Fiscal Sponsorship Transparency Act of 2026
Sponsored By: Senator Cotton, Tom [R-AR]
Introduced
Summary
Transparency and accountability for fiscal sponsorships. This bill would require tax-exempt organizations to disclose detailed information about each fiscal sponsorship and would create taxes and penalties for improper conduit transfers.
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- Tax-exempt organizations would need to report each fiscal sponsorship under Section 6033(b), listing non-individual parties, amounts made available or transferred, a description of related activities, the principal officer managing the arrangement, and start and end dates. The "applicable organization" definition would exclude private foundations and donor-advised funds and the rules would apply to taxable years beginning after Dec. 31, 2027.
- Organizations and organization managers would face new taxes on improper conduit transfers: an initial tax of 20 percent on organizations and 5 percent on managers, rising to 100 percent and 50 percent respectively if transfers are not corrected. These taxes carry caps of $10,000 for the organization tax and $20,000 for the manager tax.
- Donors would lose the charitable deduction for contributions made under an improper conduit arrangement.
The bill would also require the Secretary to issue regulations clarifying what counts as discretion and control in fiscal sponsorships.
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Bill Overview
Analyzed Economic Effects
4 provisions identified: 0 benefits, 3 costs, 1 mixed.
New penalties for improper conduit transfers
If enacted, the bill would create new taxes on transfers made under an "improper conduit arrangement." An organization would owe an initial tax equal to 20% of any knowingly transferred amount. An organization manager who agreed to the transfer would owe an initial tax equal to 5%, unless the agreement was not willful and due to reasonable cause, with a $10,000 cap for the manager tax. If the transfer is not corrected within the taxable period, the organization would owe an additional tax equal to 100% of the transfer. A manager who refused to agree to correction would owe an additional 50%, with a $20,000 cap. These rules would apply to organizations that are or were 501(c)(3) in the prior five years and would take effect for taxable years beginning after December 31, 2027.
New definitions for fiscal sponsors
If enacted, the bill would add new legal definitions for fiscal sponsorship and improper conduit arrangements. It would say when an organization receives or solicits money for another person and must keep "discretion and control." It would treat entities that were 501(c)(3) in the prior five years as covered and would exclude private foundations and donor-advised funds. These definitions would apply for taxable years beginning after December 31, 2027.
New reporting rules for fiscal sponsors
If enacted, applicable tax-exempt organizations that act as fiscal sponsors would have to report each fiscal sponsorship arrangement on their annual return. For each arrangement they would list non-individual parties, the total dollars made available or transferred that year, a short description of what the money paid for, the principal officer managing the arrangement, and the arrangement start and end dates. Private foundations and donor-advised funds would be excluded. These rules would start for taxable years beginning after December 31, 2027.
Treasury rules on fiscal sponsor control
If enacted, the bill would require the Treasury Secretary to write rules that explain which fiscal sponsorship arrangements must be reported. The rules would also define what "discretion and control" means for both reporting and the new tax rules on conduit transfers. The regulations would take effect for taxable years beginning after December 31, 2027.
Sponsors & CoSponsors
Sponsor
Cotton, Tom [R-AR]
AR • R
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
No roll call votes available for this bill.
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