A bill to amend the Internal Revenue Code of 1986 to provide that 501(c)(3) organizations are liable for the use of funding provided as a fiscal sponsor.

# Summary of S 3942 **What the Bill Would Do** This bill would change tax law to hold nonprofit organizations (specifically those classified as 501(c)(3) tax-exempt groups) financially responsible for how money is used when they act as "fiscal sponsors." Fiscal sponsorship is an arrangement where an established nonprofit receives and distributes funds on behalf of smaller groups or projects that don't have their own tax-exempt status. Currently, the bill suggests these sponsoring nonprofits may not be held legally liable for misuse of those funds by the groups they're sponsoring. This bill would make them liable. **Who It Affects** This legislation would primarily impact: established nonprofits that serve as fiscal sponsors, smaller grassroots organizations and projects that rely on fiscal sponsors to receive tax-deductible donations, and donors who contribute through these arrangements.

The Internal Revenue Service might also be affected in terms of oversight responsibilities. **Current Status** The bill was introduced by Senator Ted Cruz (R-TX) in the 119th Congress and is currently in committee, meaning it hasn't yet been voted on by the full Senate. No action has been taken beyond its initial introduction.