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.

Senate Bill

S. 3942

119th Congress

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.

In Committee

Introduced:Feb 26, 2026

Primary Sponsor

Ted Cruz

R - TX

Cosponsors

0

Quick Stats

Summary

This bill would make nonprofit organizations legally responsible for how the groups they fiscally sponsor spend their money. Currently, established nonprofits often act as 'fiscal sponsors' by handling funds for smaller or newer charitable projects that don't yet have their own tax-exempt status, but this bill would hold the sponsor liable if those funds are misused.

Latest Action

Read twice and referred to the Committee on Finance.

Introduced2/26/2026

StatusRead twice and referred to the Committee on Finance.

ChamberSenate

Data from Congress.gov

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Vote Prediction

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.

This bill would make nonprofit organizations legally responsible for how the groups they fiscally sponsor spend their money. Currently, established nonprofits often act as 'fiscal sponsors' by handling funds for smaller or newer charitable projects that don't

Community Breakdown

Pass

0%

Fail

0%

0 predictions

This bill would make nonprofit organizations legally responsible for how the groups they fiscally sponsor spend their money. Currently, established nonprofits often act as 'fiscal sponsors' by handling funds for smaller or newer charitable projects that don't yet have their own tax-exempt status, but this bill would hold the sponsor liable if those funds are misused.

Bill Number: 3942
Introduced: 2/26/2026
Status: Read twice and referred to the Committee on Finance.

Data from Congress.gov

AI-generated summary

Fact Sheet

Title: 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.
Bill Number: 3942
Sponsor: No sponsor
Status: Read twice and referred to the Committee on Finance.
Introduced: 2/26/2026
Summary: This bill would make nonprofit organizations legally responsible for how the groups they fiscally sponsor spend their money. Currently, established nonprofits often act as 'fiscal sponsors' by handling funds for smaller or newer charitable projects that don't yet have their own tax-exempt status, bu

Data from Congress.gov

AI Summary

Plain-English explanation of this bill

This bill would make nonprofit organizations legally responsible for how the groups they fiscally sponsor spend their money. Currently, established nonprofits often act as 'fiscal sponsors' by handling funds for smaller or newer charitable projects that don't yet have their own tax-exempt status, but this bill would hold the sponsor liable if those funds are misused.

Last updated: 2/28/2026

Key Points

Main provisions of the bill

Makes 501(c)(3) charitable organizations legally liable for any misuse of funds by groups they fiscally sponsor
Could affect thousands of small grassroots projects, activist groups, and community initiatives that rely on fiscal sponsorship to receive tax-deductible donations before establishing their own nonprofit status
May discourage established nonprofits from serving as fiscal sponsors due to increased legal and financial risk
Aims to increase accountability and prevent tax-exempt funds from being used for purposes that violate nonprofit rules

How This Impacts Americans

Potential effects on citizens and communities

This bill would primarily impact charitable nonprofits that provide fiscal sponsorship services and the smaller projects they support—including community organizations, advocacy groups, artistic projects, and grassroots initiatives. If passed, established nonprofits may become more selective or stop offering fiscal sponsorship altogether to avoid liability, making it harder for new charitable projects to get started and receive tax-deductible donations. This could particularly affect emerging social justice, environmental, and community development initiatives that depend on fiscal sponsors during their formative stages.

Policy Areas

No policy areas assigned yet.

Scope & Jurisdiction

Jurisdiction Level

federal

Congressional Session

119th Congress

Citation Reference

3942, 119th Congress (2026). "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.". Source: Voter's Right Platform. https://votersright.org/bills/119-s-3942

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