Experiences from JapanCharity Law and the enabling legislationYoshiharu Shiraishi (JACO)Peer Learning Event, London2th July 2012
1. Recent changes of CSO legal system in Japan
2. The issues on CSO legal environment
3. Advocacy campaigns initiated by JACO
4. Major advocacy campaigns and its achievement
<Legislation>
5. Major advocacy campaigns and its achievement
<Taxation>
6. Other processes of JACO’s advocacy campaigns
Main Issues2
1. Recent changes in Japanregarding CSO legal system
Japanese CSOs Basic Institutional StructureN
on p
rofit
For
prof
it
Mutual benefit Public Benefit
General Non-profit Corporation
Labour’s UnionsPublic Interest Corp.
Specified Non-profit Corporation
Approved SNPC
Private School Corp.Social Welfare Corp.Religious Corp. etc.The Relief and Rehabilitation Corp.
Medical Services Corporation
Consumers‘cooperative
Small business cooperative
Source: Ministry of Finance (website), National Tax Agency (2009)
Management Unionsof Condominium
4
5,293
232
22,141
44,291
46,510
7,884(since 1949)
182,601(since1951)18,537(since1951)
163(since 1995)
Public Charitable Trust
(Civil Code Org. +22,783)Since 1896Since 2008
Since 1923
Since 1998 Since 2002
Since 1950
Authorized byPIC Commission
Registration process of PIC
Public Interest Corporation(5,206)
General Non-profit Corporation (22,141)
Registered at Registry Office
Permitted byGovernment Authorities
Public Interest Corporation(22,783)
1896-2007 2008-present
Registered at Registry Office
Intermediate Corporation
2001-2007
5PIC legislation reform
Authorized byPrefectural Government
Registration process of SNPC
Approved SpecifiedNon-profit Corporation
(260)
Specified Non-profitCorporation (45,280)
Certified by Prefectural Gov.& Registered at Registry Office
Certified by Prefectural Gov.& Registered at Registry Office
Specified Non-profitCorporation
1998-2002 2002-present
1) Up until 2012 March, qualified by National Tax Agency
1)
6SNPC legislation reform
Authorized byCharity Commission
At present
Charitable organizations
Non-profit Organizations
7Next stage
Next step?
Authorized by PIC Commission
Public Interest Corporation
Registered at Registry Office
General Non-profit Corp.
Authorized by Prefectural Gov.
Approved SNPC
Certified by Prefectural Gov.& Registered at Registry Office
Specified Nonprofit Corp. Certified by Prefectural Gov.or Registered at Registry Office
Public Interest Corporation Approved SNPCGoverning law Act on Authorization of Public Interest
Incorporated Associations and Public Interest Incorporated Foundations
Act on Promotion of Specified Non-profit Activities
Authority Public Interest Corporation Commission Prefectural Governor
Type Association & Foundation Association
Necessity of extending status
Indefinite duration Once every 5 years
Activities 22 indicated 20 indicated
Political & Religious activities
Prohibited Prohibited
Profit making activities
Permitted to some extent Permitted to some extent
Residuary assets distribution
Cy-pres doctrine (It must be used for the charitable activities)
Cy-pres doctrine (It must be used for the charitable activities)
1) 1)
8Regulation for PIC & Approved SNPC - 1
1) Charitable activities and specified non-profit activities to be registered are shown on Page 8 and 10
Public Interest Corporation Approved SNPCThe least number of members
(Association)
2 or more
10 or more
Qualification ofmembers
(Association)
Unfair qualification constraint
(Association)
Unfair qualification constraint
Amount of endowment
(Foundation)
3 million yen or more
Not applicable
Decision-making body
Association: General Meeting
Foundation: Board of Councilors
General Meeting
Executive body Association : Board of trustees Foundation: Board of trustees
Board of trustees
Supervising body
Auditors (more than1) Auditors (more than1)
Disclosure Required Required
9Regulation for PIC & Approved SNPC - 2
Public Interest Corporation Approved SNPC
Corporation income tax
No tax on earning from business related to charitable activities.
No tax but impose a tax on 34 types of profit earning business, related or not related to charitable activities.
Withholding income tax of interest etc.
No tax Tax imposition
Deemed Contributions would be capped at…
50% of gross income (51% or more, depends on the condition)
50% of gross income or 2million yen, chose either larger one of the two.
Income/ dividends revenue Tax
Not levied deduction levied
Donation of bequest
Deductible from inheritance property Deductible from inheritance property
10Taxation for PIC & Approved SNPC - 1
Public Interest Corporation Approved SNPCDonation Tax Benefit for donors (private person)
Donors can choose either tax deduction, ie “deduction from income”, or tax credit, ie “ deduction from income tax”. If donors choose tax deduction, they can deduct their taxable income up to 40% of total income. If they choose tax credit, they can save their payable tax up to 25% of income tax and up to 10% of prefectural and municipal tax.
Donors can choose either tax deduction, ie “deduction from income”, or tax credit, ie “ deduction from income tax”. If donors choose tax deduction, they can deduct their taxable income up to 40% of total income. If they choose tax credit, they can save their payable tax up to 25% of income tax and up to 10% of prefectural and municipal tax.
Donation Tax Benefit for donors (Corporation)
Be given preferential taxation treatment Be given preferential taxation treatment to some extent
Expenditure (billion yen) Employees Salary (billion yen)
Public interest Corp. 20,338 3,679
Specified nonprofit Corp.
738 112
The size of expenditure and employees salary
11Taxation for PIC & Approved SNPC - 2
2. The issues onCSO legal environment
The most questionable of legal system at present is as follows;
In general1. CSO legal system is quite confused due to the existence of too
many different types of legal entities.
Related to PIC legal system2. Application procedures for initial registration, annual reporting
form and etc. are too much complicated and burdensome.3. Expenditure Ratio between program expenditure and general
administration costs on public interest activities is restricted.4. Regulation on idle assets is not flexible.
The issues on CSO legal environment - 113
Related to GNC legal system5. The operation of GNC covers non-profit activities, mutual
benefit activities and other activities.6. There is no limitation to the purposes of activities or their
specifics, except non-profit principle.7. GNC law has been too much affected by technical aspects of
the new Companies Law.
Related to legal system of SNPC approved & SNPC not approved8. Authorization requirement of Approved SNPC is restricted due
to the taxation breaks applicable to them.9. Taxation system of Approved SNPC is very similar to the one for
PIC, but legal basis of governance is not necessarily strong.10.The number of SNPC counts more than 45,000 but most of
them are grass root-type organizations.
The issues on CSO legal environment - 214
3. Advocacy campaignsinitiated by JACO
Advocacy related bodies in JACO16
Legislative Committee CSO legal system study panels
Taxation Committee
Compliance CommitteeResearch projects
Symposia / seminars
Questionnaire/public comments
Working group
PIC Commission
Government agencies
Accountancy Committee
Executive officeJACO
Department of Research
General public
Media
Advocacy on PIC legal system17
Legislative Committee15 members
CSO legal system study panels7 members
Executive OfficeAdvocacy team
Executive board members
Public Interest Corporation Commission
Executive office
JACO
National Government
Research projects
Symposia / seminars
Questionnaire/public comments
Department of Research
Executive office
Advocacy on PIC taxation system18
Taxation Committee15 members
Executive OfficeAdvocacy team
Executive board members
Public Interest Corporation Commission
Executive office
JACO
National Government
Research project
4. Major advocacy campaignsinitiated by JACO
<Legislation>
JACO’s advocacy on regulatory body initiated in 2004 towards PIC legal reform.1. Regulator: independent body2. Key functions: clearly identified public benefit,
monitoring and compliance, supporting charities.3. Board members: academics and specialists from
the private sector
4.Executive office: recruit lawyer, accountant, practitioner, etc. in executive office
5. Council organization: setting up council organizations in each prefecture
Advocacy on regulatory body (2004)20
6. element for judgment: purpose, activity, governance, but not performance results.
7. charitable activities: suggested lists of charitable activities.
8. etc…
In fact, Japanese version ofCharity Commission has beenestablished in 2008
21
Advocacy on regulatory body (2004)
October 5, 2010
JACO held mass media round-table conference
On April 17, 2006, Mr. Ohta (President & CEO of JACO) testified his opinion on the coming charity law reform at the special legislation committee of the House of Commons (which was deliberating about the draft of new charity laws) on behalf of the charitable sector of Japan.In fact, his opinion wassupported by the majority of the committee membersand was reflected into thenew charity law.
22
Mr. Ohta’s testimony at the Diet (2006)
Mr. Ohta testified at the diet of Japan
April 17, 2006
1. Improve procedures more speedy and flexible.2. Disclosing regulatory cases.3. Reforming authorization law related to financial
criteria, authorization process and guideline.4. etc…
In fact, the Commission startedto improve the process ofauthorization. Also the PICCstarted to provide consultationservice for applicants with JACO.
23
Advocacy on PICC’s role & function (2010)
Democratic Party conducted hearingswith Mr. Ohta and other experts.
September 27, 2011
24
Changes in organization number
5. Major advocacy campaignsinitiated by JACO
<Taxation>
1. Review of tax deduction for capital gains on the assets donated to PICs.
2. Review of tax deduction for inheritance property donated to PICs.
3. Review of tax deduction for donors who provided PICs flow founds.
4. Tax deduction by introducing Planned Giving Trust.
5. Special tax relief related to charitable contributions for the Great East Japan Earthquake & Tsunami
Advocacy on taxation system (2010-2011)26
6. Introduction of new selective donation tax benefit (deduction from income or deduction from income tax) for individual donors.
7. Requested for repealing the public support test.8. etc…
In fact, items no. 4, 5 and 6 were materialized in the new taxation framework in 2011.
Advocacy on taxation system (2010-2011)27
6. Other processes of JACO’s advocacy campaigns
Relationship with policy makers29
New Public Commons Roundtable11 members including Mr. Ohta
(Making high level consensus)
National Government(Reflecting CSO legislation and taxation framework)
General Meeting19 members including Mr. Ohta
(Making high level consensus)
Multi-stakeholder Forum on SocialResponsibility for a Sustainable Future
Steering Committee6 members
(Support meetings andworking groups)
Working groups Working group on earthquake support system
6 members
New Public Commons Roundtable
Working group on disclosure and facility to offer information
14 members
The expert panel on public serviceagreements between government and CSO
10 members
Other relationship with policy makers30
Congressionalrepresentative
National Government(Reflecting CSO legislation and taxation framework)
JACO Advocacy Team
Thank you!