1. Copyright © 2010 European Center for Not-for-Profit Law Possibilities for the reform of the Public Benefit Status in Hungary Nilda Bullain European Center for Not-for-Profit Law (ECNL)

2. 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

3. 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.

4. 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

5. 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

6. 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.

7. 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

8. Copyright © 2010 European Center for Not-for-Profit Law Direct vs indirect benefits Direct 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!

9. 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.

10. The framework of policy goals Legal policy objectives Public policy objectives Party policy objectives ???

11. 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

12. „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...

13. „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

14. 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? +???

15. 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!

16. 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!

17. Copyright © 2010 European Center for Not-for-Profit Law Finding the balance OBLIGATIONSBENEFITS

18. 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)

19. The framework of policy goals Legal policy objectives Public policy objectives Party policy objectives ???

20. Copyright © 2010 European Center for Not-for-Profit Law Thank you! For more information: www.ecnl.org