Looking back on the year 2012, fiscal sponsorship became more of a topic of interest to government regulators — the Internal Revenue Service, the California Attorney General, and the California legislature. An advisory committee to the IRS Exempt Organizations office recommended fiscal sponsorship as an alternative to the increasing number of nonprofit corporations being formed and seeking IRS approval of their 501(c)(3) exemption. And the IRS itself, in the wake of Hurricane Sandy, as it had after Katrina, recommended use of existing organizations for community relief efforts, rather than forming new organizations. In California, the collapse of the International Humanities Center caused some members of the state Assemby to take a closer look at fiscal sponsorship, resulting in legislation to detect those charities with restricted funds and negative unrestricted funds, requiring them to report to the AG and have insurance in place. Also, fiscal sponsors need to be more aware of how their projects may fall within the definition of "donor-advised funds" under the Internal Revenue Code, depending on the donor's role in the project.


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