Source: http://www.icnl.org/research/journal/vol3iss3/cr_9.htm
Timestamp: 2019-03-22 20:10:20
Document Index: 470878631

Matched Legal Cases: ['art. 200', '§ 14', '§ 53', '§ 52', '§ 54', '§ 52']

The Status of Political Activities of Associations and Foundations
By Caroline Newman, ICNL
In France there are two categories of charitable organizations. Organizations can acquire charitable status under the administrative law or charitable status under the tax law. While both are essential to determine certain tax benefits, the administrative law grants certain benefits with regard to receipt of donations to the organizations that have acquired the administrative law charitable status. However, certain tax benefits available to not-for-profit organizations are often independent from their charitable status under both administrative law and tax law.
The term “charitable” in this synopsis refers to the common law understanding of charity, including the “fourth head,” i.e. public benefit. It should not be confused with the French literal translation of the term charitable organization: organismes à but caritatif or organismes de bienfaisance, which are organizations providing basic needs to the needy.
Tax Law: “Organizations of General Interest” are listed in art. 200 and 238bis of the Tax Code, but no jurisprudence exists in defining what is really “general interest”. The tax administration has attempted to give a more specific definition (Doc. Adm. 5 B-3311 n° 11 and following of July 20, 1994 and Doc. Adm. 4 C-712 n° 11 and following) in requiring that activities of such organizations be of not-for-profit purpose and be not addressed to a limited group of persons. Nothing in the tax law or its interpretative documents refers to any restrictions on political activities.
Administrative Law: Associations and foundations obtain recognition of “public benefit” status by the Conseil d’Etat (France’s Highest Administrative Court). In order to be recognized as a public benefit organization, an organization must:
Be declared (i.e.-be a legal entity);
Have adopted statutes (governing documents) in compliance with the model statutes provided by the Conseil d’Etat;
Carry out activities of public benefit (referred to as “activities of general interest;” such organizations are defined by the Conseil d’Etat to include those characterized by the (i) pursuit of principal activities which are not-for-profit, not for the collective interest of the members, and which do not violate freedom of conscience and of religion guaranteed by the declaration of human and citizens rights, and (ii) which have activities or membership in a geographic area larger than the local community);
Be of substantial size (having at least 200 members, having minimum financial means...); and
Prove its capacity by having been in existence for at least three years. This requirement is not necessary if the assets of the organization will guarantee its normal functioning in the three following years (this is important for the establishment of foundations -- other than corporate foundations -- which cannot be established unless they are recognized as public benefit foundations (Law n°87-571 on Development of Sponsorship (Mecenat) as amended by Law 90-559).
Nothing in the law specifically says that a public benefit organization may not engage in political activities, but a decision by the Conseil d’Etat, (sect. Interior 18-12-1979 n° 326214) clarifies that organizations with a primarily political purpose-- such as engaging primarily in political advocacy-- cannot be recognized as public benefit organizations. (Political organizations cannot be considered to be carrying out activities of general interest and therefore do not qualify for the status).
Political organizations cannot qualify for charitable status under either the tax law or the administrative law. As a result, if the political activities of a charitable organization were to increase to the extent that the administrative authorities would consider it to be in violation of its charter, the organization would risk losing its charitable status.
Finally, it should be noted that the French law provides associations financing political parties and electoral campaigns with a special privilege similar to that granted to organizations with administrative charitable status – they are permitted to receive donations made by will. (In France only Associations et Fondations Reconnues d’Utilité Publique, as well as associations for financing political parties and elections are permitted to be recipients of post mortem donations. However, they are liable for on inheritance tax on these donations. Declared associations may only receive in vivos donations, and these are exempt as long as the donations are allocated to exempt activities). Strictly political organizations (i.e., pure advocacy organizations) only benefit from some VAT exemptions and certain qualified exemptions from the commercial tax if they meet specific requirements).
By Karla Simon, ICNL Senior Legal Consultant
Like most civil law countries, Germany has two types of not-for-profit organizations that may generally engage in what the common law refers to as charity. These are the association (Verein), referred to in the Bundesgesetzbuch (BGB) 1; 21 ff, and the foundation (Stiftung), referred to in BGB 1; 80 ff. It is also possible to register not-for-profit organizations in the GmbH (limited liability) or AG (stock company) corporate forms, but there is no need to go into those details for purposes of this short synopsis.
Although the law is very complex with regard to the administration of the typical registered association or foundation in Germany (some flavor of which can be obtained from the general papers attached to this note on political activities), the specific treatment of political activities can be found only in two places in German law. There are restrictions in the civil law regarding associations and there are restrictions in the tax law regarding all corporate bodies that are involved in charitable and public benefit activities.
The civil law restrictions set out in the Association Law (Vereinsgesetz) are really quite limited and apply only to registered associations with a significant number or foreign persons as members or leaders. The Association Law contains the more elaborated set of legal provisions applicable to associations described in the BGB and registered according to the provisions thereof. In § 14 of that law, associations with a significant number of foreigners as members or leaders are forbidden to engage in political activities that might harm the internal or external security or the internal order of Germany or its states. The exact extent to which this has been applied is unclear, but it is nevertheless the rule.
The tax law restrictions are more interesting, because they apply to all corporate organizations that engage in public benefit activities. Here the situation is a bit complex when one compares it with common law jurisdictions, because the tax law (Abgabenordnung or AO) refers to “charitable” (mildtaetige), “public benefit” (gemeinnuetzige), and “religious” (kirchliche) purposes, and defines each of them with a list of permitted purposes. While the term “charitable” in AO § 53 permits a fairly limited group of purposes, e.g., organizations that care for the sick, the handicapped, the homeless, etc.,[1] the “public benefit” term used in AO § 52 more nearly encompasses the broader range of purposes referred to as the fourth head of charity in the common law system. In addition, AO § 54, which deals with religious activities, comprises many that would be encompassed within the second head of charity referred to by Pemsel’s case.
In this discussion, therefore, the “public benefit” category is treated as essentially defining the concept of charity under consideration. The major reason for this is that this category has some restrictions with respect to political activities, while the other two do not. In fact, however, there is a built-in logic to this treatment – most Germans would not think that an organization providing a home for the homeless would engage in any prohibited political activity as described below. Nor would an organization that trains clergy. Thus, providing the limits on political activities ONLY for the broader “public benefit” class (akin to the common law fourth head) makes a lot of sense.
The restrictions on political activities of tax exempt “public benefit” organizations are found in the regulations interpreting the AO § 52 (Anwendungserlass zur Abgabenordnung -- AEAO 800). These regulations state quite clearly that political purposes “are fundamentally not” public benefit purposes. On the other hand, “political” is fairly narrowly defined by the regulations. Although it specifically includes trying to influence public opinion and supporting political parties, the regulations go on to say that a certain amount of “influencing public opinion” is permissible for “public benefit” organizations. In fact, it is permissible so long as the accomplishment of a public benefit purpose is linked with setting a political goal, and the actual attempts to influence the political parties and the state are not foremost in what the organization does. The regulations go on to cite a specific case, which held that an organization could take a specific political position, consistent with its public benefit purposes, so long as that was not its primary activity. In contrast, an organization that has the political goal as its only or its primary purpose would fail as a public benefit organization.
The regulations also cite case authority making it clear that public benefit organizations must not engage in illegal activities nor engage in certain types of passive resistance activities against the orders of the police. There is, however, no statement about electioneering activities, per se, although is seems probable that such activities would be considered to be within the general rule regarding activities that “influence public opinion.”
The rules are thus quite unrestrictive and would seem to permit considerable purpose-related advocacy and lobbying. One other interesting thing should be noted – Although German charities are not permitted to support political parties, political parties are permitted to support charities. In fact, each political party has a charitable foundation, which does lots of good works, both in Germany and abroad.
[1] These do receive greater tax benefits, e.g., a higher limit on deductible donations.