The History of Fiscal Sponsorship

The story of fiscal sponsorship began in 1954 with the creation of the 501(c)(3) tax code, which grants tax exemption to “Organizations organized and operated for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals.” Five years later, the Massachusetts Health Research Institute took on their first sponsored project, making them the first fiscal sponsor. The fiscal sponsorship movement then grew through the 1960’s in tandem with the free-services-for-all movement in California, which had created a large number of community projects in need of financial management.

Without well-established guidelines, however, the nonprofit sector saw a good number of sponsorship pitfalls. Sponsors would sometimes lose their 501(c)(3) status by handling transactions incorrectly, and the projects they sponsored would be left to fend for themselves. On occasion, sponsored projects would use their money for non-tax-exempt reasons, also leading to the sponsor’s loss of tax-exemption. An example of the latter case occurred during the election of 1984. In the aftermath, the Council on Foundations published John Edie’s essay: “Fiscal Sponsorship: A Trap For The Unwary”.

All the confusion over the years created the need for a comprehensive “instruction manual” on fiscal sponsorship. So in 1993, Gregory Colvin published “Fiscal Sponsorship: Six Ways To Do It Right”. Then in 2004 the Tides Center brought together eight fiscal sponsors, known as the Steering Committee, and created the National Network of Fiscal Sponsors. The NNFS is a group that provides resources and information to those seeking fiscal sponsorship, as well as guidelines to fiscal sponsors for how they should conduct business.

Today there are over 200 fiscal sponsors in the United States alone, covering a variety of charitable disciplines. Sponsored projects can be sure that NNFS members practice fiscal sponsorship according to network guidelines. With the help of a fiscal sponsor, projects of all types sizes can accomplish greater things.