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Fiscal Sponsorship for Independent Films

Original publish date: December 30, 2021

Fiscal sponsorship for film is another potentially important piece of your movie project’s financial package. If you plan on seeking corporate funds or applying for government and institutional grants, a fiscal sponsor is a must.  

In fact, the National Endowment for the Humanities requires you have a fiscal sponsor when applying for film grants. Many grant givers and even some individuals follow suit and require the same.  

Having a prestigious non-profit vouch for your work comes with a number of financial and creative benefits. Not only will the ability to qualify for grants give your project a financial edge, you can attract donors to fund your film in exchange for a reduced tax liability. 

We will cover issues you need to consider when engaging with a fiscal sponsor, how it helps your film project financially, how tax-exempt status effects your profitability and the benefits having a sponsor affords your project’s outlook in the market. 

How does fiscal sponsorship for films work? 

To take advantage of the free money offered in the form of grants from non-profits, governments, foundations and corporations, you will almost always need to have non-profit status.  

Organizations will require you have non-profit status to ensure their cash is being used to further institutional goals or benefitting a social cause. Whether that be raising awareness about climate change or uplifting women filmmakers and everything in between.  

Instead of forming a non-profit on your own, creating undue legal and administrative headaches for your production, you can share in the non-profit status of a charitable organization that already exists.  

Film-oriented organizations such as Film Independent are willing to house your entity under their tax-exempt status if your project and their mission align. This is true and essential for every relationship between a sponsor and project.   

Your film would effectively be covered under the “umbrella” of the organization’s 501(c)3 tax exempt status. Donors give the intended funds to the organization and “recommend” the money is for your project. That donated money is then put into the non-profit’s bank account and administered by them. 

The donated funds or grants an organization receives on your behalf are then disbursed to you in the form of a grant, written by them, minus an administration fee. The industry standard fee is in the range of 10%. Every organization has a different fee structure, so be sure to check before you apply.  

It is part of an organization’s obligation to the federal government and IRS, and the very thing that allows you to benefit from their tax-exempt status, to exercise a certain amount of control over the funds.  

Technically, any money donated to them is at their discretion. Hence their need to write a grant specifically for your project. Non-profits must make certain the disbursed money is being used as intended. 

It is otherwise illegal and impossible for a non-profit to pass an IRS stress test if the non-profit is acting as a mere conduit for a for-profit venture.  

It is absolutely vital that your project furthers they’re mission and spurs on growth for their organization. To remain legal, sponsors will be looking for projects that align with their goals, which should inform your expectations going in.      

Maintaining your ability to make a profit with fiscal sponsorship for your film  

The non-profit status your film enjoys is in effect for donated funds only that are granted to your film by your fiscal sponsor   

This is an important distinction! You want your film to retain the ability to make a profit when it comes time to sell distribution rights. You must level the government obligations of a non-profit with your own interests. Always consult an entertainment lawyer or tax professional when considering the effects fiscal sponsorship could have on your film’s unique corporate structure. 

Sidenote: Funds released to your project could be counted as income when it’s time to file a tax return. If your film is structured as an LLC, the fiscal sponsor will send you Form 1099-MISC if payments exceeded $600 for the year. You will be taxed on these funds like normal income. If the project is structured as a corporation, or members of the LLC are corporations, you won’t be issued the 1099. Be sure to inform your fiscal sponsor which structure you are using.     

Under normal circumstances, non-profit status should start and end at the donations administered by your sponsor and disbursed to your project.  

Beyond this arrangement, you will be able to finance your film as you normally would, using equity and debt financing, divvying up shares to investors, bonding your film, and delivering to a distributor for profit.  

Fiscal sponsorship for film is about access. Access to funds that would be off limits otherwise. It’s also about delivering. You need to be able to a deliver a product as expected and agreed upon; a film that bolsters the organization’s goals as much as they bolster your project financially and in the market place.  

It is essential you are able to make money on your film and benefit from a relationship with a fiscal sponsor simultaneously. Understanding and negotiating the parameters of this relationship is key.        

How does fiscal sponsorship affect ownership of my independent film? 

Once a fiscal sponsor determines your project fits their niche and they want to work with you and you decide you want to work with them, you will have to sign a contract codifying the nature of the relationship.  

It is vitally important to make certain you retain full ownership and creative and financial control of your film. This must to be laid out in the agreement.  

Another point that should be included is how your cooperation will end. At some point, the relationship will come to a close, and it will save you and the sponsor a lot of time and money to agree on terms of termination up front. 

Once you ensure financial and creative control rests in your hands, there are certain provisions that are unchangeable, as per the nature of fiscal sponsorship for film. 

The charitable organization will always hold your funds in their own bank accounts. They will administer those accounts and charge you a fee for doing so, usually a percentage of each donation earmarked for your film. Make sure the agreed upon fee structure is in the contract.     

When your film starts receiving grant money (funded by donors) from the organization, the organization is required by the IRS to report how that money was used.  

By extension, you must submit how you used the grant money in the form of ledgers and receipts. The receipts must demonstrate the money was used solely for the purpose of creating your film. This keeps the sponsor compliant with government regulation and keeps you in good graces with your sponsor.       

With the proper provisions agreed to at the outset of your relationship with your fiscal sponsor, you will open up an exciting new avenue for financing your film. You will also maintain the necessary flexibility to take on private investors, finance against tax credits and distribution pre-sales and sell your film at a profit after it hits big on the festival circuit. 

The “Pre-Approved Grant Relationship” model is best for film 

Most every organization fiscally sponsoring independent films understands your needs. They know that to be successful, you need to be able to make a film that matters to them while also allowing your film to turn a profit.  

Among the six models laid out in Greg Colvin’s Fiscal Sponsorship: Six Ways to Do It Right, The Pre-Approved Grant Relationship model is the most common and preferred for independent filmmakers. It allows for a mutually beneficial relationship between the film and the organization.  

In this model, your film enters an agreement with the non-profit as a grantee. You retain the rights to the project. All liabilities and assets of the project belong to the filmmaker who is thus responsible for filing the proper tax documents.  

When you or other individuals are soliciting donations for your project, you are no longer agents of the film, rather you become agents of the non-profit. Fundraising must be done in the name of the non-profit to benefit from its tax-exempt status.     

Is fiscal sponsorship right for my film? 

Niche appeal is the name of the game when working with a fiscal sponsor as much as it is when applying for grants. Every organization has a mission and ideals that they are attempting to further by working with the right filmmaker and their project.  

It’s a mutually beneficial relationship, you gain access to money and tools and the non-profit has a new project to tout that runs in the same vein as their other charitable efforts.   

Consider whether your project is relevant to a particular organization’s goals. Research their previously sponsored projects. Do they look similar to your project? If so, great! If not, that organization may not be the right fit. 

These guidelines closely align with niche appeal necessary for grant qualification – read more about grants and niche appeal.  

Partnering with a fiscal sponsor comes with a number of advantages that can benefit your project and your career potentially helping you find long term success.    

Financial benefits of fiscal sponsorship

First and foremost, once you have a fiscal sponsor, you have access to grants from state governments, the federal government, foundations, non-profit organizations, corporations and even some individuals who require it. 

Grants, much like fiscal sponsors, are often given to projects that fall within a particular niche. This form of free money for your project can run the gamut, with an ever-changing non-profit landscape responding to the needs of the moment. They churn out a vast array of grants, with varying intentions, that can make the difference to getting your film in the can.   

Grants can provide an excellent source of extra cash to help get your project jumpstarted or provide last ditch money in a post-production pinch. They aren’t, however, usually capable of covering the entire cost of a film. Grants are a good way to pad your budget or help you out of a tough spot.   

As an agent of your fiscal sponsor, you can attract substantial interest from donors in your project with the promise of a tax deduction. Since they are donating to a charitable organization, donors are able to offset some of their tax liability by indirectly funding your film. This is a great option for people who want to invest in your project, have a high tax liability and want a sure thing.  

It’s a win-win deal for the donor and you. You receive funding without having to give up any equity in the project and they get a tax write off. This is imperative to maintain majority ownership of the film. This an excellent way to get extra funding, retain control, and reap the greatest financial return possible when you sell distribution rights.   

Creative benefits of fiscal sponsorship for film  

Fiscal sponsors for film want to see you succeed, as if the financial benefits weren’t enough, they will often go above and beyond to provide creative assistance. 

Remember, with the correct contract, they wield no creative control. Sponsors provide these services to help your film get made because they care about film. It gets your work in front of an audience and gives the non-profit something to be proud of.  

Sponsors have been known to give creative consultations and professional guidance. They have the tools, network and experience to see that your project gets in the can and finds distribution.  

The International Documentary Association, for example, will provide support to filmmakers no matter the stage of production. They help you find your footing with distribution and promotion. They even have legal and accounting teams at your disposal if you need them.  

Some sponsors provide marketing advice, networking events, panels, conferences, workshops and more. Many will even throw in a membership so that you can participate in regularly scheduled events, access labs and other enriching programs where you can meet your peers. Others will setup dedicated donation pages or portals for your project, hosted on their website, lending great credibility to your work.  

Remember, sponsors will be touting your project all the while, using their network, newsletters and social media accounts to garner interest and possibly even increase donations.    

Getting a film off the ground is hard. When it comes time to convince lenders and investors to partner with you and finance your project, having a prestigious organization standing squarely behind you can only bolster your reputation. Bottom line: having a fiscal sponsor will help people take you seriously. 

When should I apply for fiscal sponsorship?   

Before you dive into grant applications, it’s best to first consider getting a fiscal sponsor.  

Luckily, most non-profits offering fiscal sponsorship for film accept applications on a rolling basis. So, whether you’re in the early days of development or running out of cash going into post-production, you can start an application anytime. Generally, sponsors will respond in six to ten weeks to an application. However, this can vary widely. Always check with each organization you want to work with on their specific timeline.

As with anything, earlier is better. Grants often do have deadlines, and if you want to start applying before production or if you’re in a pinch, it’s best to start applying for fiscal sponsorship for your film well in advance of those grant deadlines.     

Fiscal sponsorship provides access to grants to boost your film’s budget and more 

Engaging with a fiscal sponsor opens up a world of free money in the form of grants. The non-profits that offer fiscal sponsorship for film understand your unique needs and provide a number of ancillary services well beyond the financial benefits.  

Having the support of a prestigious and well-known organization is also a fantastic way to attract serious money from lenders and investors. Everyone loves a film that could win over hearts and minds on the festival circuit – it doesn’t hurt if the organization running that festival is your sponsor.    

It’s essential to get a thorough understanding of your relationship with a fiscal sponsor. Always maintain creative control and the right to make a profit from your film project. Once you reach a contractual understanding, having a fiscal sponsor is an excellent way to jumpstart your film’s financing, seek advice and get distribution. 

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