In addition, no one in a “Model C” project is considered an employee or representative of the Shawna Foundation.
Under the “Model C” agreement, the Shawna Foundation is responsible for the financial administration of a restricted fund. Grants from this fund support the Project at our discretion. The Project is responsible for maintaining adequate records to show that these funds are being used solely for the intended grant purposes. Any funds that are not spent must be repaid to the Shawna Foundation. All other responsibility related to the Project rests with the Project — including the preparation of grant reports to its funders and to the Shawna Foundation.
Will the Shawna Foundation raise funds for our project?
Fiscal sponsorship is not a funding relationship. The Shawna Foundation requires that the fiscally sponsored Project raise it own funds. The Shawna Foundation charges a fee to cover the shared administrative costs associated with acting as the fiscal sponsor for a Project. The fee is a percentage of the Project's income.
We realize that the process of establishing and maintaining an independent 501(c)(3) can be expensive, confusing, and time-consuming. Entering into a fiscal sponsorship agreement is very cost effective and eliminates the time and worry associated with the required filing and record-keeping of a 501(c)(3). This is beneficial to a small project in several ways: it clears the way to focus on your project; and it opens your project to time and energy spent on the project itself, not the administrative necessities.
What exactly is a 501(c)(3) organization?
The term 501(c) refers to a subsection of the United States Internal Revenue Code that lists the types of nonprofit organizations exempt from certain federal taxes. Section 501(c)(3) is one of the tax law provisions granting exemption from the federal income tax to nonprofit organizations that exist for religious, charitable, scientific, literary, or educational purposes, among others. The Shawna E. Shea Memorial Foundation, Inc. has been a designated 501(c)(3) charitable organization and is a private foundation. This requires us to enter into fiscal sponsorships with projects that fall within the scope of our mission. Our "Model C" Projects can already be incorporated as non-profits, but do not have 501(c)(3) tax exempt status.
Is there a time limit to a fiscal sponsor relationship with the Shawna Foundation?
Fiscally sponsored Projects end their work with us for various reasons. They may:
Complete the project and spend down all their funds. If the Project's work is done, but funds remain, the Project may designate a like-minded 501(c)(3) to receive the funds, or if appropriate, the remaining funds may be returned to the donor.
Transfer to another 501(c)(3) organization that will serve as the fiscal sponsor. In this case, any remaining Project funds are transferred to the new fiscal sponsor, and the Project's grantors are notified of the transfer of sponsorship.
Register their own 501(c)(3). The Project's new tax-exempt organization assumes responsibility for its own operation, and any remaining Project funds on account with the Shawna Foundation are transferred to the new entity. We will work with the Project to facilitate this transition.
Regardless of the reason for ending the relationship with the Shawna Foundation, any intellectual property created by the Project while under Shawna Foundation belongs to and goes with the Project.