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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

Public Benefit Organizations in Hungary

Nilda Bullain

European Center for Not-for-Profit Law (ECNL)

overview
Overview
  • PBO Law – when, why?
  • PBO criteria
  • PBO benefits
  • Decision-making
  • Impact?
pbo law
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
pbo criteria
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
pbo criteria1
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.

pbo criteria2
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.
pbo obligations
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
pbo obligations1
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.
pbo benefits
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
decision making
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.
decision making1
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
impact and learning points
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.
impact and learning points1
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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