Agriculture Reference
In-Depth Information
The second step is to secure federal IRS 501c3 status, which is the tax designation that makes dona-
tions to your organization deductible, and is required for foundation gifts, most grants you may apply
for, and many other forms of funding the garden could receive. It is necessary to have this tax status so
that donors who choose to support your organization can claim the deduction if that is their motivation
for giving.
If the community garden will be part of an existing 501c3 organization, you don't need to worry
about this status. If your garden is not part of another organization, is very small, or doesn't have the
resources to work with professionals to file for federal status, there is the option of getting the benefits
of 501c3 status without the paperwork (which can be time consuming and expensive.) This option is
called fiscal sponsorship. Essentially, it allows your organization the benefits of 501c3 status via part-
nership with another 501c3 organization. Oftentimes a fiscal sponsor shares a similar mission to your
own. There are also organizations with the express mission to provide fiscal sponsorship for new or
small nonprofits unable to, or not desiring to, secure their own federal status.
A successful fiscal sponsor partnership not only gives your organization the benefits of 501c3 status,
but often provides some benefit to the organization providing the sponsorship as well. Benefits could be
as simple as public association with your organization to a small percentage of any funds you raise. A
general percentage is 5 to 15 percent, with the reason ostensibly being that any monies raised by your
group will flow through the fiscal sponsor, so they may have some administrative or accounting work
to do to get the money to you. Fiscal sponsors are responsible for setting up separate checking accounts
for sponsoree funds, accounting for those funds in audits, and maintaining other financial best prac-
tices. There is also a level of general oversight required—to make sure you're living up what you said
you would do with grant funds received through the fiscal sponsorship. The sponsoring organization is
technically on the hook should your organization not spend grant monies appropriately. This fiduciary
oversight is the responsibility of the fiscal sponsor and will require administrative time on their part.
If you believe you will want to raise funds requiring 501c3 status but don't want to file independ-
ently, research and find a good fiscal sponsor ahead of time. Sometimes the relationship building takes
a while: the fiscal sponsor will want to make sure your mission and their mission are in agreement; you
may be required to provide paperwork or documentation; and meetings with, or approvals from, their
board may be necessary. Often nonprofit boards meet on a quarterly basis, so your need for a fiscal
sponsor and the sponsoring organization's schedule may not be in concert. In other words, plan ahead.
The main thing to remember is this: you're not alone. There may be a lot to learn about state non-
profit status, federal 501c3 status, boards, and the other legalities that go into running your organization,
but you will find as you research the best options for your group that there are helpful local resources
available. Most metropolitan areas have groups that can aid start-up nonprofits in making important
decisions around the type of nonprofit status the organization should secure. Organizations and profes-
sionals will also be able to assist you with board development and other necessary business functions.
Search for groups like Executive Service Corps, Donors Forum, SCORE, or Business and Professional
People for the Public Interest.
Nonprofit Cows Say MOU
There's a saying, “A verbal agreement isn't worth the paper it is written on.” As with any partnership,
a written agreement is a good idea so that everyone can work through their expectations ahead of time,
and come to an understanding on the conditions of the partnership.
