Imagine a scientist working on a new, cutting-edge technology. When you picture her, she’s probably working in a research lab or at a university, right? Despite all the shows and movies that suggest otherwise, scientists don’t work in their basements — they work within institutions, because it opens up funding avenues for their projects.
It might shock you to hear that similar, tax-exempt funding avenues exist for artists. If a project you’re working on 1) is artistic and 2) has a public benefit, you could use fiscal sponsorship to apply for funding from corporations and foundations, collect tax-deductible donations, and access nonprofit discounts. Let’s get into it.
Note: the information provided in this article does not, and is not intended to, constitute legal advice. When in doubt, we recommend reaching out to a legal professional. Here’s a resource to get you started.
how does it work?
Fiscal sponsorship is a contractual relationship between a 501(c)(3) nonprofit organization and a group or individual whose activities fall within the sponsoring organization’s mission. This relationship enables the 501(c)(3) to extend certain benefits of being nonprofit to the sponsored group, without the group having to file for nonprofit status on its own. In exchange, projects agree to share the cost burden of organizational operations. Fractured Atlas, for example, retains 8% of all project funding. If all of this sounds like serious business, that’s because it is! But taking yourself and your art more seriously can open doors and expand your creative horizons 🌅
who is it for?
If you’re embroidering a dish towel as a gift for a friend, you (unfortunately) can't use fiscal sponsorship to get discounted needle and thread. But if you’re hosting printmaking workshops in the park, running an online poetry journal, or building an interactive light sculpture for a highway underpass, fiscal sponsorship is a way to acknowledge the public benefit of your work and access all the associated financial benefits 💸
what is it for?
When it comes to bringing a creative project to life, fiscal sponsorship isn’t a silver bullet — it’s more like a spork! If you’re renting costumes for an improv show, you can use it to access nonprofit discounts. If you’re fundraising to pay the actors in your indie film, you can use it to launch a crowdfunding campaign. If you’re organizing a summer jazz festival in the park, you can use it to apply for grants — instead of paying out of pocket for artist travel fees or lodging. Applying for exclusive, nonprofit grants (ones that aren't available to individuals) and collecting tax-deductible donations are admittedly the main reasons people land on our (virtual) doorstep. That said, if you’re ready for the serious work of building a fully fledged organization, you might want to switch from a spork to a butcher’s knife and file for 501(c)(3) status instead 📜
why does it matter?
From our point of view, some of the boldest, most urgent creative work happens outside of institutions, and is led by individual artists, emerging collectives, and grassroots organizations. Done right, fiscal sponsorship supports these kinds of artistic entities in accessing the capital they need, to make art the world needs ❤️🔥
which one is right for me?
If you’re new to this game, it might surprise you to hear that there is an alphabet-soup-worth of different types of fiscal sponsorship. That said, the two types that artists are most likely to encounter in the wild are Comprehensive Fiscal Sponsorship, also known as Model A, and Pre-Approved Grant Relationship Fiscal Sponsorship, also known as Model C.
Fractured Atlas is a loud and proud Model C, but we’ll try not to be too biased in our discussion of the pros and cons of each type. After all, fiscal sponsorship is a relationship! So finding the right fit will be a personal choice, informed by where you’re at and what you need. We often see people shifting from Model A to Model C, and eventually even spreading their wings to become their own 501(c)(3). Don’t be surprised if your needs change and grow over time 🌱
In simplest terms, Model A is a more tight-knit fiscal sponsorship relationship than Model C. The project is woven into the nonprofit’s operations, and the nonprofit provides a lot of oversight over the project’s day-to-day activities. This model is great for projects that are long-term, have dedicated staff, and need more support in their back-end operations (i.e. HR, accounting, admin, etc.). As you can imagine, this model usually has a higher administrative fee to cover the cost burden of this back-end work. Here are some questions to ask yourself if you’re considering this model:
- Are you okay relinquishing control of your project to the nonprofit as long as the work gets done?
- Do you need extensive back-end support for things like insurance or human resources?
- Do you want someone else to handle filing your project’s taxes and/or payroll?
In a Model C relationship, the fiscally-sponsored project does not become a program belonging to the sponsor, but is a separate entity responsible for managing its own tax reporting and liability issues. The sponsor simply assures that the project will use the grant funds received to accomplish the ends described in the grant proposal. Model C is great for projects that are short-term, have smaller teams, and want full control over the execution of their work. In short, Model C allows for more independence but comes with more administrative burden. Here are some questions to ask yourself if you’re considering this model:
- Do you want to fully own your artistic work and project?
- Are you prepared to handle your own administration including tracking your project’s finances?
- Do you prefer more independence in how you work?
Model C is a lot like a community garden, where independent artists (the gardeners) can grow their creative projects without owning the land. Fractured Atlas (the garden administrator) owns and maintains the overall property — handling the legal ownership, insurance, and relationship with the city. In other words, they provide the infrastructure that makes everything possible.
Each artist gets their own dedicated plot where they have significant creative freedom. You decide what to plant, when to tend your garden, and how to harvest your creative fruits. You keep whatever you grow, but you also do the daily work of watering, weeding, and nurturing your artistic project. The garden administrator doesn't tell you what or how to plant, but they do ensure everyone follows basic safety rules and garden etiquette. They process the donations people make to support specific plots (your fundraising), maintain the shared tools and resources, and handle the complex paperwork with the city.
In return for these services, gardeners pay a small plot fee (the administrative percentage) that helps maintain the entire garden system that makes everyone's individual success possible. The beauty of this arrangement? Artists can focus on creating rather than forming their own nonprofits, while still maintaining artistic independence and ownership of their work.
when should I apply?
Like most things, the fiscal sponsorship relationship works best when you plan ahead and leave time for questions, stumbles, and unexpected opportunities. If a grant you’re eying is due in 2-3 months, for example, consider applying for fiscal sponsorship now so you have plenty of time to work with our team, meet with the program officer for the grant, and gather materials for the grant application itself!
what are you waiting for?
If we piqued your interest, we invite you to schedule a 1-on-1 call with one of our friendly fundraising experts to chat about the nuts, bolts, and possibilities of fiscal sponsorship. We can’t wait to see what you create next!
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