Sponsor
Lloyd K. Smucker
Representative · R-PA
Representative · R-PA
The bill strengthens oversight and transparency to curb abusive conduit arrangements and preserve the charitable deduction, but does so at the cost of substantial penalties, personal liability risks, higher compliance costs, and short-term regulatory uncertainty for nonprofits, managers, and donors.
Taxpayers and the public: closes common charitable deduction loopholes by preventing tax deductions for gifts routed through improper conduit/fiscal-sponsorship arrangements, reducing misuse of the charitable tax system.
Nonprofits and the public: requires most tax-exempt organizations to disclose detailed fiscal sponsorship arrangements on Form 990 and gives Treasury authority to define and correct 'discretion and control,' improving transparency and oversight of fund flows to nonexempt recipients.
Nonprofits and regulators: empowers Treasury to issue corrective rules that clarify when transfers are improper, enabling stronger enforcement and more consistent application of tax rules to fiscal sponsorships.
Nonprofits: face steep new excise taxes on transfers deemed improper (20% initially and up to 100% additional if not corrected), creating substantial financial risk for organizations that use fiscal-sponsorship arrangements.
Organization managers (directors/officers): may incur personal tax liability for knowingly agreeing to improper transfers (initially 5% up to $10,000 and additional 50% up to $20,000), exposing leaders to direct financial penalties.
Donors and sponsored charitable projects: gifts routed through fiscal sponsorships could lose deductibility if arrangements are later deemed improper, creating donor uncertainty and a risk of chilling donations to sponsored projects.
Based on analysis of 2 sections of legislative text.
Requires Form 990 disclosure of fiscal sponsorships, denies deductions for improper conduit gifts, and creates excise taxes on organizations and managers for improper conduit arrangements.
Official title: To amend the Internal Revenue Code of 1986 to require reporting by certain charitable organizations relating to fiscal sponsorship arrangements, and for other purposes.
Introduced July 16, 2026 by Lloyd K. Smucker · Last progress July 16, 2026
Requires most tax-exempt organizations to disclose detailed information about each fiscal sponsorship arrangement on their annual Form 990, defines an "improper conduit arrangement," and denies charitable contribution deductions for gifts made through such arrangements. The bill creates a new excise-tax regime that imposes initial and escalatory penalties on organizations and certain managers when improper conduit arrangements occur and are not corrected. Directives to Treasury require regulations to clarify terms such as "discretion and control." The reporting and tax rules apply to taxable years beginning after December 31, 2027.