Realize Impact operates a few services beyond our philanthropic investments. One is fiscally sponsoring mission-driven for-profit companies and nonprofit organizations.
What is a fiscal sponsor?
Being a “fiscal sponsor“ is a service where donors can provide money to organizations that do work similar to a 501(c)(3) nonprofit, but which themselves are not organized as a 501(c)(3) nonprofit. The key element here is 501(c)(3), with the use of the donated funds spent on charitable activities that the IRS would approve of as a 501(c)(3).
The IRS says: The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.
Can a for-profit company have a fiscal sponsor?
Yes, if and only if the funded project fits the definition of an exempt purpose set forth in section 501(c)(3) (see above).
What is the difference between fiscally sponsoring and a philanthropic investing?
Donations earmarked for philanthropic investments are used to make recoverable grants, loans, revenue-based, equity, and other investments into mission-driven for-profit companies. Donations earmarked as fiscal sponsorships are unrecoverable grants.
From an impact investing lens, both are impact investments, both must be impactful, but fiscal sponsorships have a negative 100% loss of capital.
What is the process for recommending a fiscal sponsorship?
Realize Impact treats all donations the same. All recommendations are reviewed by our Investment Committee, screened to check if the use of funds is prudent and if the recipient is sufficiently impactful.
What are the fees for fiscal sponsorship?
There is no fee charged to donors for a donation earmarked as a fiscal sponsorship. 97.5% of those donations are on-granted to the recipient organization, i.e. there is a one-time 2.5% fee.
How often does Realize Impact process fiscal sponsorships?
On average, more than one per month. This is a service Realize Impact has been operating longer far longer than philanthropic investing. Search our blog for “fiscally sponsoring” to find some of our recipients.