The Senate is set to consider the Fiscal Sponsorship Transparency Act, a measure introduced by Senator Tom Cotton (R‑Ark), designed to shine a light on a tax‑avoidance structure that allows anonymous donations to flow from American donors and left‑wing foundations into extremist organisations.
How the “fiscal sponsor” scheme works
Under the current arrangement, a properly registered nonprofit acts as a “fiscal sponsor”, receiving tax‑exempt contributions and then forwarding the money to smaller groups that are not themselves registered with the IRS. The sponsor typically retains a fee of between 5 and 10 percent before passing the remainder on. While donors can earmark their gifts, the use of a sponsor lets them give anonymously to groups that would otherwise be required to file public tax returns and disclose their benefactors.
According to the proposal, this loophole has enabled a range of organisations – described by the sponsor’s critics as extremist or “anti‑American” – to operate without direct IRS scrutiny. Examples cited include the Alliance for Global Justice and the WESPAC Foundation, which have redirected tax‑exempt gifts to groups such as the U.S.‑sanctioned Samidoun, the Palestinian Youth Movement and the campus group National Students for Justice in Palestine.
Targets of the legislation
The bill would also affect larger “dark‑money” passthrough entities that receive backing from prominent donors. Among those named are the Soros‑backed Tides Center, the charity Thousand Currents and a network of organisations linked to the Democratic consulting firm Arabella Advisors, which funds partners such as the Black Lives Matter Global Network.
Senator Cotton argues that taxing and forcing disclosure on these sponsors will make the arrangement financially unattractive, thereby cutting cash flow to radical end‑users.
Key provisions
- Charities acting as fiscal sponsors must list every partner organisation and the amount transferred on publicly available tax returns, and disclose the principal officers who approve the transactions.
- Transfers deemed “improper conduit arrangements” – where the sponsor relinquishes control over how the money is spent – would trigger a 20 percent tax on the sponsoring nonprofit, rising to 100 percent if the sponsor fails to correct the violation after being caught.
- Managers who knowingly approve an improper transfer would owe a tax equal to 5 percent of the amount sent to the partner.
- Donors would lose the ability to claim a tax deduction for contributions made under an improper conduit arrangement.
Specific organisations mentioned
The Alliance for Global Justice served as the fiscal sponsor for Samidoun, a group sanctioned in 2024 by the Treasury Department for supporting the Popular Front for the Liberation of Palestine, a designated terror organisation. The WESPAC Foundation is identified as the sponsor for the campus group SJP, Within our Lifetime, the Palestinian Youth Movement and the U.S. Palestinian Community Network – groups linked to pro‑Hamas encampments and violent “globalise the intifada” protests.
Thousand Currents and the Tides Center are said to have helped sponsor the Black Lives Matter Global Network as it raised $90 million for what the bill’s sponsors describe as radical activities. The Arabella Advisors network, which includes the New Venture Fund, is described as seeding funds to scores of far‑left advocacy groups and political causes.
Legislative outlook
A companion version of the measure is being advanced in the House by Rep. Lloyd Smucker (R‑Pa) and is expected to be considered by the House Ways and Means Committee in the coming weeks. If enacted, the new reporting and tax rules would apply to tax years beginning after 2027.
The proposal is projected to attract broad Republican support, and could also appeal to pro‑Israel Democrats because the disclosure requirements would apply to passthrough groups across the political spectrum.