SPONSOR Act

The Stop Proxy Organizations Nurturing Subversive Operations and Riots (SPONSOR) Act aims to increase oversight of the nonprofit sector by amending the Internal Revenue Code. Specifically, it targets "fiscal sponsorship" arrangements, where an established 501(c)(3) nonprofit provides its tax-exempt status and financial management to a smaller project or group. The bill proposes that these parent organizations be held criminally and civilly liable if their sponsored projects engage in illegal activities.

Under the proposal, a sponsoring organization would face legal consequences for "covered activities" performed by its sponsored groups, such as aiding international terrorism, obstructing interstate commerce, or participating in violent riots. The legislation aims to close what supporters describe as a loophole that allows radical groups to raise tax-deductible funds through established nonprofits without the same level of transparency or accountability required of independent organizations.

If enacted, this bill would likely cause large nonprofit organizations to implement much stricter vetting and monitoring processes for any groups they sponsor. It could also make it more difficult for new or grassroots community projects to find fiscal sponsors, as those sponsors would risk significant legal and financial penalties for the actions of the groups they support.