HB7799, the SPONSOR Act, would amend the Internal Revenue Code to impose liability on certain 501(c)(3) organizations that act as fiscal sponsors when funds they administer are used for specified unlawful or violent activities. The bill applies when a tax-exempt organization receives deductible contributions for a sponsored project and then expends those funds under a fiscal sponsorship arrangement. In that circumstance, the sponsoring charity would bear criminal liability related to the sponsorship and civil liability for covered activities arising from it.
The bill defines covered activity broadly to include aiding and abetting international terrorism tied to a designated foreign terrorist organization, using force or credible threats to interfere with constitutional rights, and using force or physical obstruction to block the movement of goods in commerce. It also defines fiscal sponsorship as a relationship in which a 501(c)(3) receives and administers funds for a nonexempt project while retaining discretion and control over the money. The bill creates a presumption that the sponsoring organization is responsible for ensuring compliance with applicable laws, regulations, and tax obligations, while preserving defenses based on due diligence and reasonable oversight.
Impact
If enacted, the bill would add a new subsection to section 501 of the Internal Revenue Code, expanding the legal exposure of tax-exempt charities that serve as fiscal sponsors. It would not change the basic tax-exempt status rules for 501(c)(3) organizations, but it would make them potentially liable for criminal and civil consequences linked to sponsored projects when donor deductions are involved. The measure could affect nonprofits, donor-advised or sponsored-project arrangements, and organizations that host advocacy, protest, or other third-party initiatives under fiscal sponsorship structures.
Sentiment
The available record shows no committee debate or vote history, so there is no documented floor or committee sentiment to assess. Based on the bill text alone, the measure appears to be framed as a response to concerns about nonprofits being used to channel funds to extremist, disruptive, or unlawful activities. The title and findings language suggest a strong law-and-order orientation and an intent to deter misuse of charitable sponsorship arrangements.
Contention
The main point of contention is likely to be the breadth of the liability standard and the activities covered. Supporters would likely argue that fiscal sponsors should be accountable when they knowingly or negligently facilitate terrorism, violent interference with rights, or obstruction of commerce. Opponents may argue that the bill could chill legitimate nonprofit advocacy, protest support, and charitable sponsorships by exposing sponsoring organizations to broad criminal and civil liability based on the conduct of sponsored projects. The due diligence and reasonable oversight defense may be central to any debate over whether the bill is narrowly targeted or overly expansive.