copyright © 2010 european center for not-for-profit law possibilities for the reform of the public...

Copyright © 2010 European Center for Not-for-Profit Law

Possibilities for the reform of the Public Benefit Status in Hungary

Nilda BullainEuropean Center for Not-for-Profit Law

(ECNL)

Background work• Research and team-work over the past year• Technical and financial support from Okotars

Foundation • Interviews with civil society leaders• Interviews with non-civil society representatives

(from churches to wine-growers)• Data analysis• Legal analysis (system of benefits!)• International experiences

Initial conclusions• The concept of public benefit seems simple: – Providing benefits to certain civil society organizations

in recognition of their benefit to society (due their activities and irrespective of legal form).

• Yet, the current Hungarian regulation affecting public benefit organizations (PBOs) is extremely complicated and inconsistent.

• In addition, it is purposeless, as there is practically no benefit that would relate to PBOs as such.

Initial conclusions• The concept of public benefit became empty• The system of benefits has faded• It means a kind of prestige at most• Yet is does not fulfill a „label” function („anyone

can be public benefit”)• It is used primarily as a pre-condition to

participate in state tenders (grants)• The law that was cutting edge and progressive

ten years ago needs serious revision

Initial conclusions• There is a need to re-define public benefit and

fill it with substance• There is a need to simplify the system• There is a need for some kind of „purification”• There is a need for real benefits for PBOs (and

PBOs only)• There is a need for a guarantee for

implementation

Copyright © 2010 European Center for Not-for-Profit Law

Who is the “public”?

• Traditional understanding of the concept in Western Europe: “public benefit” = that which is beneficial for (and supported by) the society, community, people, citizens.

• Emerging understanding of the concept in Central and Eastern Europe: “public benefit” = that which is beneficial for (and supported by) the state, the government.

Copyright © 2010 European Center for Not-for-Profit Law

Policy rationale?

• Facilitate relationship between PBOs and the public

• Provide a basis for indirect support such as tax deductible donations, benefits for volunteers

• State: Mediator role

• Facilitate relationship between PBOs and the state

• Provide a basis for direct support: government funding and cooperation

• State: Supporting role

Copyright © 2010 European Center for Not-for-Profit Law

Direct vs indirect benefitsDirect benefits• Case-by-case support• Specific criteria in every

case• Direct control of the

relationship through contracting

• Immediate interventions possible

Indirect benefits• Generic support• General criteria for all cases • No possibility for direct

control of the relationship by the government

• Ex-post interventions -> compliance assumed

A different logic for regulation!

State financing and public benefit status

Should the concept of public benefit be related to the state financing system?

Our proposal: it should not be related Its purpose should stay to try to attain a higher level of

support from society and communities. This does not exclude state support of civil society! If the two levels of public benefit status are kept then

there could be a relation to state financing for a certain pool of organizations.

The framework of policy goals

Legal policy objectives

Public policy objectives

Party policy objectives

???

Public policy objectives

Why is there a need to benefit the work of civil society organizations (and thereby recognize and incentivize them)?

In accordance with priorities communicated by the current government: Promotion of flexible and alternative forms of

employment Undertaking public tasks (obligatory and elective) Community organizing

„Public benefit activity”What is being carried out exclusively by civil society –

some examples of a list of „real PBO activities”: protection of minors in internet content services children ambulances, early childhood development homeless care roma integration programs volunteer centers, coordination of volunteer activity community organizing surrogate family networks, adoption psychological and other hotlines, crisis intervention legal aid for disadvantaged target groups rehabilitation of addicted persons assistance in employment of disadvantaged and disabled people animal shelters consumer awareness, healthy lifestyle education hospice care...

„Public benefit activity” There is community demand for these (and many

other) activities Central and local governments find them important,

support them and contract for them Everyone wins by supporting them Organizations have commitment and expertise (not

just implementing a government program but wanting to solve the problem)

They have real results, even if their impact is often hard to measure

Definition of public benefit

Activities (category) ...+ target group?+ societal/community need?+ societal/community support?+ result and impact of activity?+ dominance of public benefit activity?+ political neutrality?+???

Supervision of PBOs If we are to define the concept in a more substantial

way, it can only be implemented with a stronger supervisory mechanism.

Minimum: Submission of public benefit report, Official registry with easy public access

Option: designated supervisory authority for PBOs The possibility of a substantial (not just formal) check

will determine the definitional framework – cost-benefit analysis is needed!

System of benefits

Full revision of the current system of nonprofit organizations is needed (both PBO and non-PBO)

Currently the PBO status essentially serves to include the nonprofit companies into the realm of civil society organizations

The new benefits must represent a real incentive in order to achieve any policy goals!

Copyright © 2010 European Center for Not-for-Profit Law

Finding the balance

OBLIGATIONS BENEFITS

Possibilities for benefits

Bringing back tax deductions for donations Individual Company

Incentives for economic activities (social enterprises)

Keeping the „real value” of 1% Benefits related to EU resources (in case of

keeping the two-level PBO system, e.g. State guarantee)

The framework of policy goals

Legal policy objectives

Public policy objectives

Party policy objectives

???

Copyright © 2010 European Center for Not-for-Profit Law

Thank you!

For more information:www.ecnl.org