Public Libraries and Fiscal Sponsorship

Establishing nonprofit status with the IRS takes so much time and effort that it's a wonder we have any charitable organizations in this country. It does help explain why there are so few successful grassroots nonprofit initiatives, which usually lack the expertise and resources to navigate tax law. And even if they do so successfully, they're often left with little energy to see through their original idea. There is an alternative, though, within U.S. tax code: fiscal sponsorship.

Nonprofit organizations that have already achieved a 501(c)(3) designation from the IRS can act as a fiscal sponsor for people or organizations with a charitable purpose. Basically, the larger nonprofit agrees to be a guardian of grants for the small organization, thus enabling the smaller charity to solicit grants and donations under the aegis of the larger nonprofit and pursue its specific goal.

Usually for the fiscal sponsor this involves receiving moneys for the sponsored program, allotting these funds to the program to cover its expenses, and filing all sponsored program moneys within its own annual audit and tax return. The sponsorship can also include use of the nonprofit's physical or human resources.

The benefits for the smaller charity are obvious. In addition to the infrastructure and 501(c)(3) designation the sponsor provides, the sponsor also offers credibility because benefactors and grant givers are more likely to provide funds to well-established entities.

The benefits to the sponsor are equally tangible. Through fiscal sponsorship, established nonprofits get to support the goals of like-minded people and groups and potentially have a direct impact on their community in a way their larger bureaucracy might otherwise be incapable of. Freed from the concerns of infrastructure, small-scale programs often deliver effectively on their mission and to the people who will most benefit from their projects.

Fiscal sponsorship is a perfect way for public libraries, most of which carry a 501(c)(3) designation, to have an even greater impact on their communities. Through fiscal sponsorship, public libraries could support one-off noncommercial art projects, help launch social startups that otherwise don't have the infrastructure to get off the ground, or provide a foundation for necessary but not-sexy community programs.

Granted, there would be an additional administrative burden placed on the libraries, which are already overburdened in many cases. But the burden would be marginal compared to the potential impact it could have, including improving the local economy and quality of life. Furthermore, sponsoring libraries can legally charge their sponsored programs for services rendered.

Public libraries cannot afford to overlook such opportunities to punch above their weight, especially when there are mouth breathers out there like this guy with a public forum.