Federal tax-exempt status is invaluable for fundraising in the nonprofit arts world. Donations are tax-deductible, which can provide significant motivation for individuals to give, and many grants require applicants to have 501(c)3 status. But securing 501(c)3 status can be a long and complicated process. For new arts groups or smaller projects that don’t have the resources or haven’t yet met the requirements for filing, fiscal sponsorship can help.
In a fiscal sponsorship, an organization with tax-exempt status allows an individual or group access to the benefits of that status, including tax-deductible receipts for donors and eligibility for many grant programs. But finding a fiscal sponsor can be another challenge—not every tax-exempt corporation is equipped to take on the responsibility, and most arts groups have enough of their own fundraising concerns.
Fractured Atlas is the country’s largest not-for-profit arts service organization, with more than 250,000 artists and groups across the country and 25,000 current members. Its fiscal sponsorship program helps artists create and execute tax-deductible fundraising campaigns.
Fractured Atlas is touring Southern cities this month. Representatives will be in Louisville this week for an open meeting with artists interested in fiscal sponsorship and other nonprofit services. The free event is at The Bard’s Town (1801 Bardstown Rd.) at 5 p.m.
The organization works with artists in all disciplines (performing, visual, literary, design, media and more) and at all stages in their careers, including new arts organizations. The organization also offers insurance, research, ticketing services and advisory support.
Program director Dianne Debicella says the ability to offer donors a tax receipt is a major benefit to fiscal sponsorship, because it encourages larger individual donations, but it’s not the only perk.
“One other benefit of fiscal sponsorship is it lends the project credibility,” says Debicella. “They’re associated with an established 501(c)3 organization, and we’re receiving all of the donations and providing oversight for how they’re going to be spent.”
Since Fractured Atlas is itself a nonprofit, they keep costs down for their clients – a base seven percent administrative fee on all donations, with no additional credit card processing fees (compare to Kickstarter, which charges five percent on each donation in addition to the 3-5 percent credit card processing fee charged by Amazon, which fulfills their credit card donations). Donors can make automatic recurring monthly donations, and the campaigns can accept non-cash donations of equipment and materials. Projects have access to a set of online tools to monitor the campaign and interact with their donors. The new Artfu.ly ticketing service is currently being tested.
Clients can build traditional fundraising campaigns, or they can take their project to crowdfunding platforms like Indiegogo or RocketHub, where donors will still receive tax deductions for their contributions.
“We provide a lot of advice and feedback on how to run a campaign,” says Debicella. “A lot of times the projects are doing this for the first time, they don’t have fundraising experience.”
That advice ranges from how often and when to reach out to potential donors to what to say to them after they’ve given.
“Not only is it a tough economy to be starting any new endeavor in, but there’s a general misunderstanding about fundraising in the United States,” says Debicella. “They think that they can get money through grants and that’s all they need to do. Individuals are the some of the best to reach out to because that’s where most of the fundraising in the arts comes from.”