Can You Follow Your Donation? A Case Study in Why Congress Is Considering Reforms to Charity Tax Filings
Sep 22, 2026
Following the money is one of the most basic principles of charity accountability. But current IRS reporting rules do not always allow donors, journalists, regulators, and watchdog organizations to see where charitable dollars ultimately go.
Fiscal sponsorships have become a particularly significant gap in that system. These arrangements can serve legitimate charitable purposes, allowing projects without their own IRS-recognized tax-exempt status to operate under the umbrella of an established charity. But they can also make millions of dollars in charitable activity virtually disappear from public view.
Congress is now considering legislation intended to address this problem. The Fiscal Sponsorship Transparency Act of 2026, H.R. 9721, would require additional Form 990 disclosures about certain fiscally sponsored projects, including their identities, the amount of charitable resources made available to them, their activities, and information about the people responsible for the arrangements.
CharityWatch supports greater public disclosure of fiscal sponsorship arrangements. A charitable project should not be able to raise and spend millions of dollars while avoiding much of the public financial reporting expected of a similarly sized independent charity simply because it operates under another organization’s tax exemption.
Recent reporting involving a $54 million private foundation illustrates why the ability to follow charitable dollars through multiple organizations matters.
A $54 Million Foundation Falls Out of Compliance
A recent Fox News Digital investigation examined Arc of Justice, a California private foundation formerly known as The Benjamin Fund and associated with CodePink co-founder Medea Benjamin.
According to Fox News, California regulators revoked Arc of Justice’s charitable registration in January 2025 after the foundation failed to submit required annual filings with the state for 2020 through 2024. The foundation reportedly had already been suspended for more than a year and had failed to respond to delinquency and suspension notices.
This was not a charity struggling with a lack of financial resources. Federal tax returns provided to Fox News by an attorney for Arc of Justice reported approximately $54.6 million in assets at the end of 2024.
CharityWatch CEO and Executive Director Laurie Styron commented on the foundation’s compliance failures for the Fox News investigation.
“A foundation with tens of millions of dollars in charitable assets certainly has the resources to comply with basic reporting requirements,” Styron said.
California regulators also required Arc of Justice to provide an accounting of its charitable assets and prohibited the foundation from distributing or spending those assets without the California Attorney General’s prior written approval while its registration remained revoked.
An attorney representing Arc of Justice told Fox News that the foundation has submitted filings seeking reinstatement. With respect to filing status, the California Attorney General’s searchable charities database reports Arc of Justice as being on “probation” as of September 9th, 2026.
Same Name, New Nonprofit
The situation became more complicated in May 2026 when individuals associated with the California foundation incorporated a separate Florida nonprofit using the Arc of Justice name.
An attorney for Arc of Justice told Fox News that the Florida organization had been created as a “placeholder” while the foundation considered relocating from California, but that the contemplated move never occurred. He said the California foundation was never dissolved, no assets were transferred to the Florida nonprofit, and the Florida organization has conducted no business.
Financial documentation subsequently provided to Fox News reportedly confirmed that the original California foundation continues to hold its charitable assets.
Creating a nonprofit in another state is not, by itself, evidence of wrongdoing. Nor do the available records establish that Arc of Justice’s assets were improperly transferred or misappropriated.
But the creation of a new organization does not erase the reporting responsibilities of the existing one.
Styron told Fox News that Arc of Justice’s explanation for creating the Florida nonprofit did not absolve the California foundation’s board of its responsibility to file the active organization’s required forms on time.
The distinction is an important one for charity accountability. Charitable assets do not belong to a foundation’s founders, officers, or directors. Boards remain responsible for safeguarding those resources and complying with the reporting and regulatory obligations attached to them.
Questions About Arc of Justice’s Federal Filings
Questions also arose concerning Arc of Justice’s federal Forms 990-PF.
Private foundations generally must file Form 990-PF annually with the IRS. These public returns provide important information about a foundation’s assets, investments, grants, officers, compensation, and other financial activities.
Fox News reported that Arc of Justice’s Forms 990-PF for 2023 and 2024 were not publicly available through the IRS database when the news organization searched for them. Arc of Justice’s attorney subsequently provided Fox News with copies of both returns and said the foundation’s accountant maintained that they had been filed with the IRS.
The absence of a return from a government database does not necessarily establish that a charity failed to file it. IRS and state databases can lag significantly behind actual submissions. Styron noted, however, that delays lasting several years would be unusual and that determining when the returns were actually signed and submitted was necessary before reaching conclusions about Arc of Justice’s federal compliance.
“It would be tough to say more without knowing when forms were signed and filed,” Styron told Fox News.
That uncertainty itself demonstrates why timely public disclosure matters. A tax return that exists but cannot be located by donors, journalists, regulators, or watchdog organizations cannot provide meaningful public accountability until it becomes available.
Following the Money Gets More Difficult
Arc of Justice’s grantmaking provides another illustration of the limitations of current nonprofit financial disclosure.
According to federal tax filings reviewed by Fox News, Arc of Justice has distributed millions of dollars over the years to organizations including CodePink, Global Exchange, the National Iranian American Council, and Alliance for Global Justice.
Alliance for Global Justice, or AFGJ, is particularly relevant to the current debate over fiscal sponsorship transparency.
Arc of Justice and its predecessor provided approximately $114,000 to AFGJ over the years, according to a subsequent Fox News review of the foundation’s complete IRS filing history. Arc of Justice told Fox News that its final grant to AFGJ was $10,000 in 2022 and that it was not aware of the specific organizations fiscally sponsored by AFGJ when it made its grants.
That distinction matters. Arc of Justice, as a private foundation, would not itself be subject to the bill’s new fiscal sponsorship reporting requirements. Rather, its grantmaking illustrates how charitable dollars can move from a private foundation to a public charity and then into fiscally sponsored projects whose individual financial activities may be difficult for donors and the public to trace.
But that is precisely where the transparency problem becomes apparent.
A private foundation can disclose on its Form 990-PF that it made a grant to an IRS-recognized public charity. A donor, journalist, or watchdog organization following that money can identify the recipient. But if the recipient then administers dozens or hundreds of fiscally sponsored projects whose finances are combined within its own reporting, the public trail can effectively end there.
The original grant remains visible. What happens farther downstream may not.
When a Sponsored Project Disappears Inside Its Sponsor
Sponsored projects frequently have their own names, websites, fundraising appeals, employees, and public identities. To a donor, they can look indistinguishable from independent charities.
But they generally do not file their own Forms 990.
Instead, their financial activities may be combined with those of the fiscal sponsor and its other sponsored projects. A project can therefore raise and spend substantial charitable resources while donors remain unable to determine how much it raised, how much it spent, who received compensation, what portion went toward programs or fundraising, or whether the money was ultimately used as represented.
If the same project operated as an independent public charity of comparable size, much of this information ordinarily would be publicly reported.
CharityWatch believes this is a significant gap in nonprofit accountability. Fiscal sponsorship should not function as a transparency loophole.
Congress Cites Alliance for Global Justice
Congress itself has pointed to Alliance for Global Justice in explaining why it believes additional disclosure is necessary.
AFGJ previously served as the fiscal sponsor of Samidoun, a pro-Palestinian organization. In October 2024, the U.S. Department of the Treasury designated Samidoun, describing it as a “sham charity” that served as an international fundraiser for the Popular Front for the Liberation of Palestine, which the United States has designated as a terrorist organization.
The House Ways and Means Committee subsequently cited the AFGJ-Samidoun relationship when advancing the Fiscal Sponsorship Transparency Act.
The problem was not simply that a controversial organization had a fiscal sponsor. The larger accountability problem was that existing Form 990 disclosure requirements did not provide the public with the same visibility into the sponsored project’s finances and activities that generally would have existed had the project operated as its own tax-exempt public charity.
H.R. 9721 seeks to close that gap by requiring fiscal sponsors to disclose substantially more information about certain sponsored projects.
Separating the Politics From the Accountability Issue
The political context surrounding this legislation should not be ignored. Much of the congressional scrutiny that preceded the Fiscal Sponsorship Transparency Act has focused on organizations associated with left-leaning causes, and the House Ways and Means Committee’s own statements about its investigation frequently employ explicitly political language. Critics may therefore question whether some of the scrutiny or legislative effort is politically motivated.
But the motivations of lawmakers and the merits of a transparency requirement are separate questions. A disclosure rule that serves the public interest should be applied consistently, regardless of whether a fiscally sponsored project advances progressive, conservative, religious, environmental, humanitarian, or any other lawful cause.
CharityWatch’s concern is not which causes benefit from fiscal sponsorship. It is whether charitable dollars can be followed and whether organizations receiving the benefits of tax-exempt status are sufficiently accountable for how those resources are used. Those are legitimate accountability questions regardless of the politics of the organizations involved.
Fiscal Sponsors Must Do More Than Pass Along Money
Greater disclosure is only part of the issue.
A legitimate fiscal sponsor is not supposed to function merely as a charitable bank account or payment processor. The sponsor receives tax-deductible charitable contributions and therefore must exercise discretion and control over those resources and ensure that they are used for appropriate charitable purposes.
CharityWatch believes transparency requirements should reinforce that responsibility.
If an organization is effectively accepting charitable contributions and automatically passing those dollars to another entity without meaningful oversight, the public deserves to know. And if a sponsored project is raising and spending millions of charitable dollars, donors should not have less information about its finances simply because the project operates within a fiscal sponsorship arrangement.
Responsible fiscal sponsors should already maintain much of the information contemplated by the proposed legislation in order to administer project funds and fulfill their existing oversight responsibilities.
Some nonprofit organizations have raised concerns about particular provisions of H.R. 9721, including whether its penalties could create unintended burdens for responsible fiscal sponsors. Congress should consider legitimate concerns as it refines the legislation.
But those concerns do not eliminate the underlying accountability gap.
Transparency Should Allow Donors to Follow the Money
Arc of Justice did not create the fiscal sponsorship transparency problem, and its grants to Alliance for Global Justice do not establish that Arc of Justice knew about or supported every project AFGJ sponsored.
Its story instead demonstrates how quickly the public financial trail can become difficult to follow.
At the first level, regulators and the public encountered years of missing state filings from a private foundation controlling tens of millions of charitable dollars.
At the next level, the foundation’s grantmaking included funding to another tax-exempt organization.
And beyond that organization were fiscally sponsored projects whose individual finances and activities were not necessarily visible in public IRS reporting.
Each additional layer makes meaningful oversight more difficult.
CharityWatch has long believed that donors should be able to follow charitable dollars to understand how they are ultimately used. Public disclosure serves little purpose if substantial charitable activity disappears from view as money moves from one tax-exempt organization to another.
The Fiscal Sponsorship Transparency Act will not solve every weakness in nonprofit financial reporting. But requiring greater disclosure of significant fiscal sponsorship arrangements would close an important gap in the current system and give donors, journalists, regulators, and watchdog organizations a clearer view of where charitable dollars ultimately go.
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