A pass-through donation is a contribution made to one organization with the intent (or explicit agreement) that the money will be forwarded to another recipient. The term covers several different arrangements, from legitimate fiscal sponsorship to potentially problematic donor-directed giving. Here's how each version works and what the tax implications are.
The most structured form of pass-through donation is fiscal sponsorship. A project or initiative that isn't itself a registered 501(c)(3) partners with an established nonprofit (the fiscal sponsor) to receive tax-deductible donations. Donors write checks to the fiscal sponsor; the sponsor passes the money through to the project after taking an administrative fee (typically 5–10%).
This is common for new nonprofits that haven't yet received their 501(c)(3) determination, documentary film projects, community initiatives, and other charitable work that needs to move faster than the IRS application process allows. Well-known fiscal sponsors include Fractured Atlas (arts projects), Community Initiatives, and the Foundation for Louisiana.
In legitimate fiscal sponsorship, the sponsoring organization retains legal control over the funds — meaning the project can't simply demand the money back if the relationship ends, and the sponsor is responsible for ensuring the funds are used for charitable purposes. This is what makes the donor's deduction valid.
Donor-directed giving is when a donor gives to a public charity (like a community foundation or donor-advised fund) and recommends that the money go to a specific recipient. The key word is "recommends" — legally, the organization must exercise independent judgment and can decline the recommendation.
Donor-advised funds (Schwab Charitable, Fidelity Charitable, Vanguard Charitable) work this way. You contribute to the fund (and get the deduction immediately), then recommend grants over time. The fund can theoretically decline recommendations, though in practice they rarely do for grants to legitimate registered nonprofits.
Fiscal sponsorship and fiscal agency are sometimes confused but work differently. A fiscal sponsor takes legal and fiduciary responsibility for the project. A fiscal agent acts more like an administrative pass-through, writing checks on behalf of the project but without the same level of oversight. True fiscal sponsorship is the more protective and tax-defensible arrangement.
If you want to give to organizations that aren't US registered nonprofits (international charities, individuals in need, foreign organizations), a donor-advised fund can sometimes facilitate this — but only if the DAF exercises proper due diligence (equivalency determination for foreign organizations). You can't simply use a DAF to pass money to anyone you want; the charitable purpose must be genuine.
For pass-through donations to be deductible, the donor must give to a qualified 501(c)(3) and the organization must exercise genuine discretion over how the funds are used. A donation given with the specific condition that it go to a named individual is generally not deductible, even if routed through a nonprofit. The "conduit" rule applies: if the nonprofit is just a conduit with no real discretion, the deduction may be invalid.
Last updated May 2026. IRS guidance from irs.gov/charities-non-profits. DAF information from schwabcharitable.org, fidelitycharitable.org. Errors: [email protected]
The most common and legitimate form of pass-through donation is fiscal sponsorship. In a fiscal sponsorship arrangement, an established 501(c)(3) nonprofit (the fiscal sponsor) agrees to receive tax-deductible donations on behalf of a project or organization that doesn't have its own nonprofit status yet. The fiscal sponsor is legally and financially responsible for the funds, maintains oversight of how they're used, and takes a fee (typically 5–15%) for administrative services.
This arrangement is widely used and legitimate. Documentary filmmakers, community organizers, artists, researchers, and new charitable projects often use fiscal sponsors to accept tax-deductible donations before they're large enough to warrant forming their own nonprofit. Well-known fiscal sponsors include Fractured Atlas (arts), Film Independent (film), Community Initiatives (community projects), and the Alliance for Justice's Bolder Advocacy program.
When you donate to a fiscally sponsored project, your donation goes to the fiscal sponsor — the 501(c)(3) — not directly to the project. The fiscal sponsor issues your tax receipt. You are making a legally deductible donation to the sponsor, which has agreed to use the funds for the sponsored project. The key requirement: the sponsor must maintain actual discretion and control over how the funds are used. If funds automatically flow through with no oversight, the arrangement may not qualify for tax-deductible treatment.
Not all "pass-through" arrangements are legitimate. Warning signs:
Giving circles are groups of donors who pool contributions and collectively decide how to distribute them. The circle may operate through an existing 501(c)(3) (like a community foundation) that handles the administrative side. Donors contribute to the circle, get the tax deduction, and then participate in grant decisions. This is a legitimate and increasingly popular way to increase the impact of smaller donations. Giving circles range from informal neighborhood groups to large organized networks with professional staffing.
Donor advised funds (DAFs) are a structured, IRS-approved form of pass-through giving. You contribute to a DAF provider (Fidelity Charitable, Schwab Charitable, community foundations), take the deduction immediately, and then recommend grants to specific charities over time. The DAF provider maintains legal control and discretion, which is why the deduction is immediate. This is one of the most tax-efficient giving vehicles available and is explicitly designed for the "receive now, distribute later" structure.