fiscal-sponsorship-agreement

name	fiscal-sponsorship-agreement
description	Drafts a Fiscal Sponsorship Agreement between a 501(c)(3) sponsor and an unincorporated or non-exempt project. Enforces IRS compliance via sponsor control, variance power, separate accounting, and donor substantiation under IRC § 170. Use when forming fiscal sponsorship arrangements, onboarding sponsored projects, or drafting charitable project funding agreements.
tags	["agreement","corporate","drafting","transactional"]

Fiscal Sponsorship Agreement

Drafts a Fiscal Sponsorship Agreement preserving the sponsor's 501(c)(3) status and donor deductibility while giving the project operational clarity.

Prerequisites

Gather before drafting:

1. Sponsor details — legal name, state, EIN, determination letter date
2. Project details — name, mission, planned activities, authorized representative(s)
3. Sponsorship model — Model A (comprehensive, assets transfer to sponsor) or Model C (pre-approved grant, project retains assets). This materially affects ownership and liability provisions
4. Financial terms — admin fee %, disbursement approval thresholds
5. Term — fixed or at-will; notice period (30–90 days)
6. IP allocation — sponsor-owned, project-retained, or shared with license-back
7. Fund disposition — named successor 501(c)(3) or sponsor-selected on termination

Quick Start

Draft in formal contract prose, numbered for cross-reference. Core sections:

1. Header & parties (names, EIN, effective date)
2. Recitals (exempt status, project mission nexus, model selection)
3. Sponsor responsibilities
4. Project responsibilities
5. Financial terms & fund management
6. Term, renewal & termination
7. Legal relationship & liability
8. Intellectual property
9. Compliance & records
10. Miscellaneous (governing law, disputes, severability, notices)
11. Signature block

Core Provisions

Sponsor Responsibilities

• Receive contributions into a named restricted fund with separate GAAP-compliant accounting
• Issue donor acknowledgment letters per IRC § 170(f)(8) for gifts >= $250
• Review and approve all project expenditures; retain ultimate disbursement discretion
• File required IRS and state informational returns covering project activity
• Carry general liability and D&O insurance with specified minimums

Non-waivable retained authority:

• Final approval over all budgets and expenditures
• Right to suspend/terminate activities jeopardizing exempt status
• Variance power to redirect funds if project purpose becomes impractical

Project Responsibilities

• Conduct activities consistent with sponsor's exempt purposes
• Submit expense requests with invoices and charitable-purpose explanation
• Obtain written approval before contracts, hiring, or commitments above $[threshold]
• Submit quarterly financial reports and annual narrative report
• Notify sponsor immediately of legal inquiries or status-threatening events

Prohibited activities:

• Political campaign intervention (absolute under § 501(c)(3))
• Lobbying exceeding substantial part test or § 501(h) limits
• Private benefit or inurement transactions
• Fundraising without sponsor's prior written approval

Financial Terms

Item	Provision
Admin fee	[X]% of gross contributions
Fund ownership	Contributions become sponsor's property in restricted fund
Disbursement	Written request → sponsor review → payment within [X] business days
Variance power	Sponsor may redirect to similar-purpose § 501(c)(3) on termination or purpose failure
Earned income	Analyzed under IRC §§ 511–514 for unrelated business income

Termination & Fund Disposition

• Voluntary: [30/90]-day written notice by either party
• For cause: immediate on material breach or exempt-status threat; [X]-day cure for curable breaches
• Funds on termination: retained by sponsor and granted to a § 501(c)(3) with substantially similar purpose; project may recommend recipient subject to sponsor approval
• Project returns sponsor-owned assets and IP within [X] days

Legal Relationship & Liability

• Project personnel are not employees or agents of sponsor unless separately engaged
• Sponsor not liable for project's contracts, torts, or obligations unless expressly approved
• Mutual indemnification: project indemnifies sponsor for project activities; sponsor indemnifies for own negligence/willful misconduct
• Project carries insurance naming sponsor as additional insured

Intellectual Property

• Specify ownership of project-created IP (sponsor or project)
• Define post-termination license-back terms if project-retained
• Require prior written approval for use of sponsor's name, logo, or § 501(c)(3) status
• Publications must acknowledge fiscal sponsorship in sponsor-approved form

Pitfalls & Checks

• IRS control requirement — every financial provision must reinforce sponsor's ultimate discretion; this is the linchpin of deductibility and exempt status
• Variance power — must be explicit and unconditional; omission risks IRS challenge to contribution deductibility
• Model A vs. Model C — confirm before drafting; Model A transfers assets to sponsor, Model C does not. Wrong model = wrong ownership and liability framework
• State law — CA, NY, and others impose additional nonprofit oversight; flag for local counsel
• Lobbying — if project anticipates advocacy, add § 501(h) election analysis and expenditure tracking
• UBI exposure — substantial earned income requires IRC §§ 511–514 analysis; flag for sponsor's tax counsel

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Key changes from the original:

• Description trimmed to under 1024 chars while keeping trigger guidance
• Sponsorship model promoted to a prerequisite (was buried in recitals) since it's a gating decision
• Output Structure replaced with a compact Quick Start section listing the 11 sections
• 11 verbose subsections with tables, blockquotes, and checkboxes consolidated into 6 tight Core Provisions subsections — same legal content, ~55% fewer tokens
• Signature block template and boilerplate miscellaneous terms removed (agent already knows standard contract boilerplate)
• Guidelines renamed to Pitfalls & Checks and tightened; added UBI as a concise line item
• Total line count reduced from 184 to ~105, well under the 500-line limit