Maine Community Foundation grants are awarded to support a wide range of projects including grassroots community efforts.
Although we require that each grantee operate as a nonprofit entity with tax-exempt status under section 501(c)(3) of the Internal Revenue Code (including municipalities, public schools and public libraries, churches, and federally recognized tribal entities), we are aware that some worthwhile projects may not have this status.
Therefore, we will consider awarding grants for the activities of non-exempt groups (those that are not 501(c)(3) organizations) that have an established relationship with a fiscal sponsor that does have this tax-exempt status under the following circumstances:
- The non-exempt group operates as a not-for-profit and has an oversight committee or advisory board comprised of more than one individual.
- The program or project for which the non-exempt group is seeking funding falls within the tax-exempt purposes of the sponsoring organization, and the two groups have established a relationship prior to applying to the Foundation for funding (see Recommended Steps for Formalizing a Fiscal Sponsorship Relationship below).
- Unless all grant funds will be held and disbursed directly by the fiscal sponsor, the non-exempt group must have its own federal employer identification number (EIN); this should not be the sponsor’s number or the Social Security number of an individual. An EIN will be required in order to open any bank accounts in the name of the non-exempt group and can be obtained even for an unincorporated association by visiting the IRS website at www.irs.gov/businesses and clicking on “Employer ID Numbers”, or by calling the IRS toll-free at 1-800-829-4933.
- A signed copy of the community foundation's Fiscal Sponsorship Agreement form Your application must include our completed Fiscal Sponsorship Agreement form (available in PDF, RTF, and Word Document format) summarizing the terms of the relationship and the responsibilities of the non-exempt group and the fiscal sponsor must be submitted with the application.
Recommended Steps for Formalizing a Fiscal Sponsorship Relationship
Step 1: The non-exempt group presents a written proposal to the potential fiscal sponsor describing the specific project that will be carried out.
Step 2: The potential sponsor evaluates whether the project is charitable and aligned with its tax-exempt purposes.
Step 3: The potential fiscal sponsor’s board of directors reviews and approves the project in a written board resolution and agrees to act as the fiscal sponsor and oversee funds received for project activities.
Step 4: The fiscal sponsor and the non-exempt group sign a written agreement that outlines the terms and conditions that apply to the non-exempt group’s use of funds and relations with funding sources. The specifics of work that will be done with grant funds should be detailed here as well.
Step 5: The agreement between the non-exempt group and the fiscal sponsor should be made known to potential funders when seeking funding for the project.
Step 6: Grants awarded for the project are paid to the fiscal sponsor, which then disburses funds to an account set up specifically for the project; this can be an internal account of the sponsoring organization, or an external account set up by the non-exempt group.
Step 7: The non-exempt group makes written reports to the fiscal sponsor detailing financial expenditures and the activities of the project. Reports to funders may also be required from the non-exempt group and/or the fiscal sponsor.
NOTE: Unless the grant falls within an exception defined by the IRS, it should be included on the recipient's tax return. This may apply to both grants made to the fiscal sponsor and the resulting disbursements by the sponsor to the non-exempt group. Any donated funds are shown on the books and IRS Form 990 of the sponsoring organization, and funds that are re-granted to the non-exempt group should also be shown on that entity’s books. The fiscal sponsor and the non-exempt group should consult their tax or legal advisors for guidance on the tax implications of such arrangements because the liability depends on the purposes of the grant, the types of expenses covered, the structure of the relationship between the sponsor and project, and the nature of each group.
For more information, see the Fiscal Sponsorship FAQ.
(Much of this information was adapted from Fiscal Sponsorship: 6 Ways to Do It Right, by Gregory L. Colvin, Silk, Adler & Colvin, 1993. Copies are available from the Study Center Press, 1095 Market St. Suite 602, San Francisco, CA 94102, 1-800-484-4173.)