If you’re trying to raise financing for your film, whether a short film or micro-budget feature or documentary, one avenue for funding is through fiscal sponsorship. Going the fiscal sponsorship route, you can attract donors even if you’re not yet recognized as tax-exempt under the IRA Code Section 501(c)(3).⁸ In other words, using this arrangement, you don’t have to officially form your own nonprofit organization. You “partner” with a fiscal sponsor so you can raise funds from donors.

You have many options when it comes to fiscal sponsorship, but we’ll look at one organization in depth so you can get a sense of how it works and whether it might be something you want to consider for your film.

Fractured Atlas is a national nonprofit organization that supports arts organizations and individual artists in all disciplines at different stages in their careers, including filmmakers, theater artists, visual artists, musicians, and dancers. Dianne Debicella, senior program director of fiscal sponsorship at Fractured Atlas, has worked with filmmakers from across the United States to secure sponsorship.

What is the first step for an independent filmmaker looking to fund his or her project?

The first place to start is within your own network. Within the United States, in terms of fundraising, the largest pool of money typically comes from individuals, and that’s something that a lot of filmmakers aren’t aware of. When they want to start fundraising, they tend to think they should look to grants or foundations or government support.

But if you look at the budget of a lot of film projects, or any type of artistic project, it’s usually made up of a large percentage of earned revenue, like sales or something you’re providing in exchange for the money people are paying. And then about 55 percent of a budget is made up of contributed revenue, and that would be a mixture of money from individuals, grants, corporate support, and government support. But within that percentage, usually the largest percentage is from individuals, so that’s usually where you should spend most of your time in terms of fundraising efforts.

What is the incentive for people to donate money to a filmmaker?

That’s often incentivized by taxes, for people who are at a certain tax bracket. They want to give away a certain percentage of their money each year to charities, because they can take the tax deduction. For films, it’s also incentivized by investments, for somebody who is expecting to get something in exchange. While that doesn’t always happen in the film world, they still often want either the tax receipt or that stake in ownership in case there’s ever a return on the money that they put in.

If you’re going to entice people to donate to your film as a tax write-off, what kind of entity do you need to set up to make that official?

If you’re making a film and you want to issue a tax receipt to people contributing, you have to set up an independent 501(c)(3) organization, which is the classification within the IRS tax code that’s part of the charitable sector. So that means you’re actually starting a nonprofit organization.

For most people producing independent films, though, that’s not really the direction they want to head, unless of course they’re starting a company focused on producing documentaries, or they have some sort of specific social mission they want to accomplish. But if you’re just creating an independent film that’s either a narrative or a documentary, fiscal sponsorship is typically a way to enable them to have access to those charitable dollars.

Can you explain what fiscal sponsorship is?

Fiscal sponsorship is a tool that exists to help people fundraise, and it enables individuals to work with an existing 501(c)(3) organization and to use some of the benefits of their 501(c)(3) status. That means they can then receive tax-deductible donations through that 501(c)(3), or they can become eligible to apply for grants that typically only a 501(c)(3) is eligible to apply for. The nature of a fiscal sponsorship relationship is that the 501(c)(3) agrees to help them raise money for the purposes of the film.

If a filmmaker forms a relationship with an existing 501(c)(3) to raise money but later decides she wants to sell the film for a profit, what happens to the fiscal sponsorship relationship?

A film that raises money through fiscal sponsorship can absolutely become a for-profit. If you’re raising money for a film and you’re not sure yet if it’s going to be monetarily successful, we advise you to start by using fiscal sponsorship for preproduction, production, and postproduction. Then if you get to a point where you start to engage in a conversation with investors or distribution companies who will own the rights to the film, you can do that—we just have you sign an agreement with us that outlines what you’re allowed to do at that point.

The terms are usually that the ultimate purpose of the film continues to be to serve a public audience. If the point of the film becomes solely to make money, we would just ask you to end the fiscal sponsorship relationship and make sure that you spent all money you raised through the fiscal sponsorship program. That’s where you engage in the for-profit moneymaking aspect of it.

This is how the partnership with Fractured Atlas works? Is this the same for other fiscal sponsors?

Yes, this is a service Fractured Atlas offers. There are other fiscal sponsors out there. Some are national, some are geographically specific, some are focused on documentary film—it’s really a range, and everybody runs their programs differently. We happen to allow that type of fundraising. That’s what we call a hybrid model of fundraising, where you’re raising charitable dollars, and you can also have a for-profit aspect to the work. There are a handful of other fiscal sponsors that allow that, but there also are quite a few that don’t.

Is part of the draw for the filmmaker that they’re able to say they’re sponsored by Fractured Atlas?

Absolutely, fiscal sponsorship lends a certain amount of legitimacy to the project, because somebody’s not just writing a check to your bank account. Instead, they’re writing a check to Fractured Atlas, and we’re insuring that this money is spent on the project for the activities that our board has approved.

It also helps in terms of the actual grant-making landscape, because a lot of grant makers are familiar with Fractured Atlas. We’ve sponsored over 10,000 projects across the United States in the history of our program, so people know who we are. They know that if the check comes to us, we’ll make sure that it’s spent on charitable activities and the creations of projects that work.

Is there any downside? Is there anything a filmmaker should know to be cautious of in entering a relationship like this?

The biggest warning I would give filmmakers is that if they come across a 501(c)(3) organization that tells them, sure, you can use our 501(c)(3) status to raise money, to make sure that they’re organized to operate a fiscal sponsorship program and not just doing it on an ad hoc basis. The filmmaker should make sure an agreement with that 501(c)(3) outlines the terms—who owns the work, how the money is going to flow, and whose responsibilities are whose.

It’s really important to have that in writing, because a lot of times I get calls from 501(c)(3) organizations that say, “I offered to provide fiscal sponsorship to somebody, but now I don’t understand what the tax implications are for them,” or, “We were using the money they were raising for our operations, and now they’re asking for the funds and we don’t have it in our account and we’re not sure what to do.” You just want to make sure that you’re not getting into a relationship like that, that you’re working with an organization that has done their due diligence and knows how to operate that kind of relationship.

Can you explain the financial part of the relationship with Fractured Atlas? For every $10,000 a filmmaker raises, Fractured Atlas gets a percentage?

Any funds raised through the fiscal sponsorship program are charged a 7 percent administrative fee. So if you raise $100, your charge is $7; if you raise $10,000, your charge is $700. It’s standard within the fiscal sponsorship sector to charge anywhere from 5 to 10 percent of the revenue coming through the program.

If the filmmaker receives a grant that doesn’t require a fiscal sponsor—for instance, if they find a grant maker who says, “I’m happy to just cut you the check directly”—then we don’t charge a percentage on that. They can accept that money directly. Or if they have sales of any sort, we don’t accept that income either. We only charge the percentage for money that somebody requires that it go to a 501(c)(3) organization.

It’s pretty challenging, though, for a filmmaker to get grants if it’s not through an organization like Fractured Atlas, is that right?

Yes, there are very few grants out there for individual artists. It’s partly because of the way foundations are structured and the oversight they have to provide when they issue a grant, so most foundations only give to 501(c)(3)s. In the fundraising landscape, the grants that exist, probably only 1 percent go directly to individual artists, and the rest go to 501(c)(3) organizations. So if you’re fiscally sponsored, that gives you access to about 99 percent of the grants.

Are there ever scenarios where the people or organizations donating money for a film have an expectation that a percentage of that money will come back to them—as in an investment? How does that work, and how do you work with artists to determine that?

There’s a difference between a donation and an investment. If somebody gives a donation, it means they have no expectation of any return on the money they’re giving. That’s money that Fractured Atlas is processing. Donors cannot ask, after they give a charitable contribution, for it back. It’s held within the governing charitable trust laws, and those laws state that when you give to a charity, you’re giving for the public good. You no longer have control over that money, so you can’t say, “I don’t really want to give this anymore. I need it back.” Fractured Atlas practices only charitable donations.

If somebody gives $10,000 with the expectation that if the film earns a profit they will receive a percentage over time, then they would have to engage outside of the fiscal sponsorship relationship. That’s when we would ask them to sign an addendum to our agreement outlining how they’re allowed to do that. We would not manage that money, and we would not charge a percentage on that money for them.

In the filmmaker’s fantasy scenario where she raises $20,000 in donations to make a film, and the film ends up making $10 million, can the donors come back later and expect a piece of that $10 million?

We haven’t experienced that. It’s possible, but again, when a person makes a charitable contribution, they can’t demand a percentage. It’s not an investment. It’s a different relationship, so they have no terms to fall back on and later say they deserve a piece of the pie.

How does fiscal sponsorship compare to crowdfunding?

It’s similar in some ways. Crowdfunding is a component of fiscal sponsorship, so we have partnerships with several crowdfunding platforms that enable filmmakers to launch campaigns and still issue tax receipts to donors, which can be a huge incentive for people who want to give larger amounts. We currently partner with Indiegogo and RocketHub. Crowdfunding platforms don’t offer continued support on how to raise money, though—and that’s something we do.

What kind of support do you offer the filmmaker?

We coach people on how to raise the money. We do one-on-one consulting with our projects to ensure that their materials are strong and that they know how to prospect and cultivate relationships with people. We review every single thing they put out in terms of fundraising material, so if they’re running a crowdfunding campaign and also mailing a traditional individual appeal letter, we’ll review all of that and give feedback.

We also provide lists of grant opportunities that are a good fit for what the filmmaker is trying to do, and then we offer a toolkit for how to put together a grant proposal. We then review all of their grants to make sure that they’re as strong as they can possibly be. We give them feedback on things like, “You didn’t answer this question,” or “We’re not sure what you’re trying to say here,” or “You have three typos on page 3,” or “Your individual appeal letter is three pages too long.” We try to make sure they understand how to create fundraising material that will be successful.

Is there a fee for that service that you’re talking about?

No, it’s included in the 7 percent that we charge.

Do you turn down projects? What are the best chances for a filmmaker to get a sponsorship with Fracture Atlas?

We try to be as inclusive as possible. If they’re a member of Fractured Atlas and the project is artistic and has a public benefit—meaning there will be an audience or someone who will experience the work—if they fit those three criteria, then they’ll likely be accepted for sponsorship.

How much is membership for an individual filmmaker?

We have three different levels of membership: community, professional, and organizational. The first level is the community level. That’s a free membership, but it doesn’t give you access to the fiscal sponsorship program. It gives you access to some of our other programs and services. The professional level is $10 per month, and that gives you access to all of our programs and services for one person. The organizational level is for up to three people, so if you have a collective or you just happen to be working with three people and you want access to all the services, you can do the organizational level for $20 per month.

If Fractured Atlas sponsors a filmmaker’s project, does Fractured Atlas own a piece of the film?

No, that’s part of our fiscal sponsorship agreement. It specifically states that artistic ownership resides with the project and not with Fractured Atlas.

Is that true of most fiscal sponsorship arrangements?

In the arts, that’s fairly standard. But again, it’s important to make sure that’s spelled out in your agreement with your fiscal sponsor to make sure that you maintain ownership of the work.

Does Fractured Atlas offer legal services or services for getting insurance?

We don’t have legal counsel on staff. We typically refer people to other legal resources. There are a number of independent lawyers we work with for our projects, because they’re familiar with the arts or they focus on the arts. It depends what type of artist it is, because there are some who are specific to the entertainment industry and some who are specific to the theater arts realm.

In terms of insurance, a lot of times artists are told that they need insurance, maybe for a space they’re renting, equipment they’re renting, or something they’re doing that somebody has said they need liability insurance—and they might have to provide us an insurance certificate showing that they’re insured. So at Fractured Atlas, we offer insurance policies specifically created for artists and for different disciplines.

How does it work if a filmmaker wants to get insurance through Fractured Altas?

For instance, if you’re renting equipment to produce the film and you need to get coverage for the equipment, you can apply for a quote through Fractured Atlas, and we’ll try to get you the most reasonable rate. We work with independent insurance companies that we have relationships with to negotiate the rates on behalf of the artist. A lot of times insurance agents will try to upsell you and make you spend more money, so our goal is to help you spend as little money as possible to get the insurance coverage that you need.

Since you have worked with a lot of different artists, is there a common misconception or common challenges that people tend to run into that you help them with?

The number one thing we come across is that artists are often uncomfortable asking for money. They feel it’s embarrassing, or they don’t feel empowered to do that. They think it’s begging or showing that they haven’t gained some level of success if they have to ask others for money. So we do a lot of coaching to try to empower artists to actually make that ask. Within the United States, within the arts, within the charitable sector, everybody asks and everybody gives. It’s the nature of the arts world.

So if you present yourself as someone who apologizes for asking for money, then you won’t come across as confident that you have a project worth receiving donations for. We try to help people overcome that fear and feel proud of the work they’re doing, rather than something they should apologize for asking for help with.

Do you have classes online, or how do you work with artists to get over that hurdle?

We do individual consultations. Any of our fiscally sponsored projects can access our staff for individual phone consultations. We also do online webinars once a week, so each Tuesday evening we offer webinars that have different content related to fundraising or building a budget or managing your patrons. Those are also recorded so that if people can’t participate live, they can also listen to them later.

We also do an open call every day at 3:00 pm, which anybody can call into and ask questions. You don’t have to be a member to make the phone call. You can just call in and listen. For a filmmaker who’s thinking about applying for fiscal sponsorship, this can be a good way to get started learning about the kinds of questions other artists are asking.