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HR 9721

Fiscal Sponsorship Transparency Act of 2026

119th Congress Introduced by Lloyd Smucker

Reforms fiscal sponsorships by requiring detailed annual disclosures of each arrangement and imposing taxes on improper conduit transfers to deter misuse.

Committee Consideration and Mark-up Session Held
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Bill Summary · HR 9721

Overview

  • Bill: HR 9721 — Fiscal Sponsorship Transparency Act of 2026
  • Purpose: Amend the Internal Revenue Code to require reporting by certain charitable organizations about fiscal sponsorship arrangements, and to establish taxes on improper conduit arrangements. Aims to enhance transparency and curb improper use of fiscal sponsorships.

What the bill would do

  • Establish reporting requirements for fiscal sponsorship arrangements (added to the IRS Form 990 information reporting).
  • Define “fiscal sponsorship arrangement” and create a framework to identify and regulate these arrangements.
  • Impose taxes on improper conduit arrangements involving tax-exempt organizations.
  • Clarify related definitions and provide for regulatory guidance and effective dates.

Key provisions and changes

1) Reporting requirements for fiscal sponsorships (new Form 990 disclosure)

  • Adds new reporting obligation to Section 6033(b) of the Internal Revenue Code for each fiscal sponsorship arrangement in effect during the taxable year.
  • Required disclosures for each arrangement:
    • Names of all parties involved (excluding individuals).
    • Financial details:
    • For certain identified projects under subsection (p)(1)(B)(ii): aggregate amounts made available during the taxable year for the specifically identified project.
    • For other fiscal sponsorships: aggregate amounts transferred during the year to the person on whose behalf the organization receives and administers funds.
    • Description of activities funded by these amounts.
    • Name of a principal officer managing the arrangement on behalf of the organization.
    • Start date (and end date, if applicable) of the arrangement.
  • The concept is to increase visibility into how funds are being used within sponsorships.

2) Definition of fiscal sponsorship arrangement (new subsection p)

  • A fiscal sponsorship arrangement is one between a tax-exempt organization and a non-exempt party, where:
    • The organization receives and administers amounts on behalf of the other person for compensation, or
    • The organization publicly solicits and administers funds for a specifically identified project intended to further an exempt purpose, with discretionary control by the organization over use of funds.
  • The arrangement may be terminable by either party.
  • The organization must retain discretion and control over the funds to ensure they further an exempt purpose.
  • Special rules for otherwise disregarded entities (i.e., entities owned by the organization) treating such entities as separate from their owner for purposes of the subsection.

3) Clarification on improper conduit arrangements (new subsections)

  • Adds a provision that charitable contributions shall not include gifts made under an improper conduit arrangement.
  • Defines an improper conduit arrangement as one where funds are solicited or received to be transferred to a non-exempt recipient and the organization fails to exercise discretion and control over the funds.

4) Taxes on improper conduit arrangements (new Sec. 4960A)

  • Imposes taxes on improper conduit arrangements:
    • Initial tax on the organization: 20% of the amount transferred under the improper conduit arrangement (paid by the organization).
    • If the arrangement was managed by an organization manager who knowingly approved the transfer, a 5% tax on the amount of the transfer (paid by the organization manager), with exceptions if the failure to correct is due to reasonable cause.
    • Additional taxes if not corrected within the taxable period:
    • On the organization: 100% of the amount transferred.
    • On the management: 50% of the amount transferred if the organization manager refused to part or all of the correction.
    • Caps:
    • Management tax under (a)(2) capped at $10,000.
    • Management tax under (b)(2) capped at $20,000.
  • Defines terms:
    • “Specified tax-exempt organization” (501(a) organizations described in 501(c)(3) or historically described as such within the last five years).
    • “Improper conduit arrangement” (funds solicited or received to be transferred to a non-exempt recipient with insufficient discretion and control over use of funds).
    • “Correction” steps to recover funds or take prescribed corrective actions.
    • “Taxable period” and “organization manager” definitions.
  • Creates enforcement framework and clarifies joint and several liability among liable parties.

5) Administrative and effective-date provisions

  • Secretary of the Treasury to issue regulations clarifying:
    • Which arrangements fall under the new reporting (6033(p)(1)).
    • What constitutes “discretion and control” for purposes of the reporting and enforcement provisions.
  • Effective date: Amendments apply to taxable years beginning after December 31, 2027.

Who is affected

  • Tax-exempt organizations (especially those engaged in fiscal sponsorship arrangements with non-exempt partners).
  • Non-exempt partners involved in fiscal sponsorship arrangements.
  • Organization managers and officers responsible for arrangements.
  • Donors and funders who contribute through fiscal sponsorships may be indirectly affected by heightened transparency and possible tax implications for improper arrangements.
  • Tax professionals and charities who must prepare Form 990 disclosures and compliance reports.

Procedural and timeline notes

  • Introduced in the House on July 16, 2026; referred to the Committee on Ways and Means.
  • Provisions specify an effective date for the new reporting and penalties: taxable years beginning after December 31, 2027.
  • Requires regulatory guidance from the Treasury to define complex terms and ensure proper implementation.

Potential impact and considerations

  • Increased transparency around how sponsorship funds are used, including identification of projects and managing officers.
  • Potential deterrent effect against improper conduit arrangements due to new taxes and penalties.
  • Administrative burden on organizations to collect and report detailed information on each fiscal sponsorship arrangement.
  • The scope excludes private foundations and donor-advised funds from certain definitions, which shapes which entities are subject to these rules.

Compiled from official sources — confirm details with the bill’s official record.

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