HR 9721: Fiscal Sponsorship Transparency Act of 2026

HR 9721 in plain English: This bill would impose new tax penalties on fiscal sponsorship arrangements, with caps of $10,000 and $20,000 on specific violations, and would require greater transparency from organizations that act as fiscal sponsors for other groups.

Stated purpose

The bill aims to require certain charitable organizations to publicly report details about their fiscal sponsorship arrangements — situations where a nonprofit receives and manages money on behalf of another party. It also seeks to deny tax deductions for contributions made through arrangements that improperly use a nonprofit as a pass-through conduit, and to impose taxes on organizations and managers who engage in such improper arrangements.

Key points

• Imposes tax penalties on certain fiscal sponsorship arrangements, capped at $10,000 for one type of violation
• Imposes a separate tax penalty capped at $20,000 for another category of violation
• Targets transparency requirements for organizations that serve as fiscal sponsors

Arguments supporters make

• Fiscal sponsorship arrangements have operated with little public oversight, and requiring disclosure helps taxpayers and regulators see whether charitable dollars are actually being used for legitimate charitable purposes.
• Denying deductions and imposing taxes on improper conduit arrangements closes a loophole that some groups may use to funnel tax-advantaged donations to organizations or causes that would not qualify for that benefit on their own.
• Holding individual nonprofit managers personally liable encourages responsible decision-making and discourages leadership from turning a blind eye to arrangements that misuse the charitable tax system.

Arguments opponents make

• Fiscal sponsorship is a well-established and legitimate tool that allows new or small charitable projects to operate before they can form their own nonprofit, and added reporting burdens could make sponsors less willing to support worthy grassroots efforts.
• The bill's definitions of 'improper conduit arrangement' are complex, and smaller nonprofits may struggle to determine whether their arrangements comply, risking costly penalties even when acting in good faith.
• Personal excise taxes on managers could make it harder for nonprofits to recruit and retain qualified leadership, chilling legitimate activity out of fear of liability rather than stopping actual abuse.

Tradeoffs

Greater transparency and accountability in the charitable sector comes at the cost of added compliance burdens and potential chilling effects on a widely used funding model that helps smaller or newer charitable projects access nonprofit infrastructure.

Current status in Congress: In committee.

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