Proposals by the “New Public Commons” Roundtable and Government Actions toward Their Institutionalization
June 4, 2010

Proposal

Government Action

1. Developing systems to support infrastructure for “theNew Public Commons”(1) Developing donation tax and other systems
・Reforming the donation tax system
・Introducing tax deductions

The prime minister’s instructions stated: “Of donations, 50% (up to 25% of the income tax amount)should be deducted from tax. Similar tax deductions to certified NPOs should be introduced forincorporated associations, foundations, school corporations, social welfare corporations and the like.
Income tax deductions should be introduced in January 2011.” Under the instructions, the Tax
Commission will design specific systems in a bid to realize the following measures under a FY 2011 tax
reform in line with an interim report by a project team on taxation for public interest activities.

・ Provisional certification of NPOs and revision of
PST (public support test) standards, raising the 1. Introduction of the income tax deduction system- A new tax deduction system will be introduced to promote grass-roots donations. Taxpayers will beceiling on deemed donations
allowed to choose the new tax deduction or deductions from income. Since contributions emerge fromthe spirit of charity, some percentage of donations may be deducted from income tax (with a percentageof the income tax amount adopted as a tax deduction ceiling).
- The government will consider whether to introduce tax deductions for donations to school and social
welfare corporations as well as certified NPOs as undertaker of “the New Public Commons,” based onthese corporations’ relations with citizens and the transparency of their management.
2. Revision of NPO certification standards (including PST standards)(1) Revision of PST (public support test) standards- In order to allow NPOs with high business income to clear PST standards, a concrete number of people
making donations above a certain level will be included into the standards.
- PST standards and the like may not be required for NPOs that are designated by local governments
based on relevant ordinances as subject to deductions of donations from the individual inhabitant tax.

(Note) This schedule shows the topics proposed and discussed at the1 “New Public Commons” Roundtable, and the government actions atpresent.

(2) Introduction of so-called “provisional certification” system- In order to support NPO start-ups, a “provisional certification” system will be introduced to allow
NPOs to become subject to the donation tax break even without clearing PST.
- In order to prevent the system from being abused, the government will consider some measures
including one to bar NPOs from filing “provisional certification” applications for a certain period oftime if they fail to receive “final certification” after getting “provisional certification.”(3) Shifting to ex post facto check system- In an effort to allow NPOs to be certified more easily for tax breaks, the government will consider ex
post facto corrections to maintain the quality of NPOs and secure citizens’ confidence in them even if
the certification is cancelled.
- In considering the National Tax Agency’s NPO certification procedures, the central government will
examine a mechanism that local governments which authorizes the establishments of Specified NPOs
grant certification, based on the fact that local governments have close contacts with NPOs and cangrasp their activities accurately through discussions with local governments.
- Certified NPOs are allowed to book up to 20% of profit-making business income as loss if they spendmoney for non-profit-making purposes. The government will consider raising this percentage while
taking into balance with social welfare corporations and the like.

3. Supporting NPOs engaged in regional activities (individual inhabitant tax)
(1) Expanding the range of NPOs subject to donation tax deductions- A system will be introduced to allow local governments to designate NPOs under relevant ordinances- Allowing local governments to designate NPOs
as subject to taxpayers' donation deductions from the individual inhabitant tax in addition to theirsubject to donation tax deductions
deductions from the income tax.

2

(2) Local governments' support for NPOs (utilizing “hometown contributions”)- Treatment of donation subject to deductions from the individual inhabitant tax (as well as the income tax)
will be made clear to encourage taxpayers to make donations to NPOs.

- Lowering the minimum donation for the applicationof the donation deduction from the individual
inhabitant tax-Considering tax measures to enable trust-using
support for the New Public Commons (trust andpublic trust)- NPOs and the like should disclose information inline with accounting standards and make business
reports for contributors to achieve accountability
commensurate with their growing responsibilities.
(2) Reforming systems to make it easier for nonprofit
corporations to operate in the market- Considering a social service corporation system- Faster and more transparent processes to certify public
interests for public-interest corporations and the like

- Establishing a worker cooperative system(3) Reforming the systems relating to microfinanceincluding NPO banks to support NPOs
- Easing the Moneylending Control Act regulations on
so-called NPO banks(3) Others- The minimum donation for the application of the donation deduction from the individual inhabitant tax
will be lowered from 5,000 yen at present to 2,000 yen.
- If the public trust system is reviewed comprehensively to promote the use of trust for participation in
public-interest activities, relevant tax measures will be considered.

Based on the study of the relevant systems in foreign countries, the government will review and consider
systems to support social enterprises and make it easier for nonprofit corporations to operate, while taking
into account the consistency of overall systems.
- The government will improve the certification procedures for public-interest corporations into flexible
ones equipped with an appropriate ex post facto check system, in a bid to shorten the average period oftime for such processes to four months for applications to be filed in and after FY 2010 and finish allcertification procedures during the transition period. The government will also promote information
about the certification of public interests by implementing such measures as the dispatch of persons with
relevant knowledge and experience as lecturers to consultative meetings for corporations and briefings on
various types of corporations, and the enrichment of question-and-answer brochures on typical issues
regarding the certification of public interests.
- Lawmaker-initiated legislation is being considered for worker cooperatives.

- The government will compile the regulatory reform package including measures to expand the financial
3

- Easing prefecture-based regulations and net asset
requirements for regional consumers’ cooperative
societies providing loans to heavily indebted people

2. Creation of funds and other measures to promote
investment and support for social capital development- Expanding the small-scale lending system (including
bridge loans) to NPOs and the like
- Promoting cooperation between financial institutions(including labor banks, shinkin bank credit associations
and NPO banks) and organizations that assess NPOs
when loans are provided to NPOs.
- Promoting efforts to connect loans and citizens’
donations to social contribution projects to bring about
activities for the New Public Commons

scheme for supporting “the New Public Commons” which will be reported to the Government
Revitalization Unit by June. The government considers taking measures for easing Moneylending
Control Act regulations on so-called NPO banks concurrently with the revised Moneylending Control
Act takes effect on June 18. The government relaxed prefecture-based regulations for certain regional
consumers’ cooperative societies providing loans to heavily indebted people (on May 21).

- The government will consider measures (including cooperation for promoting donation projects,
facilitation of financing, development of accounting infrastructure, evaluation of NPOs and the like) tointegrally support NPOs and other undertakers of the New Public Commons in financial and operational
areas in cooperation with social efforts of enterprises, by the end of this year to consider.
- The government will launch measures to promote financial support for social business entities. In a bid
to support social contribution-oriented projects, the government will diffuse a loan system created at theJapan Finance Corporation in FY 2009.
- The government will promote activities of Regional SB/CB (social business and community business)
Promotion Council (network of regional social businesses and supporters), including matching services
for human resources and donations for NPOs and social enterprises.

- Promoting and supporting advanced efforts to enhancesocial capital of regional communities- The government will consider the promotion of regional investment contributing to regional community
development through funds and other entities utilizing regional financing schemes within this year.
- In order to diversify players engaging in regional community building, the government will launch
support in FY 2011 for voluntary regional community building efforts and for the development ofrelevant intermediate support organizations.
- From FY 2010, the government will enrich investment in culture leading to social capital formation andsupport municipal strategies taking advantage of “cultural capacity” (creativity and attractiveness ofcultural arts).
- From FY 2010, the government will launch efforts to expand theaters, music halls and other regional
cultural art bases to promote the creation and presentation of performing arts and allow residents to enjoy
these arts.

- Considering fixed asset tax cuts or breaks and easier- The Tax Commission will consider the necessity and advisability of fixed asset tax cuts or breaks for4floor-space ratio regulations for museums, halls andother public cultural facilities owned by NPOs andother nonprofit groups.

museums, halls and other public cultural facilities owned by NPOs and other nonprofit groups.

3. Expanding cultivation and education of humanresources to undertake social activities- Enterprises, intermediary NPOs, universities,
administrative agencies and other entities should
cooperate in developing human resources for social
activities.

- Developing social entrepreneurs and social ventures- The government will help utilize and reeducate enterprise employees and other adults and develop new
human resources in a bid to promote their participation in accessible social activities including education,
childcare services, town development, nursing care and welfare. The government will also support
cultivating human resources to become leaders of these activities.
- The government will promote and support regional programs for people in various generations to
support school education, PTA efforts to promote school, home and regional education, and efforts fordeveloping public schools into bases of invigorating regional communities.
- The government will build “intellectual platforms” through cooperation among local enterprises,industrial organizations and universities and promote their cooperation.
- The government will promote network formation and cooperation among NPOs and other entities basedon community centers, libraries and other social education facilities to enhance functions responding toregional challenges. The government will also promote local residents’ voluntary efforts to promote sportand cultural activities based on regional comprehensive sports clubs.
- The government will cooperate with NPOs and NGOs in promoting environmental education and ESD(education for sustainable development).
- As part of the Emergency Economic Countermeasures for Future Growth and Security, the government
implements “a regional community employment creation program” to support the creation of social
entrepreneurs and human resources for social enterprises. By the end of FY 2011, 12 selected entities will
launch operations under the program.
- The government will implement and expand advanced efforts to develop regional intermediate support
organizations, transfer social businesses’ know-how to other regions, and explore and train young people
for regional development.
-Through demonstration projects, the government will help develop environmental NPOs intobusiness-oriented environmental NPOs or social enterprises.
5

4. Reforming relationships with citizen and othersectors involved in operations of central and local
governments- Creating new mechanisms for contracts proposed by
the private sector and for citizen-participating public
works projects- Through its program-by-program screening process,the government should consider not only theelimination or reduction of programs but also thetransfer of some programs from independentadministrative corporations or public-interest
corporations to NPOs or the like.

The government will try to make the field of public services, which has been monopolized byadministrative agencies, open to enterprises, NPOs, and other non-government parties, placing importanceon the citizens' active involvement in public services. To this end, the government will review the projects
currently under the direct control of administrative agencies, and place emphasis on projects which accept
enterprises, NPOs and other non-government parties as participants as well as private finance initiatives(PFIs) and initiatives aimed at promoting public service reforms.
- The government will proceed with preparations in the current fiscal year for accelerating the introductionof PPP (public-private partnership) schemes for town renewal, maintenance and management projects.
-Through scrutinizing processes for independent administrative corporations and public-interest
corporations by the Working Groups of the Government Revitalization Unit, it will be considered whatorganizations would be appropriate for operating specific programs. The government then will review
systems and regulations for these corporations.

- A comprehensive agreement (a Japanese-version of“Compact”) on cooperation between the citizen andgovernment sectors- Providing high-quality service through a “fullrecovery” of costs (both direct and indirect costs)- The government will decide on a basic outline for public service reform to promote public service that
could utilize private sector's originality and ingenuity. The government will establish a discussion bodyunder the prime minister consisting of various actors of the "New Public Commons" as early as thissummer to consider a guideline on comprehensive cooperation in the public services (a Japanese-version
of “Compact”).
- A Regional SB/CB (social business and community business) Promotion Council (networks of regionalsocial businesses and supporters) will promote cooperation between citizen sector and local
governments.
-The government will consider measures to integrally support NPOs and other undertakers of the New
Public Commons in financial and operational areas in cooperation with social efforts of enterprises, by
the end of this year to consider.

- Introducing payments based on approximate
estimates and implementing bridge loans for services
commissioned under government contracts
5. Other measures to promote “the New PublicCommons”(1) Creating “regional markets”- Local governments should use some part of childallowances for issuing vouchers that will be utilized
for expanding the scope of NPO operations to form

- At panels including a conference on a new system for children and child rearing that considers building acomprehensive, integrated system for society to support children and child rearing, the government willconsider specific systems, including a mechanism for municipalities to make independent decisions to
combine cash and noncash benefits in providing child allowances, and relevant operational problems.
6regional communities with high social capital.

(2) Social innovation promotion mechanisms to create
communities with high social capital(3) Promoting “the New Public Commons” throughmarkets- Promote social responsibility investment by public
pension funds through a disclose system-Taking advantage of the Internet for microfinancing

The government will discuss child allowances in and after FY 2011 and give a conclusion through abudgeting process.
- A consociation comprised of representatives from the government, NPOs and other sectors will be set up
so as to propose social innovation models (for regulatory reform, public support, etc.) within FY2010
and consider a scheme in which private entities and local governments apply for them.
- The government will consider making a decision in FY 2011 on special zones where regulatory reform,
public support and other measures will be integrally implemented to promote social innovation. The
government will receive proposals on these measures from a wide range of people and consider amechanism for relevant ministries, local governments, NPOs and the like to discuss these measures.
- In order to promote the utilization of information and communications technology in areas wherewide-area cooperation is important, the government will work out technological problems and standard
specifications for development and utilization of human resources by FY 2011.

- A panel on the desirable management of the Government Pension Investment Fund is considering thedesirable management of employees and national pension reserves, including social responsibility
investment, in order to compile an interim report by the middle of this year and a final report by the endof the year. Pension reserves are “deposits” by people and should be managed safely and surely.

- The government will help enterprises position “support for developing the next generation” as one of the
6. Public characteristics of private enterprises
pillars for their corporate social responsibility and step up such support including donations of some part- Developing an environment for supporting businessofsales or support activities for school education, through measures to upgrade social assessments ofmanagement paying attention to public and social
such corporate support.
characteristics of private enterprises- The government will consider measures to encourage private enterprises to promote social marketing thatwould contribute to their own growth.
- In FY 2010, the government will compile model cases and uses of specific systems as a guideline for local
governments and private entities to cooperate in considering shopping support and other efforts.
- Expanding the social business network to foster entities - Within FY 2010, the government will mobilize a wide range of relevant organizations to launch a social
using business methods for resolving social problems
business promotion network to promote various social activities.
as an important undertaking of “the New Public - The government will compile, disseminate and promote small and medium-sized enterprise support7

Commons”

measures that social businesses by NPOs and other nonprofit entities could be benefited. The
government will also promote cooperation with regional chambers of commerce and industry and thelike to promote social businesses.

7. Future actions- A panel should be set up to follow up on progress of - The government will establish a discussion body under the prime minister consisting of various actors ofthe "New Public Commons" as early as this summer to follow up on progress of government actions andgovernment actions and continue discussions on themake proposals based on the follow-up by the end of December, and also discuss desirable public
desirable relationships between citizens, enterprises andcontracts
or agreements between the government and the citizen sector and the like.
the government sector in undertaking public service
toward working out and fixing rules and roles for “theNew Public Commons.”

8