Is fiscal sponsorship an alternative to nonprofit dissolution?

This is an interesting question, but I do not think of fiscal sponsorship in this context.  There is no legal definition of a “fiscal sponsorship” but the most authoritative writing on the topic is a book called “Fiscal Sponsorship: 6 Ways to Do It Right” by Gregory Colvin and Stephanie Petit of the Adler & Colvin law firm in San Francisco.  The whole basis of the concept of a fiscal sponsorship is to use a public charity to raise charitable funds for a charitable program that is being proposed by, or run by, a non-exempt person or entity.

There are two basic forms of fiscal sponsorship in the Adler & Colvin discussion.  Under “Type A,” the public charity that wants to sponsor the activity undertakes to do the project as a project of its own.  It employs the people to do it and runs the project as a directly controlled project of the public charity.  Under “Type C,” the public charity makes grants to the non-exempt person or entity to run the project by themselves.  The public charity assures that the funds are spent for charitable purposes, but the non-exempt person or entity operates the project.  (For a lot more on fiscal sponsorships and the issues involved, buy our Webinar on Fiscal Sponsorships in our store.)

Since the organizations we were talking about dissolving were presumably already recognized as charitable organizations to run charitable programs themselves, there would be no need to utilize a fiscal sponsorship to solicit otherwise unavailable charitable contributions to run it. It would be possible to transfer the charitable program to an organization that serves as a fiscal sponsor, but that would occur in the process of dissolution of the failing organization when its charitable assets are distributed to other organizations for charitable purposes.

I am aware of charitable organizations that have transferred their programs to public charities that run a whole range of charitable programs, some of them as traditional sponsors taking Type A sponsor control of the programs.  But most of those organizations giving up their programs dissolve shortly after the transfer.  I am aware of some charitable entities that have transferred their programs to the public charity but stayed alive in the hope that they might take the programs back at some later time but they are essentially dormant during the waiting period.

Transferring a charitable program from one charitable organization to another charitable organization does not seem to fit within the basic purpose of fiscal sponsorship, i.e. to use a public charity to run or support a charitable program proposed or run by people who don’t have their own tax-exempt status to raise charitable contributions directly for the program.

Since there is no legal definition of a fiscal sponsorship, I suppose you could call a whole lot of different relationships as a fiscal sponsorship.  But taking over a charitable program from a charitable organization does not seem to fit the overriding purpose of the concept.