Artists and Fiscal Sponsorship: What Is It and Why Should You Use It?
Are you an artist or creative looking to execute a project or take your work to the next level? Has someone told you that you or your arts organization should be fiscally sponsored? Are you curious about “physical sponsorship”?
What is fiscal sponsorship anyways, and why is it relevant for artists and arts organizations?
Fractured Atlas is a national arts service organization that has been providing fiscal sponsorship services for over 20 years. We’ve worked with artists, arts organizations, informal arts collectives, and projects of all types in all disciplines to raise over $171 million dollars for their work. We know you have a lot of questions and we’re going to give you the info you need.
Note: As a disclaimer, we aren’t lawyers and some of the information in this article touches on legal topics. This is not legal advice. You should consult a lawyer to understand the best course of action for you and your work. We aren’t accountants either. You should always consult professionals with the specifics of your situation to know what would work best for you.
What is Fiscal Sponsorship for Artists?
Technically, 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 other words, folks without tax exemption can use some of the benefits of a 501(c)(3)’s status to raise funds and execute projects as long as their work furthers the mission of the nonprofit.
Even simpler: if you do what the nonprofit does, you could possibly be fiscally-sponsored by them.
Fiscal sponsorship is one way artists can access tax-deductible funds without becoming your own nonprofit. You can then use this donated money to pay for budget items related to your work, pay your collaborators, and/or even pay yourself!
It often isn’t necessary for an artist to become a tax-exempt, nonprofit corporation, especially if you’re only looking to do their work intermittently, casually, or part-time. Nonprofits require a significant amount of oversight from a board of directors plus strong record-keeping and administrative processes. Becoming a nonprofit is a great choice if you’re looking to build an organization that can operate and exist after you’ve moved on: nonprofits need a team of people and substantial resources to operate most effectively. But if you’re just looking for a smaller step to up your creative practice, fiscal sponsorship might be the way to go.
Fiscal sponsorship isn’t just for artists — it can be a useful tool for any project or program operating in the public sector. One just needs to connect to a reputable nonprofit with a fiscal sponsorship program in their area of focus.
Why Is Fiscal Sponsorship Important for Artists?
Fiscal sponsorship is valuable for artists in a few different ways.
Donors sometimes prefer to or are only able to make tax-deductible donations. Potential donors might have limitations on what they can support, or they might just prefer the peace of mind they get knowing that there’s oversight to their donations. All donations made to fiscally sponsored projects are tax-deductible.
A number of grants for artists are only available to artists that either have 501(c)(3) status or a fiscal sponsor. If you’re looking for financial support for your work through grants, fiscal sponsorship can open doors to a larger pool of options.
Working with a fiscal sponsor means working with an established nonprofit. A side benefit of fiscal sponsorship is often that you have access to that nonprofit’s institutional support and knowledge. For example, the Fractured Atlas team reviews every grant application that our members send out where we are named as the fiscal sponsor and are available to answer our member’s questions and help guide you through the process of fundraising.
Types of Fiscal Sponsorship for Artists
Fiscal sponsorship can work for artists of all disciplines and project sizes. There are at least six different types of fiscal sponsorship, but the two types that artists are most likely to run into are:
- Comprehensive Fiscal Sponsorship (Model A)
- Pre-Approved Grant Relationship Fiscal Sponsorship (Model C)
At Fractured Atlas, we offer Pre-Approved Grant Relationship Fiscal Sponsorship.
For an in-depth understanding of the models, you should check out the National Network of Fiscal Sponsors’ guidelines. Each type has pros and cons based on what your creative endeavor needs; there’s no hard-and-fast rule about which model you should use for your artistic project.
Comprehensive Fiscal Sponsorship (Model A)
In simple terms, the project becomes a part of the nonprofit’s operations in a comprehensive model. The nonprofit provides a lot of oversight over the project’s day-to-day activities. The nonprofit both executes the work and receives the donations. There is usually a project director who manages the on-the-ground aspects and reports to the fiscal sponsor.
Model A is great for projects that are ongoing and/or long-term, have dedicated staff, and need more support in their back-end operations (human resources, finance, administration, etc.) 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?
Pre-Approved Grant Relationship Fiscal Sponsorship (Model C)
In this model, the project operates independently from the nonprofit that is fiscally sponsoring it. Donations for the purposes of the project are given to the nonprofit. The nonprofit then releases those dollars to the project for related expenses. The project is responsible for taxes on the funds as they are considered grant income.
Model C is great for projects that are short-term and/or have smaller teams. This is also ideal for people who want full control over the execution of their work, regardless of how large the project is. Model C allows for more independence but comes with more administrative burden.
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?
Do I Need Fiscal Sponsorship for my Artistic Work?
Like every tool and strategy, it’s best used when it’s the right solution to your problem or problems. If your problem is a nail, you need a hammer. If your problem is a hangnail, you need tweezers. If you’re perfectly happy with your creative practice the way it is without fiscal sponsorship, you might not need it. If you are happy to personally finance it, or have streams of income from revenue or elsewhere, you might not need fiscal sponsorship to apply for grants or seek tax-deductible donations. If you want to offer a tax deduction to potential donors, apply for a wider pool of grants, or run a tax-deductible crowdfunding campaign, then fiscal sponsorship could make a real impact in your work.
Fiscal sponsorship is also about building a relationship between yourself and your sponsor. Each fiscal sponsor is unique and it’s worth it to do some due diligence to confirm the right fit. You can check out our Introduction to Fiscal Sponsorship webinar to learn more, or reach out to our team to learn more about our fiscal sponsorship program.
Here are some basic questions to ask yourself that will better determine if fiscal sponsorship is the right tool for you.
Is Fiscal Sponsorship the Right Choice to Support My Artistic Work?
Fiscal sponsorship can be a great way for artists to access donations and grants to fund your creative projects. Successful fiscal sponsorship relationships have allowed artists to grow their projects, expand their audience and even start their own nonprofits. Fiscal sponsorship in any model can give you the time to develop both your project and your fundraising skills while you figure out your next steps.
Fractured Atlas is proud to fiscally sponsor artists and small arts organizations, within the purview of our mission to empower artists to create a more agile and resilient cultural ecosystem.
We do what we do to help you do what you do.
There’s a lot that fiscal sponsorship is, but it’s also important to know what fiscal sponsorship is not and what questions to ask before finding a fiscal sponsor.
About Courtney Harge
Courtney Harge is a producer, director, and professional arts administrator originally from Saginaw, MI. She is the Founder and Artistic Director of Colloquy Collective, a theater company based out of Bedford-Stuyvesant, Brooklyn. She has worked for the Elaine Kaufman Cultural Center, Theater for the New City, The Public Theater, Gibney Dance, and, most recently, the New York Foundation for the Arts with a focus on institutional fundraising, crowdfunding, and fiscal sponsorship. She holds a Masters of Professional Studies, with Distinction, in Arts and Cultural Management from Pratt Institute and a Bachelors of Fine Arts with Honors from the University of Michigan in Theater Performance. Her credo (#HustlingKeepsYouSexy) is not merely a hashtag; it’s a way of life.