In Algeria, nonprofit organizations are regulated by Law No. 12-06 of 12 January 2012 on Associations. This law provides guidelines for the establishment, registration, and operation of nonprofit organizations. It sets out the requirements for formation, membership, governance, financial reporting, and dissolution of associations. Nonprofit organizations are required to register with the local authorities to obtain legal recognition and must comply with reporting obligations as stipulated by the law.[1]
Algeria, during its third and fourth UN Human Rights Council universal periodic reviews, made a commitment to revoke Law No.12-06 of 2012 concerning associations and develop a new legislation. These reviews highlighted the significant limitations imposed by the existing law on the formation of associations, the registration procedures, funding, and the discretionary authority of the administration when it came to dissolving associations.[2]
Australia
In Australia, nonprofit organizations include trade unions, charitable entities, co-operatives, universities and hospitals, mutual societies, grass-root and support groups, political parties, religious groups, incorporated associations, not-for-profit companies, trusts and more. Furthermore, they operate across a multitude of domains and industries, from health, employment, disability and other human services to local sporting clubs, credit unions, and research institutes.[3] A nonprofit organization in Australia can choose from a number of legal forms depending on the needs and activities of the organization: co-operative, company limited by guarantee, unincorporated association, incorporated association (by the Associations Incorporation Act 1985) or incorporated association or council (by the Commonwealth Aboriginal Councils and Associations Act 1976).[4] From an academic perspective, social enterprise is, for the most part, considered a sub-set of the nonprofit sector as typically they too are concerned with a purpose relating to a public good. However, these are not bound to adhere to a nonprofit legal structure, and many incorporate and operate as for-profit entities.
In Australia, nonprofit organizations are primarily established in one of three ways: companies limited by guarantee, trusts, and incorporated associations. However, the incorporated association form is typically used by organizations intending to operate only within one Australian state jurisdiction. Nonprofit organizations seeking to establish a presence across Australia typically consider incorporating as a company or as a trust.[5]
Belgium
Under Belgian law, there are several kinds of nonprofit organization:
Non-profit associations by membership, called Vereniging zonder winstoogmerk (abbreviated VZW) in Dutch, or Association sans but lucratif (abbreviated ASBL) in French, or Vereinigung ohne Gewinnerzielungsabsicht in German.
Internationale vereniging zonder winstoogmerk (Dutch, often abbreviated IVZW) or Association internationale sans but lucratif (French, often abbreviated AISBL) for international nonprofit organizations.
Stichting van openbaar nut (Dutch, abbreviated SON) or Fondation d'utilité publique (French, abbreviated FUP); a private non-membership organization for the common good.
Feitelijke vereniging (Dutch) or Association de fait (French), an informal organization, often started for a short-term project, or managed alongside another NPO that does not have any status in law, and thus cannot purchase property, etc.
Vereniging zonder winstoogmerk (Dutch, abbreviated VZW) or Association sans but lucratif (French, abbreviated ASBL) or Vereinigung ohne Gewinnerzielungsabsicht (German, abbreviated VoG) is the legal term for a basic non-profit organization in Belgium and Luxembourg. It is a formal designation under Belgian and Luxembourg law, and organisations are entered in a register and allocated numeric identifiers.
Internationale vereniging zonder winstoogmerk (Dutch, often abbreviated IVZW) or Association internationale sans but lucratif (French; often abbreviated AISBL) or Internationale Vereinigung ohne Gewinnerzielungsabsicht (German; often abbreviated IVoG) is the legal term used in Belgium for an internationally acting non-profit organization based on Belgian law and located in Belgium.[6]
Importance of the association without lucrative purpose in the Belgian economy
It is estimated that 497,400 employees work for associations without lucrative purpose in Belgium.[7] The international associations without lucrative purpose employ an estimated 20,000 to 30,000 people in Belgium. Brussels is the second largest city in terms of housing of international associations after Washington, DC. The category includes among others professional associations, foundations and NGOs.[8]
Legal reform of the associations without lucrative purpose rules
In 2019, Belgium adopted new legal rules for private companies which also cover associations without lucrative purpose.[9] The new rules allow the association without lucrative purpose to exercise any commercial activity. They are, however, not allowed to distribute their profits.
Associations without lucrative purpose have been in the past criticized for their poor management practices. In response, the new rules also increase the liability for the administrators of an association without lucrative purpose with respect to the association.[10][11][12][13]
Burundi
In January 2017, Burundi announced an entry-into-force of a new law governing foreign NGOs. This law introduced ethnic quotas on foreign NGOs, designating that local staff must remain 60 percent Hutu and 40 percent Tutsi.[14] In October 2018, Burundi's National Security Council announced an immediate suspension of a large number of foreign NGOs, with the exemption[15] of hospital and school-based organizations.[16][17] The suspended NGOs were required to present four documents reinforcing the organizations' commitment to banking regulations and ethnic staffing quotas, among others; or face deregistration.[16]
Canada
Canada allows nonprofit organizations to be incorporated or unincorporated. They may incorporate either federally, under Part II of the Canada Business Corporations Act, or under provincial legislation. Many of the governing Acts for Canadian nonprofits date to the early 1900s, meaning that nonprofit legislation has not kept pace with legislation that governs for-profit corporations, particularly with regards to corporate governance.[citation needed] Federal, and in some provinces (including Ontario), incorporation is by way of Letters Patent, and any change to the Letters Patent (even a simple name change) requires formal approval by the appropriate government, as do bylaw changes. Other provinces (including Alberta) permit incorporation as of right, by the filing of Articles of Incorporation or Articles of Association.
During 2009, the federal government enacted new legislation repealing the Canada Corporations Act, Part II – the Canada Not-for-Profit Corporations Act. This Act was last amended on 10 October 2011, and the act was current until 4 March 2013.[18] It allows for incorporation as of right, by Articles of Incorporation; does away with the ultra vires doctrine for nonprofits; establishes them as legal persons; and substantially updates the governance provisions for nonprofits. Ontario also overhauled its legislation, adopting the Ontario Not-for-Profit Corporations Act during 2010; the new Act is expected to be in effect as of 1 July 2013.
Canada also permits a variety of charities (including public and private foundations). Charitable status is granted by the Canada Revenue Agency (CRA) upon application by a nonprofit; charities are allowed to issue income tax receipts to donors, must spend a certain percentage of their assets (including cash, investments, and fixed assets) and file annual reports in order to maintain their charitable status. In determining whether an organization can become a charity, CRA applies a common law test to its stated objects and activities. These must be:
The relief of poverty
The advancement of education
The advancement of religion, or
Certain other purposes that benefit the community in a way the courts have said is charitable[19]
Charities are not permitted to engage in partisan political activity; doing so may result in the revocation of charitable status. However, a charity can carry out a small number of political activities that are non-partisan, help further the charities' purposes, and subordinate to the charity's charitable purposes.[20]
Ethiopia
On March 12, 2019, the government of Ethiopia enacted a new law on civil society organizations (CSOs), the Organization of Civil Societies Proclamation No. 1113/2019 (CSO Proclamation). The CSO Proclamation replaces the Proclamation of Charities and Societies No. 621/2009 (2009 Proclamation).[21] The 2009 Proclamation was criticized by many NGOs as extremely restrictive, requiring NGOs to report to the Charities and Societies Agency; NGOs were also required to follow a '70/30' rule in which organizations were to allocate 70 percent of their budget to operational costs and 30 percent to administrative costs.[22]
France
In France, nonprofits are called associations. They are based on a law enacted 1 July 1901. As a consequence, the nonprofits are also called association loi 1901.
A nonprofit can be created by two people to accomplish a common goal. The association can have industrial or commercial activities or both, but the members cannot make any profit from the activities. Thereby, worker's unions and political parties can be organized from this law.
In 2008, the National Institute of Statistics and Economic Studies (INSEE) counted more than a million of these associations in the country, and about 16 million people older than 16 are members of a nonprofit in France (a third of the population over 16 years old). The nonprofits employ 1.6 million people, and 8 million are volunteers for them.[23]
The Hong Kong Company Registry provides a memorandum of procedure for applying to Registrar of Companies for a Licence under Section 21 of the Companies Ordinance (Cap.32) for a limited company for the purpose of promoting commerce, art, science, religion, charity, or any other useful object.[24][25]
India
In India, non-governmental organizations are the most common type of societal institutions that do not have commercial interests. However, they are not the only category of non-commercial organizations that can gain official recognition. For example, memorial trusts, which honor renowned individuals through social work, may not be considered as NGOs.[26][failed verification]
They can be registered in four ways:
Trust
Society
Section-25 company (Section 8 as per the new Companies Act, 2013)
Registration can be with either the Registrar of Companies (RoC) or the Registrar of Societies (RoS).
The following laws or Constitutional Articles of the Republic of India are relevant to the NGOs:
Articles 19(1)(c) and 30 of the Constitution of India
Income Tax Act, 1961
Public Trusts Acts of various states
Societies Registration Act, 1860
Section 25 of the Indian Companies Act, 1956 (Section 8 as per the new Companies Act, 2013)
Foreign Contribution (Regulation) Act, 1976.
Israel
In Israel nonprofit organizations (NPOs) and non-governmental organizations (NGOs) are usually established as registered nonprofit associations (Hebrew: עמותה, amutah; plural: עמותות, amutot) or public benefit companies (Hebrew: חברה לתועלת הציבור, Chevrah LeTo’elet Hatzibur or חל”צ, Chalatz, not to be confused with public benefit corporations). The structure of financial statements of nonprofit organizations is regulated Israel's Accounting Standard No. 5, and must include a balance sheet, a report on activities, the income and expenditure for the particular period, a report on changes in assets, a statement of cash flows, and notes to the financial statements. A report showing the level of restriction imposed on the assets and liabilities can be given, though this is not required.
Amutot are regulated by the Associations Law, 1980[he]. An amutah is a body corporate, though not a company. The amutah is successor to the Ottoman Association[he] which predated the State of Israel, and was established by the now-superseded 1909 Ottoman Law on Associations, based on the French law of 1901. Public benefit companies are governed solely by company law; if their regulations and objectives meet the two conditions specified in Section 345A of the Companies Act, they will in effect be amutot in all but name.
An amutah must register with the Rasham Ha’amutot (רשם העמותות, 'Registrar of Amutot'); a public benefit company must register with the Rasham HaChavarot (רשם החברות, 'Registrar of Companies'). Both are under the purview of the Rashot Hata’agidim (רשות התאגידים, 'Corporations Authority') of the Ministry of Justice.
Japan
In Japan, an NPO is any citizen's group that serves the public interest and does not produce a profit for its members. NPOs are given corporate status to assist them in conducting business transactions. As at February 2011, there were 41,600 NPOs in Japan. Two hundred NPOs were given tax-deductible status by the government, which meant that only contributions to those organizations were tax deductible for the contributors.[27]
Kenya
Since 1990, the rights and obligations of nonprofits in Kenya have been regulated by the NGO Coordination Act, which in the eyes of many CSOs and even some politicians contains arduous and complex conditions for the sector. In 2013, the Public Benefits Organizations (PBO) Act was drafted as a replacement, aiming for a more transparent and efficient legal framework. However, it did not enter into force due to the general elections in March 2013.[28]
Government-NGO relations deteriorated after the elections, primarily due to the involvement of Kenyan human rights NGOs in providing evidence against the new president and vice president to the International Criminal Court (ICC) regarding the post-election violence in 2007–2008. Local NGOs formed a protest coalition under the Civil Society Organizations Reference Group (CSORG) and adopted a two-track approach of lobbying MPs and mobilizing the public. They highlighted the negative socioeconomic impacts of the amendments, emphasizing the importance of the NGO sector for the Kenyan economy and service delivery.[29]
The lobbying activities aimed to convince MPs that the amendments would harm their constituencies, while the public mobilization campaign sought to activate public pressure. Social media campaigns, media statements, petitions, and personal meetings were used to mobilize public support. External actors, including international non-governmental organizations (INGOs) and development partners, criticized the amendments and supported the socioeconomic narrative presented by the Kenyan NGO alliance.[29] The proposed amendments to the PBO Act were rejected by the majority of parliamentarians, including those from opposition parties and the governing parties. The resistance from local NGOs, along with external support, played a role in this outcome.[29]
The Irish Nonprofits Database was created by Irish Nonprofits Knowledge Exchange (INKEx) to act as a repository for regulatory and voluntarily disclosed information about Irish public-benefit nonprofits. The database lists more than 10,000 nonprofit organizations in Ireland. In 2012 INKEx ceased to operate due to lack of funding.[30]
Russia
Russian law contains many legal forms of non-commercial organization (NCO), resulting in a complex, often contradictory, and limiting regulatory framework.[31] The primary requirements are that NCOs, whatever their type, do not have the generation of profit as their main objective and do not distribute any such profit among their participants (Article 50(1), Civil Code). Most commonly there are five forms of NCO:
Public associations – A public association is the form most comparable to an 'association' as used in international parlance. A public association is a membership-based organization of individuals who associate on the basis of common interests and goals stipulated in the organization's charter.
Foundations – Foundations are property-based, non-membership organizations created by individuals or legal persons (or both) to pursue social, charitable, cultural, educational, or other public benefit goals.
Institutions – The institution (uchrezhdeniye) is a form that exists in Russia and several other countries of the former Soviet Union. Like foundations, institutions do not have members. Unlike foundations, however, institutions do not acquire property rights in the property conveyed to them (Article 120, Civil Code, and Article 20, NCO Law). Moreover, the founders are liable for any obligations of the institution that it cannot meet on its own.
Non-commercial partnerships – A non-commercial partnership (NP) (Article 8, NCO Law) is a membership organization pursuing activities for the mutual benefit of members. Therefore, assets that have been transferred to an NP as donations can be used for purposes other than those having public benefit.
Autonomous non-commercial organizations – An autonomous non-commercial organization (ANO) (Article 10, NCO Law) is a non-membership organization undertaking services in the field of education, social policy, culture, etc., which in practice often generates income by providing its services for a fee.
South Africa
In South Africa, nongovernmental organizations are governed by the Nonprofit Organisations Act of 1997 (NPO Act).[32] The NPO Act has been generally characterized as a "good" law, seeking to enable and assist civil society organizations in the country.[33]
Certain types of charity may issue a tax certificate when requested, which donors can use to apply for a tax deduction. Charities/NGOs may be established as voluntary associations, trusts or nonprofit companies (NPCs). Voluntary associations are established by agreement under the common law, and trusts are registered by the Master of the High Court.
In Ukraine, nonprofit organizations include non-governmental organizations, cooperatives (inc. housing cooperatives), charitable organizations, religious organizations, political parties, commodities exchanges (in Ukraine, commodities exchanges cannot be organized for profit) and more. Nonprofit organizations obtain their non-profit status from tax authorities. The state fiscal service is the main registration authority for nonprofit status.[35]
Of these, a charitable trust, charitable incorporated association, or charitable company is required to be charitable, while the others may be for a charitable purpose or not. Unincorporated associations may be for any non-profit purpose, but do not have legal personality and so cannot own property, enter into contracts, sue or be sued in their own name and the liability of their members and officers is unlimited. Charitable unincorporated associations are nonetheless common because they require no registration or other bureaucracy to set up and are not subject to stringent controls on the nature of their activities.
After a nonprofit organization has been formed at the state level, the organization may seek recognition of tax-exempt status with respect to U.S. federal income tax. That is done typically by applying to the Internal Revenue Service (IRS), although statutory exemptions exist for limited types of nonprofit organization. The IRS, after reviewing the application to ensure the organization meets the conditions to be recognized as a tax-exempt organization (such as the purpose, limitations on spending, and internal safeguards for a charity), may issue an authorization letter to the nonprofit granting it tax-exempt status for income-tax payment, filing, and deductibility purposes. The exemption does not apply to other federal taxes such as employment taxes. Additionally, a tax-exempt organization must pay federal tax on income that is unrelated to their exempt purpose.[36] Failure to maintain operations in conformity to the laws may result in the loss of tax-exempt status.
Individual states and localities offer nonprofits exemptions from other taxes such as sales tax or property tax. Federal tax-exempt status does not guarantee exemption from state and local taxes and vice versa. These exemptions generally have separate applications, and their requirements may differ from the IRS requirements. Furthermore, even a tax-exempt organization may be required to file annual financial reports (IRS Form 990) at the state and federal levels. A tax-exempt organization's 990 forms are required to be available for public scrutiny.
Governance
The board of directors has ultimate control over the organization, but typically an executive director is hired. In some cases, the board is elected by a membership, but commonly, the board of directors is self-perpetuating. In these 'board-only' organizations, board members nominate new members and vote on their fellow directors' nominations.[37] Part VI Governance, Management, and Disclosure, section A, question 7a of the Form 990 asks "Did the organization have members, stockholders, or other persons who had the power to elect or appoint one or more members of the governing body?"; the IRS instructions added "(other than the organization's governing body itself, acting in such capacity)".[38]
Zimbabwe
In February 2023, Zimbabwean President Emmerson Mnangagwa announced that he will sign into law the Private Voluntary Organization (PVO) Bill.[39] The PVO Bill was introduced in 2021, seeking to restrict and supervise civil society in Zimbabwe.[40]
Related Research Articles
A nonprofit organization (NPO) or non-profit organization, also known as a non-business entity, or nonprofit institution, and often referred to simply as a non-profit not followed by a noun, is a legal entity organized and operated for a collective, public or social benefit, as opposed to an entity that operates as a business aiming to generate a profit for its owners. A nonprofit is subject to the non-distribution constraint: any revenues that exceed expenses must be committed to the organization's purpose, not taken by private parties. An array of organizations are nonprofit, including some political organizations, schools, business associations, churches, social clubs, and consumer cooperatives. Nonprofit entities may seek approval from governments to be tax-exempt, and some may also qualify to receive tax-deductible contributions, but an entity may incorporate as a nonprofit entity without having tax-exempt status.
A charitable trust is an irrevocable trust established for charitable purposes. In some jurisdictions, it is a more specific term than "charitable organization". A charitable trust enjoys varying degrees of tax benefits in most countries and also generates goodwill. Some important terminology in charitable trusts includes the term "corpus", referring to the assets with which the trust is funded, and the term "donor," which is the person donating assets to a charity.
A foundation is a type of nonprofit organization or charitable trust that usually provides funding and support to other charitable organizations through grants, while also potentially participating directly in charitable activities. Foundations encompass public charitable foundations, like community foundations, and private foundations, which are often endowed by an individual or family. Nevertheless, the term "foundation" might also be adopted by organizations not primarily engaged in public grantmaking.
A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being.
United States non-profit laws relate to taxation, the special problems of an organization which does not have profit as its primary motivation, and prevention of charitable fraud. Some non-profit organizations can broadly be described as "charities" — like the American Red Cross. Some are strictly for the private benefit of the members — like country clubs, or condominium associations. Others fall somewhere in between — like labor unions, chambers of commerce, or cooperative electric companies. Each presents unique legal issues.
A 501(c) organization is a nonprofit organization in the federal law of the United States according to Internal Revenue Code and is one of over 29 types of nonprofit organizations exempt from some federal income taxes. Sections 503 through 505 set out the requirements for obtaining such exemptions. Many states refer to Section 501(c) for definitions of organizations exempt from state taxation as well. 501(c) organizations can receive unlimited contributions from individuals, corporations, and unions.
A nonprofit corporation is any legal entity which has been incorporated under the law of its jurisdiction for purposes other than making profits for its owners or shareholders. Depending on the laws of the jurisdiction, a nonprofit corporation may seek official recognition as such, and may be taxed differently from for-profit corporations, and treated differently in other ways.
A 501(c)(3) organization is a United States corporation, trust, unincorporated association or other type of organization exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is one of the 29 types of 501(c) nonprofit organizations in the US.
A private foundation is a tax-exempt organization that does not rely on broad public support and generally claims to serve humanitarian purposes.
A foundation in the United States is a type of charitable organization. However, the Internal Revenue Code distinguishes between private foundations and public charities. Private foundations have more restrictions and fewer tax benefits than public charities like community foundations.
A religious corporation is a type of religious non-profit organization, which has been incorporated under the law. Often these types of corporations are recognized under the law on a subnational level, for instance by a state or province government. The government agency responsible for regulating such corporations is usually the official holder of records, for instance, the Secretary of State. In the United States, religious corporations are formed like all other nonprofit corporations by filing articles of incorporation with the state. Religious corporation articles need to have the standard tax-exempt language the IRS requires. Religious corporations are permitted to designate a person to act in the capacity of corporation sole. This is a person who acts as the official holder of the title on the property, etc.
Indian non-governmental organisations (NGOs) can be set up under various Indian laws.
Fiscal sponsorship refers to the practice of non-profit organizations offering their legal and tax-exempt status to groups—typically projects—engaged in activities related to the sponsoring organization's mission. It typically involves a fee-based contractual arrangement between a project and an established non-profit. Originally, this concept was developed at the request of the Department of Housing and Urban Development to enable distribution of funds to local charitable groups in the 1950s and has been a practice ever since.
A low-profit limited liability company (L3C) is a legal form of business entity in the United States. Commonly referred to as a hybrid structure, it has characteristics of both for-profit and non-profit entities. L3Cs were created to comply with the Internal Revenue Service (IRS) program-related investments (PRIs) rules which allow most typically private foundations the ability to maintain tax-exempt status through investments in qualifying businesses and/or charities. With a social mission as the primary objective and a secondary objective of profit generation, the L3C legal form is considered a viable option for businesses seeking a reputation or marketability for being a social enterprise.
The Bulgarian Center for Not-For-Profit Law (BCNL), founded in 2001, is a legal entity based in Sofia, Bulgaria with public benefit purposes to provide legal support for the development of civil society in Bulgaria. BCNL is under the guidance of the International Center for Not-for-Profit Law (ICNL) under an Affiliation Agreement. It is registered in the Central Registry at the Ministry of Justice of Bulgaria. It is also a partner of the European Center for Not-for-Profit Law (ECNL) with its headquarters in Budapest.
A charitable organization in Canada is regulated under the Canadian Income Tax Act through the Charities Directorate of the Canada Revenue Agency (CRA).
A voluntary group or union is a group of individuals who enter into an agreement, usually as volunteers, to form a body to accomplish a purpose. Common examples include trade associations, trade unions, learned societies, professional associations, and environmental groups.
A not-for-profit or non-for-profit organization (NFPO) is a legal entity that does not distribute surplus funds to its members and is formed to fulfill specific objectives. An NFPO does not earn profit for its owners, as any revenue generated by its activities must be put back into the organization.
Form 1023 is a United States IRS tax form, also known as the Application for Recognition of Exemption Under 501(c)(3) of the Internal Revenue Code. It is filed by nonprofits to get exemption status. On January 31, 2020, the IRS abandoned the paper format of the form 1023. Those who used the paper version were given 90 days grace period and that ended on April 30, 2020. Going forward, every application has to be filed online through Pay.gov portal.
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