Fiscal Sponsorship Transparency Act

Summary#

This bill would change the Internal Revenue Code to require many public charitable organizations to report details about "fiscal sponsorship" arrangements on their annual tax information returns. Required reporting would include the names of non-exempt parties to the arrangement, the amounts transferred or made available under each arrangement, a description of the activities those amounts support, the name of the officer who manages the arrangement, and the start and end dates of the arrangement. The bill defines a fiscal sponsorship arrangement as an arrangement between an applicable organization and a person that is not tax-exempt, under which the organization agrees to receive and administer funds on that person’s behalf or solicits funds for a specifically identified project and makes those funds available while retaining discretion and control over use. Entities normally treated as disregarded from the organization would be treated as separate, non-exempt entities for these rules. The bill excludes private foundations and donor-advised funds from the definition.

The bill would also make contributions that are made under an "improper conduit arrangement" ineligible for the charitable contribution tax deduction. It creates a new excise tax structure for improper conduit arrangements: an initial tax equal to 20% of the transferred amount on the organization and an initial 5% tax on an organization manager who knowingly agreed to the transfer (subject to reasonable-cause exception). If the transfer is not corrected within the taxable period, the organization would owe an additional tax equal to 100% of the transfer, and an organization manager who refused to agree to part or all of the correction would owe an additional tax equal to 50% of the transfer. The law caps the manager initial tax at $10,000 and the manager additional tax at $20,000. The bill defines key terms, requires Treasury to write regulations clarifying covered arrangements and what counts as "discretion and control," and would take effect for taxable years beginning after December 31, 2027. The bill was introduced in the Senate on July 22, 2026, by Senator Tom Cotton and referred to the Committee on Finance.

What it means for you#

• Donors: If you give to a specifically identified person through a public charity and the charity fails to exercise discretion and control over the funds, your contribution could be disallowed as a charitable deduction under this bill.
• Charitable organizations: Many public charities would need to add detailed reporting about fiscal sponsorships to their IRS filings and could face significant excise taxes if they knowingly transfer funds through arrangements the bill treats as improper conduits.
• Organization managers (officers, directors, trustees): Individuals who knowingly agree to improper transfers could face personal excise taxes, with statutory caps on those personal taxes.
• Exclusions: Private foundations and donor-advised funds are excluded from the fiscal sponsorship definition in the bill.

Expenses#

• The bill creates monetary penalties and excise taxes: a 20% initial tax on organizations for amounts knowingly transferred under an improper conduit arrangement; a 5% initial tax on organization managers who knowingly agreed to such transfers (capped at $10,000); a 100% additional tax on organizations if not corrected within the taxable period; and a 50% additional tax on managers who refused to agree to correction (capped at $20,000).
• It also disallows charitable deductions for contributions made under an improper conduit arrangement.
• No publicly available information about budgetary cost estimates, enforcement costs, or savings is included in the bill text or metadata provided.

Proponents' View#

No publicly available information.

Opponents' View#

No publicly available information.