Charities in Europe

England: Re Campden Charities

((1881), L. R. 18 Ch. D. 310). The cy-pres doctrine is applied to charitable gifts when it is no longer beneficial or desirable to carry out exactly the intention of the donor. The Court will not interfere with a scheme settled by the Charity Commissioners unless the Commissioners have exceeded their jurisdiction or gone wrong in principle or in law. In 1643 a testatrix gave a sum of money to buy land of the annual value of 10 for the benefit of the parish of Kensington ; of this sum 5 was for the apprenticing of one poor boy or more being of the said parish. In 1881 the annual income from the land was more than 2,000. Held, that considering the enormous increase of the population of Kensington and the change of habits, particularly the fact that apprenticeship had been superseded by education, the Charity Commissioners were justified in applying a considerable portion of one half the income towards educational purposes. [1]

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Russian Charities

The Federal Law on Nonprofit Organizations provides additional regulations for certain Nonprofit Organizations forms, including: public associations, associations (unions), foundations, institutions, non-commercial partnerships, and autonomous non-commercial organizations. The Federal Law on Public Associations specifically addresses the sub-category of Nonprofit Organizations called “public associations,” which consists of public organizations, mass movements, public foundations, public institutions, and other forms. Finally, the Federal Law No. 135-FZ, “On Charitable Activities and Charitable Organizations,” August 11, 1995, as amended (hereafter “Charities Law”) provides for a sub-category of Nonprofit Organizations called “charity organizations.” This is a particular status for public associations, foundations, institutions, and others forms which entails certain limitations on Nonprofit Organization activities and provides unique tax benefits.

The Charities Law provides for a sub-category of Nonprofit Organizations called “charity organizations.” This is a particular status for public associations, foundations, institutions, and others forms which entails certain limitations on NCO activities and provides unique tax benefits.

A public association, foundation, or institution may also register as a charity pursuant to the Charities Law (Charities Law Article 7). An institution can register as a charitable organization only if another charitable organization serves as its founder. Other forms of Nonprofit Organizations may register as charities only if “stipulated by the federal laws for charitable organizations.” Russian legislation does not specifically permit autonomous non-commercial organization to register as charities.

Registration as a charity subjects an organization to stricter regulation in terms of activities, expenditures, and internal governance, in return for limited tax benefits. For example, a registered charity must expend at least 80 percent of the charitable donations (in monetary form) that it receives within a year after the donation is received (Charities Law Article 16(4)). Other than tax benefits, federal law currently does not provide any particular benefits that are exclusive to registered charities.

The recently adopted federal law on patronage activities established the legal framework for patronage activities in the Russian Federation, as well as rights and duties of patrons and recipients of patronage support. The law defines patronage activities as “activities for gratuitous transfer of property, including money, or the rights of possession, use, disposition of property and (or) gratuitous performance of work and rendering services in the sphere of culture and education in the field of culture and the arts directed on preservation of cultural values and development of activity in the sphere of culture and education in the field of culture and art.”

A public association, foundation, or institution may also register as a charity pursuant to the Charities Law (Charities Law Article 7).

Charities are required to promote at least one of the enumerated charitable activities indicated in the law (Charities Law Article 2). Charities are limited to activities of general public benefit (Charities Law Article 6; Law on Public Associations Article 10; Federal Law No. 7-FZ on Nonprofit Organizations, Article 7). Foundations that are not charities must undertake “public benefit” activities. Registration as a charity does not affect or limit the right of an Nonprofit Organization to engage in economic activities (Charities Law Article 12). The recent amendments to the Civil Code prohibit economic activities (for Nonprofit Organizations other than autonomous non-commercial organizations), but allow “income-generating activities” if stipulated in the Nonprofit Organizations’s by-laws. For a Nonprofit Organization’s activities to be considered “income-generating” there must be a minimum chartered capital provided to companies with limited liability (i.e, the property value must be not less than 10,000 rubles, or approximately $167).

Charities and foundations are limited to activities of general public benefit (Charities Law Article 6; Law on Public Associations Article 10; Federal Law No. 7-FZ on Nonprofit Organizations Article 7). Charities must engage in charitable activities, which are defined as “voluntary activities of individuals and legal entities involved in the altruistic (gratuitous or on privileged terms) provision to individuals or legal entities of property, including money and the altruistic provision of services or other support” directed towards achieving any of the indicated objectives that generally correspond to public benefit activities (Charities Law Articles 1 and 2(1)).

Charities are expressly prohibited from using their assets to support political parties, movements, and campaigns (Charities Law Article 2(2)-2(3))

In the case of liquidation of charities, remaining assets must be distributed for charitable purposes under the procedure stipulated in the charity’s charter, or, in the absence of such provisions in the charter, as determined by the liquidation commission (Charities Law Article 11). Although there are no explicit limitations on how the liquidation commission can dispose of the assets, presumably it must observe the general provision allowing distribution only to charitable purposes.

Taxes

With some exceptions, profit from the economic activities of Nonprofit Organizations, including charities, is taxed in the same manner as that of commercial organizations.

Registration of a Nonprofit Organization as a charity pursuant to the Charities Law provides the organization with a particular status, and this status in itself provides unique tax benefits. However, certain tax benefits are granted for charitable activities without requiring that the organization have charitable status.

Goods and services provided on a gratuitous basis as part of charitable activities in compliance with applicable laws are also exempt from VAT.

Legal entities do not receive any federal tax deductions or credits for grants or donations to Nonprofit Organizations, including charities. Subject to specific rules, individuals may deduct from their taxable income charitable contributions provided to various Nonprofit Organizations, including registered charities, socially oriented organizations (SOOs), and religious organizations, as well as to Nonprofit Organizations that use such contributions for the purpose of building an endowment. The maximum amount of a deduction shall not exceed 25 percent of the taxable income received by an individual during the reporting period (Tax Code Article 219).

Individual beneficiaries of charitable assistance are exempt from paying income tax on the value of the charitable assistance received.Charitable assistance provided in-kind and in cash is exempt from income tax when provided by registered charities. The Tax Code does not restrict the amount of income tax-free charitable assistance to individuals (Tax Code Article 217, 8.2).

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Notes

1. Definition of Re Campden Charities is from A Concise Law Dictionary (1927).