Organization Trends

Inside Fiscal Sponsorships: Incubation and the Tides Center


Inside Fiscal Sponsorships (full series)
A Way to Start NonprofitsIncubation and the Tides CenterObscuring Finances?Improving Transparency

Summary: The concept of fiscal sponsorship means many things to many people. To some, it represents an efficient solution to the difficulties fledging nonprofit groups face when trying to get off the ground. Others wonder whether it has become the equivalent of a lucrative “profit center” for a handful of organizations—or a convenient way to mask links between donors and controversial causes. Perhaps that’s why a variety of observers want to see clearer rules around the application of fiscal sponsorship.

Fiscal Sponsorship and the Tides Network

The above definitions emphasize fiscal sponsorship as a grassroots, community-level, activity. A different view of the concept comes into focus if one takes a top-down view of it, particularly considering tax-exempt groups with deep pockets, such as the constellation of Big Green nonprofits, or labor unions.

In Jarol Manheim’s 2013 report for the U.S. Chamber of Commerce entitled The Emerging Role of Worker Centers in Union Organizing, he defines fiscal sponsorship as follows:

Fiscal sponsorship is, in effect, a means of providing administrative infrastructure—office space, accounting services, computer support, grant-seeking and other fundraising, and the like in support of organizations that are too new, too small, too weak, or insufficiently funded to maintain their own, independent operations. Typically performed on a fee-for-service basis, it is a way of encouraging and subsidizing desired activities [emphasis added].

Manheim’s paper includes some fascinating lore about fiscal sponsorship—including the fact that the mysterious Tides network was intimately involved with both the first major gathering of organizations playing a fiscal sponsor role, as well as the formation of the National Network of Fiscal Sponsors.

The Tides Center calls itself “the leading fiscal sponsor for social change initiatives in the United States. We have a long history of providing high quality services and support to the nonprofit community and have sponsored over 1400 projects throughout our history.”

Perhaps the most serious attack to yet appear in print on how green activists such as the ones behind Tides have harnessed aspects of fiscal sponsorship appears in a 2014 United States Senate Committee on Environment and Public Works Minority staff report.

Entitled The Chain of Environmental Command: How a Club of Billionaires and Their Foundations Control the Environmental Movement and Obama’s EPA, the report alleges that:

wealthy liberals fully exploit the benefits of a generous tax code meant to promote genuine philanthropy and charitable acts, amazingly with little apparent Internal Revenue Service scrutiny. Instead of furthering a noble purpose, their tax-deductible contributions secretly flow to a select group of left wing activists who are complicit and eager to participate in the fee-for-service [i.e., fiscal sponsorship] arrangement to promote shared political goals.

The committee report looked closely at the activities of the Sustainable Markets Foundation (SMF), which it describes as only existing “on paper and has zero public presence—no website, no Facebook page, no Twitter account, nothing.” Based in New York, SMF reported just under $4 million in net assets on its 2016 990 tax filing. The report catalogues that SMF has acted as fiscal sponsor for support to anti-fracking activists and environmental activist Naomi Klein, among others.

The interesting thesis put forward by the report is that SMF uses fiscal sponsorship to make it harder to track direct support from the large foundations that fund SMF and those funds in turn being dispensed by SMF to “fringe startups” that large foundations such as Rockefeller Brothers or Tides may not wish to be associated with directly—but that they nonetheless wish to see thrive. A similar thrust has been, for decades, at the core of critiques of how the Tides Network structures its activities as well.

(See CRC’s December 2014 edition of GreenWatch for more background on the Senate report.)

More recently, Christopher C. Horner of the Competitive Enterprise Institute (CEI) used access to information laws to uncover email correspondence from 2017 between the ultra-green U.S. Climate Alliance and Georgetown University’s Climate Center, exploring how the Center could act as fiscal sponsor for the Alliance. The Alliance brings together more than 20 state governors determined to impose the Paris Climate Change Accord on the U.S. economy.

Horner’s findings included a draft contract that shows how fiscal sponsorships can be structured and provide further real-life context around the points raised in Manheim’s paper.

The contract (which was not executed) contemplated Georgetown providing:

a full suite of administrative and project management capabilities and services in an efficient manner, including but not limited to [the following]: routine operations, human resources, accounting, finance, IT, auditing, other back-office and logistical support, fiduciary services, grant and sponsored programs capabilities, budget and other project administration, and the opportunity to initiate contracts with individuals and firms . . . .

In addition, “Alliance Staff will be interviewed and selected for hire by the Alliance Co-Chairs in coordination with Georgetown, and will be employed by Georgetown University . . .” (An interesting attempt at camouflage, needless to say.)

All this support was available for Georgetown’s 15 percent rate “to serve as fiscal sponsor.” That is, Georgetown would determine a cost for its back office and administrative services for acting as fiscal sponsor, based on 15 percent of the project budget.

The Alliance opted instead to select the tax-exempt U.N. Foundation as its fiscal sponsor— which, Horner’s diligent digging into the relevant records reveals, also charges a 15 percent rate for its fiscal sponsorship services.

In the next installment of Inside Fiscal Sponsorships, learn how fiscal sponsorships can be used to obscure funding.

Neil Maghami

Neil is a freelance writer and regular contributor to CRC publications.
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