The Fiscal Sponsorship Transparency Act, a new federal bill, would impose reporting requirements on fiscal sponsors for the first time, and it has already moved further than most nonprofit legislation gets. Representative Lloyd Smucker introduced the Fiscal Sponsorship Transparency Act of 2026 (HR 9721) on July 16, 2026, and the House Ways and Means Committee voted 23-15 to advance it on July 22, 2026. It is not law yet, but fiscal sponsors nationwide, including organizations we work with in Arizona and Washington, should understand what it would require before it moves further.
What the Bill Would Require
For each fiscally sponsored project, the bill would require a fiscal sponsor to report the aggregate amounts made available during the year for that project, a description of the project’s activities, the name of the individual designated as the principal officer managing the arrangement, and the dates the arrangement began and, if applicable, ended. This is new. Fiscal sponsors currently do not report at this level of project-by-project detail.
Which Arrangements Are Covered
The bill defines a “fiscal sponsorship arrangement” narrowly enough to matter but broadly enough to create real ambiguity. It applies to an arrangement between a fiscal sponsor and a non-exempt party (an individual or an entity that is not itself tax-exempt, including 501(c)(4), (c)(5), or (c)(6) organizations) where either the sponsor is paid to receive and administer funds on the other party’s behalf, or the sponsor publicly solicits funds for a specifically identified project, agrees to receive and administer those funds for the project, and either party can terminate the arrangement.
Traditional Model A fiscal sponsorship, where the sponsor takes full ownership and control of a project and its funds, appears to be the bill’s primary target. Model C arrangements, where the sponsor acts more like a grantor to a separately operating project, are treated differently under the bill’s language, and commentators analyzing the bill have flagged real uncertainty about how it would apply to a Model C sponsor providing management services, and about whether the disclosure requirements could sweep in ordinary restricted grants and project-specific funding agreements that were never meant to be fiscal sponsorship at all.
The Improper Conduit Penalty
The bill also creates a new excise tax for what it calls an “improper conduit arrangement,” meaning an arrangement where a tax-exempt organization solicits or receives contributions intended for a specific non-exempt person and fails to exercise discretion and control over how the funds are used. The organization itself would face a first-tier tax of 20 percent of the amount improperly transferred, rising to 100 percent if not corrected. Organization managers, including board members and officers, who knowingly permit the improper transfer would face their own tiered tax of 5 percent, rising to 50 percent. This is a meaningful personal exposure for board members, not just an organizational penalty.
Where the Bill Stands
HR 9721 has been approved by the Ways and Means Committee but has not passed the full House, has not been taken up by the Senate, and is not law. Bills at this stage frequently change substantially, and this one is likely to see further revisions given the ambiguity around Model C arrangements and disregarded entities. Fiscal sponsors should track it, not react to it as though it is final.
What Fiscal Sponsors Should Do Now
Even before this bill moves further, it is a good prompt to clean up two things that fiscal sponsors should already have in order. First, every fiscal sponsorship agreement should clearly document that the sponsor retains discretion and control over sponsored funds, not just as boilerplate language, but in how the arrangement actually operates in practice. Second, sponsors should be able to identify, for every active project, who the responsible principal officer is, when the arrangement began, and what has been disbursed to date. Organizations that already track this at the project level will have little to do if the bill becomes law. Organizations that do not will have real work ahead of them.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C., licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form. This post is for general informational purposes and does not constitute legal advice.