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Taxation of Nonprofit Associations in an International Comparison Anita Dehne, Peter Friedrich, Chang Woon Nam and Rüdiger Parsche Nonprofit and Voluntary Sector Quarterly 2008; 37; 709 originally published online Apr 24, 2008; DOI: 10.1177/0899764008315545 The online version of this article can be found at: http://nvs.sagepub.com/cgi/content/abstract/37/4/709

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Research Note

Taxation of Nonprofit Associations in an International Comparison

Nonprofit and Voluntary Sector Quarterly Volume 37 Number 4 December 2008 709-729 © 2008 Association for Research on Nonprofit Organizations and Voluntary Action 10.1177/0899764008315545 http://nvsq.sagepub.com hosted at http://online.sagepub.com

Anita Dehne Ifo Institute for Economic Research

Peter Friedrich University of Federal Armed Forces Munich

Chang Woon Nam Rüdiger Parsche Ifo Institute for Economic Research

The objective of this study is an investigation of tax regulations for nonprofit associations (NPAs) in EU countries, Japan, and the United States. Following a brief description of qualification principles for NPAs, treatment of business units, or liability issues, a particular focus is put on a comparison of regulations concerning the taxation of current profits, inheritance, and gift taxes and the tax treatment of contributions and membership fees. In general, a strong similarity among the examined developed countries can be found for the different aspects considered, but significant differences also exist. Keywords:

nonprofit association; taxation; international comparison

T

he nonprofit sector has grown steadily in most developed countries during the past decades and is becoming increasingly more complex at the same time. One of the most crucial factors in its expansion is the scheme of collective finance and private provision of key welfare state services. Such development has in turn stimulated academic and political interest in examining the economic significance and efficiency of the nonprofit sector, accompanied by the search for internal and external factors that determine such characteristics (Burger & Veldheer, 2001; Marcuello & Salas, 2001; Rose-Ackermann, 1996; Salamon & Anheir, 1996). Most notably, conventional theory of voluntary provision of public goods suggests that if people are concerned with the total amount of a public service offered, they will treat government spending on such goods and services as substitutes for their own donations1 to the provision of similar services (Duncan, 2004; Romano & Yildirim, 2001; Simmons & Emanuele, 2004). In this context, a number of studies related to the economics of nonprofit associations (NPAs) have examined the public goods crowding-out questions in various ways. In their theoretical research, Warr (1983) and Roberts (1987) predicted that a complete crowding out is likely to occur (e.g., one dollar of government subsidies will displace one dollar of donations) if 709 Downloaded from http://nvs.sagepub.com at University of Melbourne Library on September 17, 2009

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donors are pure altruists—that is, if their only concern is for the total amount of public goods available. “As a result, a [‘pure’] public goods philanthropist prefers to ‘free-ride’ off the gifts of others, that is, enjoy the supply of a public good without having to pay for it” (Duncan, 2004, p. 2160). Emphasizing the fact that donors have additional motives such as warm-glow effects, Andreoni (1990) and Duncan (1999) argued for a fractional crowding-out between government spending on public goods and private donations. “The warmglow utility specification introduces [a donor’s personal satisfaction derived from his] own contribution into the utility function, so that he gets utility not only from the total provision of public goods but also from his own contribution” (Romano & Yildirim, 2001, p. 424). Such a warm-glow private consumption model suggests that “one philanthropist’s gift does not necessarily affect the enjoyment others receive from giving. Consequently, a warm-glow philanthropist cannot free-ride off the gift of others” (Duncan, 2004, p. 2160). In this case government spending on public goods does not necessarily crowd out private donations one for one, although some degree of crowding out is still likely (Simmons & Emanuele, 2004).2 On the other hand, the studies including Schiff (1985) and Brown (1997) as well as Hughes and Luksetich (1999) demonstrate the possibilities of emerging crowdingin effects (see also Brooks, 2003). According to their main logic, an increase in government spending on public goods can stimulate an increase in private donations because donors assess the increased spending as a signal that their donations would now be more effective and generate a higher marginal product. This basic crowdingin idea is also linked with the so-called impact philanthropy hypothesis that reveals the negative gift externalities. According to this behavioral approach, Rather than free-riding off the gifts of others, or being unaffected by them, giving by others can reduce . . . charitable fulfillments of an impact philanthropist [whose donation is motivated by his or her desire to personally make a difference, since, for example, he or she] cannot enjoy saving children if other philanthropists save them first. (Duncan, 2004, p. 2160)

There are large numbers of prior publications that deal with the strengths and limitations of various nonprofit organizational forms, their financial and administrative aspects, and the regulation of their activities (Rose-Ackermann, 1996). Yet, the essence of this form of institution is that a nonprofit association may not lawfully pay its profit to owners or indeed to anyone associated with the organization. Along with this restriction, however, there is a variety of tax and subsidy benefits that influence a nonprofit’s actions (Weisbrod, 1988). For this reason, many recent discussions of NPAs have centered on their tax advantage status (Glaeser & Shleifer, 2001; Weisbrod, 1988). In particular, a large number of empirical estimations show that donations and other types of charitable gifts are strongly responsive to these tax subsidies (Gruber, 2004; Wu, 2004).

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Those tax subsidies applied to NPAs not only help to overcome free-rider tendencies but also affect the behavior of warm-glow and impact philanthropists while increasing organizational revenues in two ways. First, the deductibility of donations on the donor’s individual income tax return stimulates giving because it reduces the after-tax cost to the donor. Second, the various tax subsidies to the [nonprofit] organization increase the amount of output that a donor can buy for any given donation. Both have the effect of rewarding people if they reveal— even partially—their willingness to pay for particular collective goods. (Weisbrod, 1988, p. 29)

In these theoretical contexts one can also easily postulate that citizens’ voluntary and charitable activities or their financial contributions help to relieve public budgets because activities taken over by NPAs often mean that the government does not need to provide these collective goods and services. In times of tight public budgets, the activities of civil society, namely, political, cultural, and social activities of the population, gain importance. In addition to the positive externalities of these activities (Gruber, 2004), European policy makers aim to give stronger support to the provision of several public goods and services by NPAs for this reason (Sargeant & Lee, 2004). In particular, tax regulations are to be designed in such a way that the commitment of the population increases or is less strongly hindered. The main objective of this study is a comparative investigation of tax regulations for NPAs in EU countries, Japan, and the United States. A systematic international comparison of such institutional settings is rather rare in this public policy area. In addition to a brief description of the qualification principles for NPAs, the treatment of business units, or the liability issues, a particular focus is put on a comparison of regulations concerning the taxation of current profits, inheritance, and gift taxes and the income tax treatment of contributions and membership fees. In general, a strong similarity between the examined countries can be found for the different aspects considered,3 but significant differences also exist.

General Characteristics of Nonprofit Associations First, their general characteristics can be determined with regard to the forms, kinds, and recognition principles of NPAs or nonprofit societies.4 These societies can be incorporated or not, whereby both forms occur in all legal systems. Incorporated societies have legal identity, whereby the same capacity to acquire and hold rights and duties does not always result. In some countries, such as in Germany, the capacity to acquire and hold rights and duties is virtually unlimited as long as the organization acts within the framework of its statutes. In other countries the capacity to acquire and hold rights and duties can be greatly limited. For example, in some countries explicit permission of the responsible governmental agency is necessary

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(e.g., Belgium) or the society must be recognized (e.g., Italy) for it to receive gifts or donations or to own real property. The legal rules stress the nonprofit character (Bundesministerium der Finanzen, 2006).5 On the other hand, the rules with regard to founding members tend to differ. They extend from at least 2 founding members (e.g., Austria) to up to 20 (e.g., France and Greece). Also with respect to citizenship the rules differ: The majority of the examined countries have no specific rules concerning the nationalities of the founding members or other members (e.g., Germany, Denmark, France, Finland, Greece, Luxembourg, the Netherlands, and Cyprus). In other countries (e.g., Belgium, Ireland, and Sweden), on the other hand, restrictions exist with respect to the nationalities of the members or executive boards (Friedrich, Kaltschütz, Nam, Parsche, & Wellisch, 2005). The definition of the nonprofit character is of great importance under the aspect of fiscal promotion. There are numerous countries that have a broad definition of the nonprofit character, such as Austria, the Czech Republic, Finland, Germany, Greece, Hungary, Ireland, Japan, Luxembourg, Poland, Slovenia, Spain, the United Kingdom, and the United States. Here, as a rule, tax-preferential treatment is applied to nonprofit bodies. In other countries (e.g., Belgium, Denmark, and France) only those NPAs that at the outset undergo a recognition procedure or governmental registration enjoy such tax privileges. Such a strict selection rule aims at granting tax advantages to only those well-qualified NPAs in a better targeted way while at the same time reducing tax-avoiding efforts of similarly structured organizations with different business motives. Foreign societies that have been registered receive the same tax privileges as domestic societies in countries such as Belgium, Cyprus, Denmark, France, Italy, Latvia, and the Netherlands (Friedrich et al., 2005). The delimitation to foundations derives from the fact that as a rule, for NPAs the membership of persons stands in the foreground. Foundations are legal entities that have no members and that are supported by assets. They are managed by independent executive boards or trustees. Normally, when a foundation is established, an examination is made as to whether the assets are sufficient for achieving the goals of the foundation. This underscores the central importance of assets for foundations. There are also countries, such as Finland, that do not distinguish between NPAs and foundations (Hopt, Walz, von Hoppel, & Then, 2006).6 Extensive similarity exists in the question of insignificant commercial activity. As a rule, a nonprofit association may exercise business activity without loss of tax benefits under the condition that the activity is included in the statutes and is considered to be economically insignificant. At the same time, this activity must be directly linked to the aims of the association and should not be used only for improving its general financial situation. Furthermore, none of the profits may be distributed (see also Ballou & Weisbrod, 2003). In addition, the generally applicable competition rules must be observed, taking into consideration the special features of the sector.

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Profit-yielding commercial activity related to the purpose of the organization is accepted in all countries without loss of tax advantages if it is actually aimed at promoting nonprofit performances (Bundesministerium der Finanzen, 2006). This is the case when the commercial activity serves to realize the nonprofit purposes of the association and if it can only be achieved via such business activity. The terms of liability depend on the legal form of a nonprofit association. In the case of associations with a private-law character, the liability of the executive board can be regarded as problematic. Here creditors can make claims on the executive board members if the nonprofit association can no longer meet its payments. In contrast, registered and officially recognized associations, as corporate entities with legal identity, are liable for the actions of the executive board with their entire assets. Only in cases of deliberate or gross neglect on the part of the executive board, for example, by issuing false donation certifications or by orders that donations not be employed for the stated purpose of the association, are the members of the executive board privately liable for the damage they cause. This is the normal case in the examined countries (Friedrich et al., 2005). As a rule, the tax authority, the district court, a ministry, or a regional/local authority or commission is entrusted with a copy of the statutes (often with the membership list as well). Also, recognition as a nonprofit association and/or registration in a list is combined with tax advantages, an act that is carried out by administrative authorities and is correspondingly examined. In Germany and the United States, the tax authority decides on the recognition of the association as a tax-privileged organization. In France the Ministry of the Interior is responsible, and in Estonia the government decides on registration (Friedrich et al., 2005). With regard to the accounting, the rules are such that only simple accounting (cash bases of accounting) is required of NPAs in general. Recognized or specially registered large associations with tax preferential treatment must submit precise records on their income and particularly on their expenses. Therefore, double bookkeeping is frequently required of these associations to exercise a monitoring function. In the case of purpose companies or business companies, separate records are necessary. Differences exist for the regulation of the disclosure obligation. In some countries such as Ireland or Luxembourg there is not only a disclosure obligation vis-à-vis the supervising authorities such as the revenue office, but a general disclosure is also prescribed (see also Hopt et al., 2006).

Taxation of Current Income of Nonprofit Associations Regarding the taxation of current income, the corporate tax usually applies. NPAs are generally exempt from this tax within the framework of their purpose-related activity (Weisbrod, 1988). As shown in Table 1, this is the common case in the countries with a broad definition of the nonprofit character such as Denmark,

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Estonia, Finland, Germany, and Greece. Some countries such as Belgium, France, Portugal, and other countries with a list for special associations only grant tax exemption to specially recognized or separately registered NPAs. There is also the case, however, that NPAs are basically taxable but can file for exemptions (e.g., Finland). In Belgium, instead of the corporate tax, a special tax is levied for corporate bodies on real estate and capital gains (Friedrich et al., 2005). If in addition to the nonprofit activity a commercial, profit-yielding activity is engaged in, this is basically taxable, although within certain limits exemptions from the corporate tax may be granted (e.g., in France and Germany). Apart from the general commercial activity, income from renting and leasing and from capital gains can play a special role. In many countries these profits are tax exempt, such as in Austria, the Czech Republic, Germany, Greece, Ireland, Japan, Luxembourg, Poland, Sweden, and the United Kingdom (see Table 1). On the other hand, a tax obligation exists in countries such as France (only income from French shares are tax exempt), Italy, and also Lithuania. Depending on the type of income, differentiated rules can be applied. In addition to the so-called unrelated business income tax, sales and property taxes may apply in the United States.7 Income from real estate and returns on capital are subject to the special tax for corporate entities in Belgium, whereas gains on sales remain tax exempt. Finland allows a tax exemption on income from real estate if the income is employed for the nonprofit purpose of the society; otherwise, a reduced rate is applied. In Hungary, capital gains are tax exempt; income from renting and leasing is, however, subject to taxation. In some of the examined countries, in addition to the corporate tax, there are also local business taxes or other types of local taxes that accrue to the municipalities. Inasmuch as NPAs receive preferential treatment for the corporate tax, this arrangement is also valid with respect to local taxes. This applies to Germany and also to France, Hungary, Luxembourg, and Austria (local tax). In addition to these rules, some countries also have other types of income tax arrangement aimed at promoting nonprofit activity. The main objective of these arrangements is to give preferential tax treatment for specific activities of people involved in NPA activity. In Germany, for example, there is the so-called standard trainer allowance (Übungsleiterpauschale) system: Income up to €€ 1,848 is tax free for sideline activity as sports trainers, educators, social workers, artists, and caregivers if this activity serves the promotion of nonprofit, charitable, or religious organizations. In France, expenses for voluntary activities for recognized societies active in special areas receive favorable treatment in that the costs for the purchase of goods or services for the benefit of the association and trips with a person’s own automobile can be listed for deductions in the tax declaration. For the use of an own automobile a deduction of €€ 0.26 per km is allowed. Also in the Netherlands, costs from trips with an own automobile (0.18 €€ per km) that accrue in connection with voluntary activity are deductible. Austria also has a similar deduction for such travel expenses as well as additional food expenditures (see also Bundesministerium der Finanzen, 2006).

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Table 1 Taxation of Current Income (Corporate Taxation) of Nonprofit Associations (NPAs) in an International Comparison Country Austria

Belgium

Cyprus

Czech Republic

Denmark Estonia Finland

France

Germany

Greece Hungary

Tax Rules NPAs are exempt if they are not commercially active. Income from renting and leasing is not taxed. Capital gains tax is credited on the declaration of corporate tax if income from capital assets is part of taxable business assets. NPAs can file for a tax exemption if interest payment is included in company income. Recognized NPAs are not taxable on their nonprofit activity. They are exempt from the general corporate tax in their commercial activities but subject to the IPM (tax for corporate bodies), which is levied only on income from real estate and capital gains. Conditions for special recognition: no profit-making goals and activity in “favored areas” (e.g., education, family assistance). Tax is not applied on sales of real estate that are used for social or charitable purposes. Income is tax exempt if it is used exclusively for the nonprofit purpose of the association. This includes investment returns and income from renting and leasing. Also capital, rent, and lease profits number among that. Capital gains are taxable, however. Revenues are tax exempt from the main activity, inheritances or donated buildings, plots or mobile assets, and interest from current accounts. Income from advertising and renting is taxable. Only commercial business activity is taxed as a rule. Nonprofit purpose–related activity is tax exempt. Dividends are also tax exempt. Other areas (including income from renting and leasing) are normally taxable. Income from business and commercial activities are taxed to the rate of 26%. An exemption is possible if the purposes are purely charitable, the activity is not limited locally, and no distortion of competition arises. Income from renting and leasing is generally tax exempt. Income from land that is not used for public/nonprofit purposes is subject to the reduced corporate tax rate. Capital gains are tax exempt. Basically freed from corporate tax (and thus also exempt from trade and sales tax in connection with the so-called combined exemption). Exception: income from land and capital assets, 24%; income from French obligations, 10%; from French stocks, tax exempt. All NPAs are exempt from the minimum tax. Basically exempt from corporate tax; this also applies to income from renting, leasing, or capital gains. Exemptions for business activity related to the purpose of the association. Exception: income from commercial activity that exceeds €€30,678 a year. Income necessary for achieving the association’s purpose is tax exempt. This also includes income from renting and leasing and income from stocks. NPAs are exempt from the corporate tax for income from purpose-related activities. This includes income resulting from the pursuit of charity and voluntary activities and returns on investments (deposits, bonds, and dividends from Hungarian firms) as well as other income that is used for the purpose of the association. Capital gains are not considered as income if the source is exclusively from the pursuit of the purposerelated activity. Only income from commercial activity is taxable, including income from renting, leasing of real estate that is in the possession or use of the association, income that according to organization statutes arises from activities and are explicitly included in the commercial activities, and income from advertising activities. (continued)

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Table 1 (continued) Country Ireland

Italy Japan

Latvia Lithuania

Luxembourg Malta

Netherlands

Poland

Portugal Slovakia

Slovenia

Tax Rules Interest yields, dividends, donations, rentals, and income from the sale of agricultural products are exempt if they are solely for the purpose of the charity. Capital gains are tax exempt if they exclusively serve the purpose of the charity. For charities that are corporates, the types of income mentioned in connection with income tax are exempt from corporate tax if they exclusively benefit the purpose of the charity. Recognized NPAs are exempt from corporate tax for their nonprofit activity; additional income from real estate and/or capital is taxed at the normal rate. Income of NPAs from their actual nonprofit area is basically tax exempt. For the portion of income from profit-oriented activities there are various reductions depending on the type of nonprofit organization. Interest and dividend yields as well as capital gains are only subject to corporate tax if their attainment is linked with profit-oriented activities. Income from charity and voluntary activities is tax exempt. Other areas are normally taxable. Since 2005 only income from purpose-oriented activities are tax exempt, whereas those from commercial activities are taxable. Annual income of up to LTL 1 million (ca. €€ 290,000) receives a tax exemption for LTL 25,000 (ca. €€7,240); the rest is taxed at a rate of 15%. Income of more than LTL 1 million (ca. €€ 290,000) is subject in total to a tax rate of 15%. Included in income are gains from renting and leasing, capital gains, and investment income. Freed from corporate taxes (including income from renting and leasing as capital gains and investment income); exception: income from commercial business unit. Particularly recognized associations with idealistic purposes are exempt from income tax. For other nonprofit organizations, income is taxed normally (staggered rates) if revenue from membership fees is less than half of total income. Special NPAs are generally exempt from corporate tax, otherwise up to annual income of €€7,500 or total income of up to €€ 37,500 for the past 4 years as long as income is exclusively for the benefit of the nonprofit purposes. Investments are not subject to taxation. If there is an exemption from corporate tax, a reimbursement of the withholding tax on dividends can be applied for by an association resident in the Netherlands. Income (including revenue from renting and leasing) that is used for the nonprofit purpose is tax exempt. Also investments in government bonds as well as other specific bonds remain tax exempt if the resulting revenue is used for the registered nonprofit activities. NPAs are tax exempt. The condition for exemption is recognition by the tax authorities in the form of a decree published in the legal gazette. NPAs are exempt within the framework of their actual purpose. Gains from commercial activities are fully taxable. Capital gains and investment income are taxable if they are not in accord with the nonprofit purpose, but NPAs can deduct SKK 300,000 (ca. €€8,000) from the basis of tax assessment. Only the commercial activity of NPAs is subject to the corporate tax at a rate of 25%. This also includes capital gains and investment income if these are in connection with for-profit activities. (continued)

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Table 1 (continued) Country Spain

Sweden United Kingdom

United States

Tax Rules NPAs are tax exempt for activities that are in accord with the purposes of their statutes. If income from commercial activity does not correspond with the nonprofit purpose, a reduced tax rate of 10% applies. NPAs are exempt within the framework of their actual purpose. Capital gains are not taxed. Charities are exempt if the income is used exclusively for charitable purposes. Capital gains as well as income from renting and leasing are exempt if the revenue is used only for charitable purposes. NPAs are exempt at the federal level for the so-called activity-related income (but not as a rule for unrelated commercial income).

Source: European Commission Taxes in Europe Database; International Bureau of Fiscal Documentation; International Center for Not-for-Profit Law (ICNL); Mennel and Förster (2004); Hopt, Walz, von Hoppel, and Then (2006); Friedrich, Kaltschütz, Nam, Parsche, and Wellisch (2005); various relevant tax document released by national authorities including the Internal Revenue Service (IRS) and the Charity Commission.

Income Tax Treatment of Donations and Membership Fees Income tax regulations regarding tax deductions for charitable contributions differ considerably from one country to another (Table 2). In countries like Austria, the Czech Republic, Germany, Hungary, Italy, Poland, the United Kingdom, Japan, and the United States, tax deductions are granted to those donors contributing to a broadly defined group of qualified NPAs (see also Glaeser & Shleifer, 2001).8 For the income tax deduction of donors other countries require that the recipient associations be active in specific welfare fields or hold a certain special status in the sense that they are particularly recognized and/or registered. These countries include Belgium, Denmark, Estonia, France, Latvia, the Netherlands, Portugal, and Spain (see also Marcuello & Salas, 2001). Finland allows no preferential income tax treatment for donations made by private persons; only corporate donors may receive tax deductions for contributions. Ireland has a similar regulation: A private person can only make a donation from his or her taxable income, but the charity9 may be reimbursed for the income tax paid. In the case of donations of corporate entities, however, a deduction in the amount of the contributions can be made from the corporate tax due. In Sweden there is no preferential treatment of donors as a rule (Mennel & Förster, 2004). In general, the relevant income tax rules are particularly restrictive for the contributions to foreign NPAs. In Italy, Lithuania, and the Netherlands only the donations to domestically recognized or registered foreign associations receive tax deductions (see also Raiffeisenverband Südtirol, 2000). Austria is the only country that grants

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Table 2 Income Tax Treatment of Charitable Contributions and Membership Payments Made to Nonprofit Associations (NPAs) in an International Comparison Country Austria

Belgium

Cyprus

Czech Republic

Denmark

Estonia

Finland

Tax Rules Monetary and material donations (also to foreign NPAs) receive preferential tax treatment; up to 10% of previous year profit of a corporate donor can be deducted from his operating costs and on top of that up to 10% of the previous year revenues if the association pursues scientific purposes exclusively. Goods donations are assessed at the common value of the good. If an association has its seat outside the EU, a predominant domestic purpose is the condition for the deductibility of a donation. Membership fees are not deductible. For recognized associations: Donations are deductible from income tax. For private donors: Donation amounts are recognized from €€30 to a maximum of ca. €€300,000 or 10% of the entire net income. For corporate donors: The upper limits are €€ 500,000 or 5% of taxable earnings. Movable goods as donations or gifts of more than €€100,000 as well as real estate need permission (royal exemption). Membership fees can be set off against income or corporate tax. Private as well as corporate donors can fully deduct monetary donations of up to CYP 20,000 (ca. €€ 34,300) up to the amount of their annual income; amounts beyond this are deductible at a 50% rate. Goods donations and donations to foreign associations are not deductible. Private donors can deduct from income CZK 1,000 (ca. €€ 34) or 2% of earnings to a maximum of 10% of the tax assessment. For corporation taxpayers, donations of at least CZK 2,000 (ca. €€ 67) up to 5% of taxable profit are deductible. Can be set off against tax only for recognized NPAs (list of the tax authorities). Private and corporate donors can deduct single donations of at least DKK 500 (ca. €€ 67) to a maximum of DKK 5,000 (ca. €€ 672) without claiming the first DKK 500; in addition, contractually backed-up donations of up to 15% of capital earnings (or profit) and up to DKK 15,000 (ca. €€ 2,015), if the 15% is below this amount. Donations of private persons to registered associations are deductible from the tax base up to an amount of 5% of earnings. Donations of corporate bodies to registered associations are tax deductible up to 3% of the current taxable earnings or 10% of the previous year profit. Donations to foreign associations are deductible if these are registered and liable to tax in Estonia. The receipt of donations and membership fees is basically tax exempt. If a donation supports the business activity, a type of “indirect” taxation occurs via the deduction of the donation amounts from depreciable capital stock. Private persons: Donations and membership fees are not deductible. Corporate bodies: Membership fees are not deductible. Donations in amounts of at least €€ 850 to a nonprofit association supporting the Finnish cultural heritage with a seat in Finland can be claimed in the corporate tax declaration. Donations ranged from €€ 850 to €€25,000 that go to an association with a domestic seat and that exclusively pursues scientific or artistic purposes can be deducted from tax. If the seat of an association is abroad, the tax deduction cannot be claimed. (continued)

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Table 2 (continued) Country France

Germany

Greece

Hungary

Ireland

Italy

Tax Rules Monetary and material donations of private persons to recognized NPAs can be deducted from income tax to an amount of 60% of the donated amount but to a maximum of 10% of taxable earnings. Also donations to foreign associations with activities in France are deductible. Donations of enterprises are deductible from income or corporate tax of up to 60% of their amount but to a maximum of 5% of turnover. If this limit is exceeded in a year, the excess amount can be deducted in the following 5 years. Membership fees are deductible from income tax in amounts of 50% (for recognized NPAs or those active in special areas: science, family, culture, etc.). Foreign associations must apply for recognition of nonprofit character according to French law to attain the same rights as French associations. Donations are eligible in general for deductions to an amount of 5% of the total amount of income within the framework of income tax (special cases: increased deductible of 10%). The actual value is applied to goods donations and the book value is applied to business assets. Services can be recognized as voluntary donations only if there is a clear legal claim for a reimbursement of expenses. Direct donations to foreign NPAs are not deductible, but indirect donations can qualify. Membership fees are deductible only for selected NPAs. Private persons: Donations of up to 10% are deductible from taxable earnings; if the donation is above €€2,950, 10% withholding tax is applied. Corporate bodies: Transfers via specific public banks required. If the donation is above €€2,950, 10% must be paid to a public bank. Goods donations and donations to foreign associations are not deductible. Donations of private individuals are deductible up to the amount of 30% of the tax (a maximum of ca. €€ 206 for general and ca. €€410 for particular NPAs; for permanent donation commitments, an additional 5 percentage points). Private persons can donate 1% of their income tax to NPAs and a further 1% to churches. Goods donations are not recognized. Donations of corporations reduce the tax assessment to the full amount, in the case of permanent commitments to an increased value of 20%. The common deductible limit for permanent and nonpermanent donations stands at 20% of profit before taxes. For particular NPAs, 150% of the donation is deductible and a further 20% for a permanent commitment. The common limit of the deduction here stands at 25% of profit before taxes. For corporations also material donations and services are recognized. Goods donations are assessed at book value, services at the cost price. Monetary donations of at least €€250 to charities that are tax exempt for at least 3 years are deductible. If there is no link between donors and charities, the deduction is not limited; otherwise, donations are capped at 10% of annual income. Goods donations are not deductible. Private persons: Donation is made from net earnings after taxation but the charity can be reimbursed for the paid income tax. Corporate bodies can take a tax benefit to the amount of the corporate tax that applies to the donation. Membership fees are tax exempt to a maximum of 10% of annual income. Donations to associations with seats abroad are not tax deductible. Donations are deductible from income tax. For private individuals or business partners 19% of amounts up to €€ 2,065.80 are deductible. Corporations can deduct amounts of up to €€ 2,065.80 from corporate profits or 2% of profits. Donations to foreign associations with a seat in Italy and registered in an Italian regional registry are treated as domestic associations. (continued)

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Table 2 (continued) Country Japan

Latvia

Lithuania

Luxembourg

Malta Netherlands

Poland

Portugal

Slovakia

Tax Rules Donations and membership fees are deductible from income tax. If the member or the donor is a domestic society liable to corporate tax, a specific amount can be deducted from the tax assessment base. Yet, the following amounts cannot be exceeded: Deductible amount = (1/2) × (2.5% of entire annual income of the contributor + 0.25% of asset value of the contributor). Special deduction rules for donations apply for selected domestic NPAs. Donations of private persons to registered NPAs are deductible for up to 20% of the taxable earnings of the donor. Corporate bodies can deduct 85% of the donation sum to registered NPAs from corporate tax. The tax deduction is at most 20% of the entire tax amount. Donations of private persons are deductible in amounts of up to 2% of their earnings. Corporate donations are deductible up to twice the amount of the donation but not more than 40% of taxable earnings. Donations to foreign NPAs are only deductible if the association is recognized as a nonprofit in Lithuania. Goods donations and services are deductible at their respective procurement prices. Membership fees can also be deducted from tax. Donations of private persons of more than €€ 124 or 10% of net income of up to ca. €€ 250,000 are deductible. The same rule applies to donations of enterprises. Goods donations are deductible at book value. Donations to NPAs abroad are not deductible, neither are membership fees. Money and material donations to recognized NPAs are exempt from income tax. Periodic donations of private persons to recognized NPAs are fully deductible; other donations only if they are more than €€ 60 and between 1% and 10% of taxable earnings. Donations of enterprises of at least €€ 227 are deductible to a maximum of 6% of taxable income. Donations both of private persons and of enterprises to foreign associations are deductible if these associations are listed with the tax authorities. Private individuals: Donations of up to PLN 350 (ca. €€ 90) are deductible from the tax assessment or up to 1% of tax can be given to a domestic nonprofit association. Corporate bodies: Up to 10% of profits can be donated and deducted from tax. Donated goods and services are assessed at their respective procurement prices. Membership fees are exempt from corporate tax for the recipient only if they are not used for a commercial activity. For donors, membership fees to domestic or foreign NPAs are not tax deductible. Private individuals: Monetary or material donations to associations with social, cultural, environmental, scientific, technological, athletic, or educational aims can be deducted to the amount of 25%, but the amount cannot exceed 15% of tax due. Corporate bodies: Donations supporting general social activities are recognized to an amount of 0.8% of sales turnover and are included in costs at 130% for tax allowance. Donations for promoting cultural, environmental, scientific, technological, athletic, or educational activities are recognized to an amount of 0.6% of the sales turnover and are included in the tax allowance at a rate of 120% or at a rate of 130% in cases of donation assurances of several years. Private persons and corporate bodies can donate 2% of their paid income tax to a nonprofit association (for the case of corporate bodies a distribution among several associations is possible). For private individuals a minimum of SKK 20 (ca. €€0.5) is necessary, for corporate bodies at least SKK 250 (ca. €€ 6.50) per donation. (continued)

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Table 2 (continued) Country Slovenia Spain

Sweden United Kingdom

United States

Tax Rules Private individuals: Donations are tax deductible up to 3% of earnings. Corporate bodies: Donations are deductible up to 0.3% of the enterprise’s earnings. Private individuals: 25% of the donation to organizations such as UNICEF are deductible from income tax; 30% of the donation for major cultural-sponsoring activity is deductible but a maximum of 15% of the tax base; 10% of a donation to NPAs can be deducted from income tax amount (also applies to membership fees). Corporate bodies: A maximum of 10% of the tax base can be deducted. If the acquisition value is known in the case of material donations, this is given as the donation value. Otherwise a committee decides on the value of the donation, whereby the market value must not be exceeded. For donations to foreign NPAs, no laws exist. Cannot be deducted from tax. There are different forms of donations. Within the framework of payroll giving, monthly donations are directly deducted from gross salary. The donation recipient can only be a charity with a domestic seat. No tax-preferential treatment for donations to a foreign association. A gift aid is a donation in monetary form and out of taxable income. The receiving charity can be reimbursed for the paid income tax, however. Membership fees are deductible only if they do not carry with them the right that the facilities and services offered by the charity can be used personally. Charitable contribution to a number of selected NPAs (e.g., churches, nonprofit schools and hospitals, public parks, etc.) in the form of money, material, or services as well as membership fees can be deducted from federal income tax. The limit is a maximum of 50% of adjusted gross yearly income. A 30% limit applies to donations to veterans organizations, fraternal societies, nonprofit cemeteries, private nonoperating foundations, and so on. A special 30% limit also applies for gift of capital gain property to the aforementioned 50% limit organizations, whereas the 20% limit applies for the same type of gift to other qualified NPAs. If this limit is exceeded, the amount can be carried over into the following 5 years. If the (cash as well as noncash) donation is more than $250 (ca. €€ 190), the donor needs a written confirmation for tax deductions. Goods donations are usually assessed at market value on the date of the donation. Yet special value determination rules apply for the contribution of clothing and household items, vehicles, property subject to a debt, a partial interest in property, business inventory, a patent or intellectual property, and so on. For services, the accruing expenses are deductible.

Source: European Commission Taxes in Europe Database; International Bureau of Fiscal Documentation; International Center for Not-for-Profit Law (ICNL); Mennel and Förster (2004); Hopt, Walz, von Hoppel, and Then (2006); Friedrich, Kaltschütz, Nam, Parsche, and Wellisch (2005); various relevant tax document released by national authorities including the Internal Revenue Service (IRS) and the Charity Commission.

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the same status to NPAs from other EU countries as to domestic associations, even if the foreign associations have no domestic base. No preferential tax treatment of donations made to NPAs with seats abroad is granted in Finland, Ireland, Luxembourg, and the United Kingdom. With respect to direct donations to NPAs based abroad, German regulations are similarly restrictive as the tax rules in most of the countries examined, but for domestic associations with charity and voluntary activities abroad an indirect solution is planned: If the society’s statutes allow the use of the funds or if it is a supporting association whose statutes include activities in foreign countries, donations to such associations receive preferential tax treatment (see also Bundesministerium der Finanzen, 2006). Membership fees paid by individuals and corporate entities to NPAs are usually not deductible when calculating the member’s taxable income. This is explicitly regulated in Austria, Finland, Luxembourg, Poland, and Sweden, for example. However, consideration is in part possible in many countries (e.g., in Ireland, Japan, and Slovakia). Rules also exist in France and Germany that membership fees for certain special NPAs are at least partly tax deductible. In the United States such payments are deductible from the federal income tax (Gruber, 2004; Mennel & Förster, 2004). In contrast to monetary donations, the assessment of the rules relating to donations of goods and services is rather problematic. In Austria, Germany, and the United States the market value of a donated good is usually used. Yet for donations in the form of business property the fair-value approach is applied. On the other hand, services can be recognized in Germany as a voluntary donation in cases of a clear legal claim for reimbursements of expenses (see Table 2).

Inheritance and Gift Taxes The tax rules concerning bequests and gifts made by individuals and corporate bodies to NPAs also differ considerably from country to country. In principle, anyone may freely bequeath his or her property to an association completely or in part, but some countries have restrictive rules such that only associations with special recognition, registration, or special government approval are entitled to receive such gifts (e.g., Italy). If the association only has a limited legal capacity to acquire and hold rights and duties, special permission is the normal case (Raiffeisenverband Südtirol, 2000). As shown in Table 3, testamentary donations are not taxable in countries such as Cyprus, Estonia, Italy, Latvia, Malta, Portugal, Slovakia, and Sweden (since the beginning of 2005). In some EU member states, for example in Germany, Poland, and the United Kingdom, testamentary donations to NPAs are tax exempt for both the recipient and the deceased (Mennel & Förster, 2004). Domestic NPAs (to some extent only those particularly recognized) are basically tax exempt as recipients also in Belgium, the Czech Republic, Denmark, Finland,

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Greece, Hungary, Japan, Spain, and the United States (donations are tax exempt at the federal level, and this is also possible at the state level as shown by Poterba, 2001). Donations of goods and account receivables (donations in cash form) to a nonprofit association are tax exempt in Austria if the use of the donation is for the stated purpose of the association. France usually levies an inheritance tax on associations; the donations are tax exempt only for associations active in special areas. In the Netherlands, too, inheritance and gift taxes are levied, but NPAs can apply for exemptions (Friedrich et al., 2005). Only few countries in Europe apply the same preferential tax treatment to foreign NPAs as to domestic associations. Belgium and Austria, for example, give preferential treatment for the pursuit of tax-deductible purposes also in foreign countries. In Germany, contributions to foreign NPAs are only tax free if the use for nonprofit purposes is guaranteed, namely, if this is certified by an authority of the foreign country. On the other hand, countries such as France require of foreign NPAs that they apply for recognition of their nonprofit character based on French law. In Greece, tax exemptions apply, subject to the principle of mutuality, also for all foreign corporate entities with regard to property to be inherited in Greece. The donor is tax exempt in Austria, the Czech Republic, France, Greece, Hungary, Ireland, Japan, Luxembourg, and the Netherlands. In Belgium by contrast, an inheritance or gift tax is levied at the donor level, although reduced rates apply (Table 3). In the United States an unlimited deduction applies to the federal estate and gift taxes for charitable gifts not only to domestic but also foreign charities. In Spain gifts are treated as donations, namely, they can be taken into consideration to a certain extent when computing tax liabilities (Marcuello & Salas, 2001). In Finland only corporate bodies can receive partial tax exemption for donations. There are currently few double taxation conventions aiming at the prevention of tax avoidance or double taxation for gift taxes. Germany has concluded such agreements only with Austria, Denmark, Greece, Sweden, the United Kingdom, and the United States (Mennel & Förster, 2004). In the case of cross-border gifts in other EU countries, uncertainty prevails.

Conclusion The international comparison of the taxation of NPAs has shown that the different legal traditions of the examined countries are quite evident. This complicates a comparison of tax rules, especially because the legal systems behind the association regulations are differently constructed. In general, groups of the examined countries can be formed in which the regulations concerning NPAs are similar. The German legal tradition has influenced regulations in Austria, Luxembourg, and the Netherlands. Association law is similar in all Scandinavian countries. The Belgian rules are strongly influenced by French law. Association law of an Anglo-Saxon background is to be

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Table 3 Inheritance and Gift Taxes of Nonprofit Associations (NPAs) in an International Comparison Country Austria

Belgium

Cyprus Czech Republic Denmark

Estonia Finland

France

Germany

Greece

Hungary

Tax Rules A linear tax rate of 2.5% is applied for inheritances, of which €€ 110 is exempt. Gifts made by public bodies to a nonprofit association are completely tax exempt. Material and monetary gifts to a domestic nonprofit association are tax exempt if used in accordance with the association’s purpose. The nonprofit purpose can also be pursued abroad. If a double taxation convention exists, this also applies to foreign associations but not for inheritances. For inheritance tax a double taxation convention exists between Austria and Germany, for example. No general exemption. Inheritance tax rate for NPAs in Belgium in general: 8.8% (reduced rate; regional deviations possible). Gift tax rate for NPAs—Wallonia and Brussels: in general 8.8%, Flanders: 7%. Tax is to be paid by the donor. The same applies to inheritances and gifts to NPAs within the EU. No inheritance or gift tax obligation. Donations to NPAs are exempt from inheritance and gift tax. An exemption from the inheritance tax is granted only to recognized NPAs (list of the tax authorities). For inheritance tax a double taxation convention exists between Denmark and Germany. NPAs are tax exempt for all assets that they receive as heirs or legacy recipients. Gifts are treated as donations. Recipient NPAs with a seat in Finland are tax exempt. Gifts in the form of goods or rights are tax exempt. Private individuals: no exemptions. Corporate bodies: Donations to an amount of at least €€850 to a nonprofit association, supporting the Finnish cultural heritage with seat in Finland, are tax deductible. Gifts or donations of €€ 850 to €€ 25,000 that go to an association that exclusively pursues scientific or artistic purposes can also be deducted from tax. Associations with seats abroad are taxable unless there are other regulations based on international tax agreements. Recognized NPAs pay 35% on donation amounts below €€23,000 and 45% above that (normal tax rate: 60%). Only NPAs active in special fields (science, charity, culture, and higher education) are tax exempt. Foreign associations must apply for recognition of the nonprofit character according to French law to attain the same rights as French associations. NPAs (also foreign) are tax exempt for all assets that they receive as recipients of inheritances or estates or as beneficiaries of donations. For the donor, no tax obligation results. Due to the tax exemption no problems result regarding the assessment of property value. Normally in the case of land the gross rental method is applied, namely, the value of property is determined by applying statutory multipliers to the annual rental. Double taxation conventions currently exist with Austria, Denmark, Greece, Sweden, the United Kingdom, and the United States. NPAs with a seat in Greece (also foreign) that pursue charitable purposes, education, or purposes of national interest are exempt. Double taxation conventions exist with Germany, Italy, Spain, and the United States. In the case of inheritances and gifts, a duty charge applies. NPAs are fully exempt from the charges. (continued)

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Table 3 (continued) Country Ireland

Italy Japan

Latvia Lithuania

Luxembourg

Malta Netherlands Poland

Portugal Slovakia Slovenia Spain Sweden United Kingdom

United States

Tax Rules If inheritances, gifts, or donations are used exclusively for the nonprofit purpose of a charity, the tax obligation is lifted. This also applies to the transfer of material property, which is assessed according to its market value. Foreign NPAs are not exempt from inheritance and gift taxes. An inheritance and gift tax no longer exists. Donations for nonprofit purposes are tax exempt. Taxes to be paid abroad for inheritance or donations can be set off against Japanese taxes. An inheritance tax agreement exists only with the United States. There is neither an inheritance nor a gift tax. If the gift is booked as “sponsoring,” the rules for donations apply. Otherwise, gifts and inheritances are subject to income tax if their value is double that of the socalled nontaxable amount of earnings (NTIA). Payments in kind are deductible up to LTL 250 (ca. €€ 72). For corporate bodies: The depreciated value of real estate is to be applied. Movable properties are assessed at their acquisition costs; services at their costs. For private individuals the market value always applies. For foreign NPAs the same rules apply if they are exempt from inheritance and donation tax according to the law on charity and sponsoring. For NPAs the tax rate for gifts and inheritances is 6%. In the case of NPAs, no inheritance or gift tax applies for the donor. For NPAs abroad no preferential treatment exists. There is neither an inheritance nor a gift tax. Domestic NPAs are exempt for inheritances up to €€ 8,602 and for gifts up to €€4,143; otherwise, a reduced tax rate of 8% applies. Domestic and foreign NPAs are exempt from inheritance and gifts taxes. For private individuals, gifts or donations are deductible to a maximum of €€90. Corporate bodies may donate up to 10% of their profits tax free. Double taxation agreements exist with Austria, the Czech Republic, and Hungary. NPAs are exempt from inheritance and gift taxes. The double taxation convention between Portugal and Germany does not include the inheritance tax. There is neither an inheritance nor a gift tax. NPAs are exempt from inheritance and gift taxes. For corporate bodies, corporate tax is applied instead of inheritance or gift tax. NPAs are exempt from corporate tax for activities in line with their statutes. Eliminated since January 1, 2005. No inheritance tax obligation. Gifts or donations of natural or corporate bodies in the form of bonds and other capital investments are given preferred treatment. No tax obligation exists for charities in cases of donations in the form of bonds, buildings, or property. The federal estate and gift tax has an unlimited deduction for charitable gifts. In addition, almost all states have their own inheritance tax.

Source: European Commission Taxes in Europe Database; International Bureau of Fiscal Documentation; International Center for Not-for-Profit Law (ICNL); Mennel and Förster (2004); Hopt, Walz, von Hoppel, and Then (2006); Friedrich, Kaltschütz, Nam, Parsche, and Wellisch (2005); various relevant tax document released by national authorities including the Internal Revenue Service (IRS) and the Charity Commission.

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found in the United Kingdom, Ireland, Malta, and Cyprus. In the Eastern European countries, the construction of civil society is still in progress. Here association law is being developed from funds and socialist organizations. Recently, many new regulations have been issued in these countries concerning nonprofit associations. The tax privileges applied to NPAs that provide collective goods and services can be justified for they not only help to overcome free-rider tendencies but also stimulate the behavior of warm-glow and impact philanthropists while increasing their products and organizational revenues. Apart from the positive employment effects created, the continued growth of charity and voluntary activities accompanied by generous financial contributions of citizens has also contributed to relieving public budgets because activities taken over by NPAs often mean that the government does not need to provide such collective goods and services. However, countries should not provide excessive tax advantages that hinder competition in some NPA activities. For instance, the German Ministry of Finance doubts the cost-consciousness of voluntary welfare organizations in Germany and suggests that generous tax subsidies have been unable to induce these entities to produce the desired level of services at reasonable prices (Bundesministerium der Finanzen, 2006). Rather, their effects seem to have been detrimental to efficient resource allocation. A narrow legal definition of eligible nonprofit activities is an option to solve this problem. In this context it should also be borne in mind that the status of NPAs also needs regulation and surveillance because among others, these characteristics are crucial prerequisites for enjoying tax and other financial privileges.

Notes 1. Donations are important for nonprofit associations (NPAs) because the collective good nature of much of their output limits user fees as a source of revenue (Okten & Weisbrod, 2000). Despite the substantial tax subsidy to giving in developed countries, few studies have examined the effects of corporate income tax on contributions, and the little available evidence is inconclusive, in sharp contrast to the large sum of references on individual donations (Carroll & Joulfaian, 2005). 2. A fractional crowding-out is also most commonly encountered in empirical investigations (Brooks, 2000; Kingma, 1989). 3. There is also strong agreement in the regulations related to sales turnover tax in the EU. This can be traced back to the Sixth VAT Directive (Sixth Directive 77/388/EEC of May 17, 1977). According to Article 13, Part A, Paragraph 1 of this directive, member states are obliged to grant exemption from VAT for “certain activities that benefit the general common welfare.” This includes many activities engaged in by NPAs in fulfilling their purposes such as hospital and medical care, services closely linked with social welfare and social security as well as services and provision of goods combined with child and youth care, and the upbringing and education of children and adolescents. A VAT obligation does exist, however, for NPAs if their revenue comes from commercial activity, whereby the definitions and in particular the turnover limits beyond which a tax obligation sets in can vary from one country to another. 4. In the following the term society is used even though in some countries societies as commonly defined in Germany do not exist. 5. As is the case in the United States there are also three primary legal forms of voluntary associations in the United Kingdom: company limited by guarantee (corporate association) and trust, both with legal

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identity, and unincorporated association. According to the information provided by the Internal Revenue Service (IRS) in the United States and the Charity Commission in the United Kingdom, corporate associations offer membership, whereas unincorporated types are usually more suitable for groups with low incomes, not employing staff or acquiring property. 6. There are private and public foundations in the United States. Public foundations are mostly community foundations. Private foundations are further classified into the operating and nonoperating types. The private operating foundations use the bulk of their resources to provide charitable services or run charitable programs of their own. In general they do not raise funds from the public. The nonoperating types are also tax-exempt, grant-making entities that solely provide financial supports to other charitable organizations. Also in Austria, for example, the differentiation between private and public foundations exists. Compared to the case with public foundations, however, private entities offer different tax deductions for gifts and donors and enjoy less generous income tax privileges (Hopt, Walz, von Hoppel, & Then, 2006; Mennel & Förster, 2004). 7. In addition, private foundations pay excise tax in the United States. 8. In the United States, income tax subsidies to charities and NPAs vary across states because (a) Some states have no state income tax system, (b) tax rates vary across the states that do have income taxes, both on average and in terms of the progressivity of tax rate schedules, and (c) states differ in their treatment of charitable contribution. In terms of the last factor, a number of states follow the federal definition of income, so that charitable contributions [i.e., donations] are fully deductible for itemizers; others ask the taxpayer to explicitly report (and deduct) their federally itemized amounts from their state taxable income; and a final set of states does not allow a deduction for charitable contributions. (Gruber, 2004, pp. 2642-2643) 9. In Irish law, the term charity includes all NPAs.

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Duncan, B. (2004). A theory of impact philanthropy. Journal of Public Economics, 88, 2159-2180. Friedrich, P., Kaltschütz, A., Nam, C. W., Parsche, R., & Wellisch, D. (2005). Die Besteuerung gemeinnütziger Organisationen im internationalen Vergleich. ifo Forschungsbericht 24 [Taxation of nonprofit organizations in international comparison. Ifo Research Report 24]. Munich: Ifo Institute for Economic Research. Glaeser, E. L., & Shleifer, A. (2001). Not-for-profit entrepreneurs. Journal of Public Economics, 81, 99-115. Gruber, J. (2004). Pay or pray? The impact of charitable subsidies on religious attendance. Journal of Public Economics, 88, 2635-2655. Hopt, K. J., Walz, W. R., von Hoppel, T., & Then, V. (Eds.). (2006). The European foundation. Gütersloh, Germany: Verlag Bertelsmann Stiftung. Hughes, P. N., & Luksetich, W. (1999). The relationship among funding sources for art and history museums. Nonprofit Management & Leadership, 10, 21-37. Kingma, B. (1989). An accurate measure of the crowding-out effect, income effect, and price effect for charitable contributions. Journal of Political Economy, 97, 1197-1207. Marcuello, C., & Salas, V. (2001). Nonprofit organizations, monopolistic competition, and private donations: Evidence from Spain. Public Finance Review, 29, 183-207. Mennel, A., & Förster, J. (2004). Steuern in Europa, Amerika und Japan. Herne, Germany: NWB Verlag. Okten, C., & Weisbrod, B. A. (2000). Determinants of donations in private nonprofit markets. Journal of Public Economics, 75, 255-272. Poterba, J. (2001). Estate and gift taxes and incentives for inter vivos giving in the US. Journal of Public Economics, 79, 237-264. Raiffeisenverband Südtirol. (2000). Non-Profit-Organisationen Onlus, Ein Handbuch für die Praxis [Non-Profit-Organisations Onlus: A handbook for the practice]. Bolzano, Italy: Author. Roberts, R. D. (1987). Financing public goods. Journal of Political Economy, 95, 420-437. Romano, R., & Yildirim, H. (2001). Why charities announce donations: A positive perspective. Journal of Public Economics, 81, 423-447. Rose-Ackermann, S. (1996). Altruism, nonprofits, and economics. Journal of Economic Literature, 34, 701-728. Salamon, L. M., & Anheir, H. K. (1996). The emerging nonprofit sector: An overview. New York: Manchester University Press. Sargeant, A., & Lee, S. (2004). Donor trust and relationship commitment in the U.K. charity sector: The impact on behavior. Nonprofit and Voluntary Sector Quarterly, 33, 185-202. Schiff, J. (1985). Does government spending crowd out charitable contributions. National Tax Journal, 38, 535-546. Simmons, W. O., & Emanuele, R. (2004). Does government spending crowd out donations of time and money? Public Finance Review, 32, 498-511. Warr, P. G. (1983). The private provision of a public good is independent of the distribution of income. Economic Letters, 13, 207-211. Weisbrod, B. A. (1988). The nonprofit economy. Cambridge, MA: Harvard University Press. Wu, S. Y. (2004). Tax effects on charitable giving in the presence of uncertainty. Public Finance Review, 32, 459-482.

Anita Dehne is a PhD candidate at the Ludwig Maximilian University Munich and a junior researcher at the Department of Public Finance of the Ifo Institute for Economic Research. Her major research fields are income taxation and budget analysis. Peter Friedrich is the professor for public economics at the University of Federal Armed Forces Munich. He has carried out a huge number of studies on public finance and administration as well as regional science.

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Chang Woon Nam is a senior researcher at the Department of Public Finance of the Ifo Institute for Economic Research. His major research interests are corporate taxation and regional science. Rüdiger Parsche is a senior researcher at the Department of Public Finance of the Ifo Institute for Economic Research. He is a well-known expert on the issues of VAT taxation, tax revenue analyses, and fiscal federalism.

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