SPONSOR Act

The Stop Proxy Organizations Nurturing Subversive Operations and Riots (SPONSOR) Act aims to change how the Internal Revenue Service (IRS) regulates "fiscal sponsorship" arrangements. Currently, many large 501(c)(3) nonprofits act as fiscal sponsors, allowing smaller projects or groups to receive tax-deductible donations under the larger organization's tax-exempt status. This bill would amend the tax code to make these sponsoring organizations legally liable for the criminal or civil wrongdoing of the projects they fund.

Specifically, the legislation proposes that a sponsoring nonprofit could be held responsible if its sponsored project engages in "covered activities," such as providing assistance to foreign terrorist organizations, using force to interfere with constitutional rights, or blocking the movement of goods in commerce. It would establish a legal presumption that the sponsoring organization is responsible for ensuring that all funds distributed through these arrangements comply with federal laws and tax regulations.

If enacted, the bill would likely lead to stricter oversight and vetting processes within the nonprofit sector. Large charities might become more hesitant to sponsor grassroots movements or independent projects due to the increased risk of legal and financial penalties. For everyday citizens, this could mean more transparency regarding how charitable donations are used by sponsored groups, but it may also make it more difficult for new or small community initiatives to secure the fiscal backing needed to accept tax-deductible contributions.