Fiscal Sponsorship FAQ
What is a fiscal sponsor?
A Fiscal Sponsor (also sometimes called a fiscal agent) is a non-profit organization eligible to receive tax-deductible contributions — which agrees to accept, and be responsible for, 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 many of the benefits of a tax-exempt nonprofit organization. The main benefit is that donors to the project may take their donations as an income tax deduction.
Who are fiscal sponsorships for?
Fiscal Sponsorship is a good solution for individual film and media projects (or certain events or even small organizations) whose scope or timeframe is relatively limited and so do not want to set up a non-profit organization with all its related infrastructure. It is also good for fledgling organizations in “start-up” mode.
What does a fiscal sponsor do? Why are they valuable?
A Fiscal Sponsor:
- Accepts and safeguards charitable donations on behalf of a project.
Most donors and funders require a recipient to be a 501(c)(3) corporation. Nonprofit 501(c) (3) corporations are able to accept contributed funds without any tax liability. If a grant or gift is made to an individual, the IRS usually considers it taxable income.
- Takes on legal liability for those funds
- Creates and maintains accounting records for the project
- Prepares legal, financial, and tax reports as required for donors and funders (Filing grant reports remains the responsibility of the project organizers.)
- 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 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 sponsorship program.
Who is eligible for IFP Minnesota’s Fiscal Sponsorship program? What is not eligible?
Our program is limited to IFP Minnesota members. The lead artists must also be currently living, or has previously lived, in Minnesota or the 5-state region (MN, IA, WI, ND, SD).
We cannot manage funds meant for for-profit purposes, and will not manage funds on behalf of for-profit corporations.
In addition, we will not accept donations for a project in which the donor is also an investor.
How much does it cost?
IFP Minnesota has recently revised our fee structure to make it more accessible to our artists. Our fees (which are generally lower than other fiscal sponsorship organizations), are as follows:
- $65 application fee at the beginning of the project
- $45 annual fee for each year thereafter
- 5% fee deducted from each payout
- In addition, the lead artist must maintain a current IFP Minnesota membership.
We also may charge rush fees if we need to accommodate requests for materials or payouts on short notice or outside of our usual monthly schedule.
Fiscal sponsorship is an important part of IFP Minnesota’s non-profit mission, and the fees do not cover 100% of the program’s administrative costs.
What do I get for my fees?
- All membership benefits.
- Your project’s money held in a separate account and paid out monthly.
- Monthly contributor reports.
- Letters of agreement for grant applications available as needed (you must inform IFP Minnesota 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 IFP Minnesota to document tax deductions.
- A project description and dedicated donation link on our webpage.
- Your project’s own online fundraising page available through GiveMN.org.
- Periodic highlights of your project in our E-Flash and other social media.
- Consultation and advice as needed.
- An annual 1099 summarizing your contributions.
How does the application process work? What is the timeline?
Potential projects fill out an application for fiscal sponsorship. They must meet with IFP Minnesota’s executive leadership before finalizing their application.
All applications received by the first of the month are reviewed by the Executive Committee and passed on for board review on the third Friday of the month, assuming the application is complete and there are no further questions. If the board approves the application, fundraising may begin as soon as the contract is signed!
Applications that miss this deadline or have other issues (such as being incomplete) can be carried forth to the next month. Thus, the application process generally takes 3-8 weeks.
My application 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, as well as a list of the information we will need to build your online presence on our site. 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 often need some paperwork from us before you turn in proposals.
How long is the contract?
Contracts are for one year, renewable annually in January. Contracts can remain active so long as a member is current with an annual fee and mambership, and can be terminated by the project at any time. (If, for example, a sponsored project gets their own federal tax exempt status, having a fiscal sponsor becomes unnecessary.) If IFP Minnesota decides to end a contract for any reason, we will give the project 30 days notice. Once a fiscal sponsorship relationship with IFP Minnesota ends, we will keep your records on file for five years.
We got the grant but the check is made out to IFP Minnesota. 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 IFP Minnesota for deposit. We will deposit your funds and hold them for you in a separate checking account.
We do monthly payouts on the account, unless other arrangements have been made. Payments are made between the 1st-7th of the month for the month prior. All payments are net of fees.
How do people get money to us?
IFP Minnesota can help you set up a number of remittance options. These include:
- Checks (or cash), made out to IFP Minnesota and sent directly to us or brought in.
- A PayPal button on your project page on our website (fees are about 3%, on top of our fees).
- A GiveMN project page (fees are about 4.9%, on top of our fees).
- Square credit card processing (fees are about 3%, on top of our fees).
What about crowd-funding, like Kickstarter and Indiegogo?
IFP Minnesota understands that crowd-funding has become an important way for film and media artists to fund their work. However, since these platforms vary greatly on their fees, set-up, and tax-deductibility options, we require that any crowd funding activities (such as Kickstarter, Indiegogo, etc.) are carried on outside of the IFP Fiscal Sponsorship program. This allows us to ensure that IFP regulations regarding tax-deductibility are met, and thus of course any of these activities are not subject to IFP Minnesota's 5% processing fee.
The exception to this is through GiveMN/Razoo, which has set up a special mechanism for such activities. To set up a GiveMN site, please see the special instructions in your initial packet. Please do note that GiveMN charges a 4.9% fee (before IFP Minnesota's 5% fee), and that donations are generally one month behind due to their remittance cycle.
Can we accept in-kind donations?
In-kind donations can be passed on directly to you (we really don’t want the Chipotle driver leaving your craft services at our offices!)
If you provide us with a specific donation description, as well as the donor information, we can send the donor a thank-you letter/receipt. IRS regulations preclude us from setting a value on in-kind donations, but their tax advisors should be able to assist them with that.
As a newly sponsored project, how can I make things easier for you?
Hey, thanks for asking!
Be aware of your deadlines – it makes things easier for everyone (and avoids any 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 IFP Minnesota and not to you, and write your project’s name is in the memo field.
Keep track of your records.
Keep IFP Minnesota aware of what’s going on, if you’re exploring new funding, making changes, or have new projects coming up. We’re here to help you!