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Public Benefit Organizations in Hungary

Public Benefit Organizations in Hungary. Nilda Bullain European Center for Not-for-Profit Law (ECNL). Overview. PBO Law – when, why? PBO criteria PBO benefits Decision-making Impact?. PBO Law. Adopted in 1997 Governmental initiative – liberal coalition party

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Public Benefit Organizations in Hungary

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  1. Public Benefit Organizations in Hungary Nilda Bullain European Center for Not-for-Profit Law (ECNL)

  2. Overview • PBO Law – when, why? • PBO criteria • PBO benefits • Decision-making • Impact?

  3. PBO Law • Adopted in 1997 • Governmental initiative – liberal coalition party • Experts involved, NGOs consulted • Aim: to provide for greater accountability in the sector and to create the opportunity for private support of NGOs • Taxation status harmonization also important

  4. PBO criteria • PBOs can be all nonprofit organizational forms existing in Hungary • Associations (not parties, trade unions and employers’ associations) • Foundations • Public foundations • Public benefit companies • Public associations (e.g. chambers) if the establishing law allows • National sports federations

  5. PBO criteria • Should conduct public benefit activities (PBA). • Should provide services beyond membership. • If it engages in economic activities, those should be related to PBA and should not jeopardize PBA. • Its profits should support the PBA and should not be distributed. • Does not conduct direct political activities, is independent from political parties and does not support such. All of this should be included in the founding statutes.

  6. PBO criteria • Outstanding PBOs should in addition include that: • It conducts a public task, the provision of which is according to law or regulation the duty of the central or local government. • It publishes the most important data of its operations and finances in the local or national media.

  7. PBO obligations • Openness in decision-making (board meetings, registry of decisions etc.) • Conflict of interest rules in governance and management • Supervisory board above a certain budget (5 million HUF) • Publication of any governmental support through media • Should prepare investment policy and other financial control provisions

  8. PBO obligations • Needs to prepare annual public benefit report • Including activity and financial report; • Report on any budgetary support; • Report on any grants given; • Value or amount of compensation provided to leading officials (privacy issues!); • Report on assets management.

  9. PBO benefits • Most significant benefit: ability to receive tax deductible donations • Additional benefits for long-term donations • Ability to provide income-tax free support to individuals • Increased benefits for economic activities compared to non-PBO NGOs • Outstanding category of PBOs even higher benefits • Profit tax, customs and charges exemptions are available for all NGOs

  10. Decision-making • Application to the courts at the time of registration or any time later. • Court has to check whether statutes contain required provisions. • In case of outstanding PBOs it usually asks for an actual contract to provide the public task. • There is no monitoring of fulfillment of the requirements other than the “usual” check-up of the public prosecutor.

  11. Decision-making • Practical experience shows that PBO registration is cumbersome • Courts require copy-pasting of legal provisions in the statutes • Courts often require contracts or other supporting documents not stipulated in any law • Court practice differs widely in the country

  12. Impact and learning points • About 45% of NGOs are now registered PBOs (36% by 2000) • Private and corporate donations have not increased significantly • On the other hand, state funding became increasingly directed towards PBOs only • NGOs regard PBO status good for two reasons: • Gives a certain prestige in the eyes of the public if they read “public benefit” in the name of the NGO. • Provides them with increased opportunities to apply for government funding.

  13. Impact and learning points • Key factors in deciding PBO regulatory approach: How much it will be tax oriented or include other goals? How low or high the treshold will be? (I.e. how easy or difficult it will be to become a PBO?) – “Elite” or “minimum standard” approach? How formal or substantial it will be? (I.e. check papers only or look at what you do?)

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