Fiscal Sponsor Organizations

Are you explicitly asking applicants if they’ve already been rejected by the IRS?

This is such an interesting question and It think its worth orgs thinking through their approach prior to it happening.

Currently we do not ask if they have applied and been denied - I can see value in that… and there is a little bit of an “ignorance is bliss” to not asking.

To me, the facts and circumstances would really matter - were they denied because they simply filled something out wrong and/or were unresponsive to some request for clarification OR were they denied because the IRS really determined their mission was not charitable. If deemed to be not charitable, does that seem like a clerical error or misunderstanding of their mission or were they really operating in a bit of the gray area.

If we knew they had been denied I would think we would need to dive deep into understanding why they were denied (if known), what they may have adjusted in response to the denial, and possibly loop in legal support to make our own determination on the Charitability of their work. If they were denied because the IRS deemed their work not-charitable, I would find it very hard to look past that and take on the project. It Feels very risky to form a new internal charitable program knowing the IRS has already said it is not charitable.

Agree that circumstances/context matter, Josh. We always ask if folks have an incorporated entity and if they have submitted a 1023. I don’t think we’ve ever encountered a project that been denied by the IRS but I think it’s likely coming.

I’m looking forward to someone who is not us encountering this and letting us know. ;) We have not actually seen an increase in interest in fiscal sponsorship.

Given this administration’s priorities, about 95% of what nonprofits do would run counter to that, so I can’t imagine most of them would be approved.

However, one of our FSOs applied at the beginning of the year and got approved in THREE WEEKS. Our working theory is that a rogue IRS agent who knew it wouldn’t be approved was signing off on everything that came across their computer screen.

Lisa, we also had a project that got their determination on a similar timeline in Jan/Feb. I wonder if it was the same person approving them! To the question Oliver posted, I have also thought about what we would do if a current project applied for status and was denied. What would it mean for us to continue sponsoring them after that? Again, this has not happened to us, but I wonder if it will happen.