Fiscal Sponsorship Transparency Act of 2026

Key Points

• This bill changes how charities report money they handle for outside groups. Some charities act as a sponsor for projects that do not have their own tax-exempt status. This bill would require these charities to tell the IRS exactly who they are working with and how much money is being spent.
• Charities would have to name a specific person in charge of managing each sponsored project. They would also need to provide a clear description of what the project is doing. This is meant to make sure the money is actually being used for charitable goals and not just passed through to avoid taxes.
• The bill creates new penalties for what it calls improper conduit arrangements. This happens when a charity collects money for someone else but does not actually control how that person spends it. If a charity is caught doing this, they could face a tax penalty equal to 20 percent of the money involved, and donors would lose their tax deductions for those gifts.
• Individual charity leaders could also be fined if they knowingly allow these improper money transfers. If the problem is not fixed quickly, the tax penalty for the charity could jump to 100 percent of the money. This puts more pressure on non-profit boards to watch their spending closely.
• These new rules would start for the tax year beginning in 2028. The goal is to prevent people from using a charity tax-free status to fund private projects or activities that are not allowed under current law.

Impact Analysis

Govbase has not yet run an impact analysis on this legislation.