Nonprofit Law Prof Blog

Kenya—Harmonized Draft Constitution Recognizes Broad Freedom of Association Rights

A long-awaited draft constitution has been released in Kenya, the first step in a full review of a document which many Kenyans say gives the president nearly unchecked power over state affairs.  Kenyans have been calling for a new constitution since the early 1990s to replace one dating back to the eve of independence from Britain in 1963, which critics say encourages corruption and tribalism because of the president's immense powers.  The public will have 30 days to scrutinize the draft and forward proposal and amendments to their respective Members of Parliament.  A referendum on the Constitution is expected to be held in 2010 to determine whether the new constitution is acceptable.  Article 53, which provides for freedom of association, deals not only with the basic requirements of freedom of associations for individuals, but also addresses the need to provide ease of registration for civil society organizations.  The text is available in the ICCSL Documentation Center.

 

kws

ICCSL Publishes December Newsletter

ICCSL has published the December IJCSL Newsletter, which is available at http://www.iccsl.org/pubs/09-12_IJCSL-N.pdf.  You can subscribe to the Newsletter to receive all the latest updates on laws affecting civil society around the world.

kws

New Director for Office of the Third Sector in U.K.

The Office of the Third Sector announced that Rolande Anderson has been appointed as the new Director General for the Office of the Third Sector (OTS).  She joins the OTS from the Office for National Statistics (ONS) where she was Director General for Transformation and Corporate Services.  Before joining ONS, Rolande was Regional Director of the Government Office for the South East, England’s largest region.  Rolande has two family members with hearing disabilities and is a member of RNID.  Throughout her career she has championed diversity, and she has mentored on various schemes for BME and disabled civil servants.

 

kws

Cass Business School Study Recommends 5% Payout for UK Foundations

The Centre for Charitable Giving and Philanthropy at City University London's Cass Business School recently issued a new report on grant-making foundations in the United Kingdom.  While applauding their role in supporting philanthropy, the report's authors make several recommendations for increasing that support, including considering a 5 percent payout requirement based on the existing United States and Canadian payout requirements for such entities.  For summary of the report, see the School's press release.

LHM

China -- Tax Rules for NPOs and Donors Announced in Circulars

The Ministry of Finance (MoF) and the State Administration of Taxation (SAT) issued two circulars in November to clarify the tax treatment of CSOs/NPOs and to provide rules for donors to them.  Both circulars are retroactive to January 1, 2008, the effective date of China’s new Enterprise Income Tax Law.  With respect to the former, Circular [Caishui] 122 says that exempt items include gifts, state subsidies, membership fees, interest on bank accounts, and other income as determined by the MoF and the SAT.  The second Circular [Caishui] 123 describes the procedures whereby CSOs/NPOs seeking to qualify themselves as appropriate donees of tax deductible contributions can do so.  It also describes attributes of such NPOs, including governance and conflict of interest rules.  This is a reissuance of a Circular first issued in 2007, and it is described in detail in Karla W. Simon, Regulation of Civil Society Organizations in China: Necessary Changes after the Olympic Games and the Sichuan Earthquake, which was published 32 Fordham International Law Journal 943 (2009).  The translated texts of the Circulars will be available on the ICCSL website in the Documentation Center.

 

kws

Draft co-operation agreement between the Conference of INGOs and the North-South Centre

The Executive Council of the European Centre for Global Interdependence and Solidarity [North-South Centre] recently approved a draft cooperation agreement with the Conference of INGOs.  Both groups are part of the Council of Europe.  The agreement reinforces the existing close cooperation between theConference of INGOs [through its Transversal Group on Europe and Global Challenges] and the North-South Centre.

The general aim of the agreement is the cooperation between the two bodies within the Council of Europe.  Additionally, the agreement speaks to civil society cooperation within the framework of the North-South Centre and information sharing between the two groups.  The agreement will be signed January 27, 2010.

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Canada – Scholars Propose New Charities Council to Replace CRA

The C.D. Howe Institute recently released a new paper by Adam Aptowitzer, Bringing the Provinces Back In: Creating a Federated Canadian Charities Council.  The paper proposes replacing the Canadian Revenue Agency [CRA] with a “Charities Council” as the primary regulator of charitable organizations in Canada.  The proposed structure of the Charity Council borrows certain aspects of the Charity Commission of England and Wales, but the paper acknowledges the impossibility of wholesale adoption in Canada due to constitutional difficulties.

The paper offers two primary arguments against the CRA’s continued role as the national regulator of Canadian charities; one based on organizational mandate, the other based on history.  It asserts that the regulation of charities is directly at odds with the CRA’s mandate to protect the tax base because the nature of charities is to reduce the tax base through donation tax credits.  Additionally, the CRA is the current regulator as an accident of history.  The CRA’s role was a response to a failure of the provinces to provide regulation that was their Constitutional responsibility.  The result has been a rigid regulatory system that impedes the formation of new charities and that favors the principles of tax law over those of the charitable sector.

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CANADA – CRA ISSUES ADVICE ON COMMERCIAL ACTIVITIES AND PROFITS OF NON-PROFIT ORGANIZATIONS

On November 5, 2009, the Canada Revenue Agency (CRA) released a technical interpretation (which is not publicly available) clarifying its position on various issues involving non-profit organizations (NPOs) defined under paragraph 149(1)(l) of the Income Tax Act, including whether NPOs can earn a profit or engage in commercial activities.  This is discussed in a short article by Theresa L. M. Mann in the Carters.ca Charity Law Update.  On the question of whether an NPO can compete against taxable entities, CRA responded, after referring to the BBM case (BBM Canada v. Canada (Minister of National Revenue), 2008 TCC 341), that the Income Tax Act does not prohibit an NPO from engaging in certain types of activities, including commercial activities, and therefore it is permissible for NPOs to compete against taxable entities.  In relation to the question of whether an NPO can earn a profit, CRA’s view is that an NPO can earn a profit, provided that it is unanticipated and incidental to carrying out the NPO’s exclusively not-for-profit purposes. CRA is of the view that an NPO cannot intentionally earn a profit, even though the profits are used to fund the activities of the organization, because it does not matter what the profit is used for.

 

kws

 

CANADA—BILL WILL BRING CHANGES IN ONTARIO LEGISLATION AFFECTING CHARITIES

On Wednesday, October 27, 2009, the Attorney General for Ontario introduced Bill 212, the Good Government Act, 2009, (“Bill 212”) in the Ontario Legislature, which passed second reading on November 18, 2009.  Bill 212 is currently before the Standing Committee on Finance and Economic Affairs, and it is expected to return before the House by November 30, 2009.  If Bill 212 passes, it will mean significant reform to the regulation of charities in Ontario by overcoming limitations that have for decade’s plagued charities operating in Ontario.  Most of these changes are a direct result of an initiative by the Ontario Bar Association’s Charity and Not-for-profit Section in calling for reform in this area.  An article by Terrance S. Carter in the recent Charity Law Bulletin from Carters.ca reviews the many changes to be implemented by this Bill.

 

kws

Europe – The Infrastructure of Participation

The CEV [European Volunteer Centre] recently held a conference in Malmö, Sweden on “An Enabling Volunteering Infrastructure in Europe.”  The purpose of the conference was to discuss the development of a stronger volunteering infrastructure, allowing more individuals to take part in the political, social and economic environment of Europe.  The key roles of such an infrastructure are “raising public awareness about volunteering; developing volunteering opportunities and brokering between (potential) volunteers and placements; developing good practice; working on policy response and the strategic development of volunteering in our societies.”

The conference provided a number of workshops such as “Volunteering in Southern and Eastern Europe (SEE) - from underground to mainstream” and “Volunteer infrastructure in Italy: framework law on volunteering and the system of volunteer support centres (CSV).

SS

Public Benefit Assessments – The Government’s Perspective

Third Sector reports that the Charity Commission of England and Wales has given charities a five year deadline to improve performance under the Commission’s public benefit assessment structure.  The Charity Commission’s website states that “the Charities Act 2006 requires all charities to have aims which are, demonstrably, for the public benefit” and provides two core principles and a host of sub-principles that must be met in order for a charity to pass a public benefit assessment.  The overarching principles require “identifiable benefit or benefits” provided to “the public or a section of the public.”  The Commission provides greater detail of what is required in its general guidance publication.

In recent months, the Charity Commission, has called for a demonstrable commitment from certain fee-charging schools.  Two of the five schools assessed earlier this year by the Commission were found to not be providing sufficient public benefit and were given three months to respond.  The schools were then given an additional nine months to create plans to address the assessment results.

SS

Public Benefit Assessments – The Lawyers’ Perspective

The Charity Commission of England and Wales performs assessments of the public benefit provided by charitable organizations.  Where the Commission finds the benefit provided wanting it may require further action by the charity to increase or diversify the public benefits provided.  Third Sector reports that “Charities are being put off from engaging with the Charity Commission because they fear becoming embroiled in lengthy assessments of their public benefit, according to some charity lawyers.” 

Lawyers have raised a number of concerns about the assessment process.  Lawyers complain that the assessments cause charities a lot of anxiety and frustration.  The Commission has not been able to provide a definitive answer to the question of what triggers a public benefit assessment stating only that each case is taken on its merits.  Public benefit assessments have been launched against charities for a variety of activities such as incorporation, altering their objective, selling land or revising their trustee benefit provisions.  Further, lawyers claim that they do not see the assessment results as having any real consistency.  This lack of certainty regarding both the triggering and the results of assessments creates a serious hurdle for lawyers trying to counsel their charitable clients.

SS

Timor-Leste Decree Law on NPOs Posted to Web

The Decree Law for not-for-profit associations and foundations in Timor-Leste has been added to the ICCSL Documentation Center and is available at http://www.iccsl.org/pubs/Timor-Leste_Decree_Law.pdf.

kws

ASIA—REPORT RELEASED DESCRIBING PROBLEMS FACING AIDS NGOS

Asia Catalyst has released a reportdetailing restrictions on NGO registration, censorship, harassment and imprisonment of AIDS activists in Cambodia, China, Myanmar and Vietnam.  In its press release accompanying the report, Asia Catalyst said that despite pledges by world leaders and the UN to support civil society, AIDS NGOs face heavy restrictions in those countries; the report was released for World AIDS Day.  Asia Catalyst also noted that three AIDS activists – Hu Jia (China), Than Naing (Myanmar) and Wengdue (China/Tibet) -- are in prison, and called for their immediate release.

 

 

kws

 

 

 

Choice of Entity in Scotland – The SCIO

The Scottish Charitable Incorporated Organization [SCIO] is a new legal form aimed at charities with incomes between £25,000 and £1m that want to acquire a legal personality and relieve their trustees of personal liability, but do not want to become charitable companies subject to the full range of company law.  The SCIO is a product of the Charities and Trustee Investment (Scotland) Act 2005.

Third Sector reports that the Scottish government launched a consultation to determine the details of implementation and regulation regarding SCIOs.  A committee of experts is trying to determine the best possible middle ground for the creation and regulation of SCIOs.  They feel that the existing Scottish company law is too burdensome, but that unincorporated organizations must submit to some sort of heightened regulation upon becoming an SCIO in order to bolster investor confidence.

The Scottish government seeks to promote uniformity between its SCIO laws and law governing English CIOs.  However, the Scottish consultation document recognizes that “the ultimate design of each regime must be tailored to the specific context within which it will operate.”  The law governing English CIOs is undergoing revision because it is based too heavily on English company law. 

While the Scottish government is hopeful that the SCIO will provide a viable option for unincorporated organizations that do not want to become companies, experts have raised a number of concerns.  There is concern that becoming an SCIO may not be any simpler than becoming a company because at present there is no clear mechanism for converting from an unincorporated organization into an SCIO.  Further, the SCIO form is designed for charities with incomes between £25,000 and £1m, but there is no clear path to convert from an SCIO to a company once a charity outgrows the SCIO form.  Finally, there is a concern that relieving trustees from liability, one of the SCIO’s key features, may result in weak and unaccountable governance.  The consultation is scheduled to run through February 26, but the new form is not likely to be available until late 2010 or early 2011.

SS

UK – Constitution for Small Charities

Third Sector reports that the Charity Commission of England and Wales recently published a model constitution for small charities.  The Commission created the constitution as boilerplate for charities that are so small that they are not required to register with the government.  This includes charities that do not own property, employ a staff or expect their annual income to exceed £5,000.

The purpose of the model constitution is both guidance and governance.  In only 750 words the document explains membership criteria, trustees' powers and regulations governing trustee and members' meetings.  The document has the potential to standardize practices among small charities because it provides a set governance structure and framework for the concepts that it explains.  The model constitution leaves only a few details, such as the name of the charity and its purposes, to be filled in by the charity.  All other matters such as member voting regime, frequency and format of trustee meetings, and procedures for winding up the charity are predetermined.   The document provides a simple and efficient way for small charities to ensure legal compliance and to implement best practices for governance.

SS

ICNL Releases Paper about Civil Society in Mexico

ICNL announced the release of an informative study authored by a USAID-sponsored ICNL senior research fellow from Mexico, Ireri Ablanedo Terrazas. The paper was written during this past summer and provides an in-depth overview of the legal framework impacting CSOs in Mexico. To view the paper in Spanish, please click here.

kws

Russia: Incentives for Charities Promised by Medvedev

The New York Times reports that President Dmitri A. Medvedev has called for tax incentives and other measures to assist Russia’s beleaguered nonprofit groups, which have come under government pressure in recent years.  Mr. Medvedev, promoting policies that he hopes will modernize the country, said in a meeting with human rights advocates that new laws would not alleviate all the problems the groups faced, but that they would certainly help.  “Our main goal is the support of the authority of nonprofit groups in society, and the attraction to this sector of more talented people and philanthropic resources,” Mr. Medvedev said.  “We need to stimulate philanthropy and create a stimulus or a motivation for volunteers who toil for such organizations.”  The government has sought in recent years to establish more control over nonprofit groups, especially those that receive foreign assistance. Mr. Medvedev’s mentor, Prime Minister Vladimir V. Putin, the former president, has at times portrayed the groups as little more than tools that the West uses to meddle in Russia’s affairs.  Under Mr. Putin, the groups were subjected to new regulations, as well as increased scrutiny that they have sometimes characterized as harassment.  Charities and other nonprofit groups have also not prospered in Russia because there is less of a tradition of giving here.  In Soviet times, the Communist Party was supposed to take care of societal needs, so a philanthropic sector barely existed.  And current tax regulations do not encourage charitable donations or charitable activity, as they do in many countries, including the United States.

 

kws

Council of Europe’s Code for Civil Participation

The Ministers’ Deputies of the Council of Europe recently adopted a Code of Good Practice for Civil Participation in the Decision-Making Process.  The Conference of INGOs [International Non-Governmental Organizations] of the Council of Europe created the Code pursuant to a request by participants of the June 2007 Council of Europe Forum for the Future of Democracy held in Sweden.

As stated in its introduction, the “Code offers a repertoire of good practices. It does not have a mandatory character, does not prescribe rules, or require enforcement mechanisms.”  The purpose of the Code is to provide guidelines for civil participation in decision making processes at the European level.  The Code targets public authorities across all levels of public administration.

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Scottish Government Issues Statement on Interaction with the Third Sector

Vertical and cross sector cooperation are constant themes in the promotion of non-profit initiatives.  To that end, national and local Scottish authorities issued a detailed statement for future interaction with the third sector under the government’s revised administrative arrangements.  The 41-point statement, issued in late September, focused on funding, management of shared services, grant funding, procurement, and creating successful relationships various levels of government and the public sector.

To promote stable and long-term change, funders will aim to take a “three-year approach” for both grant funding and contract funding as a general rule.

SS