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Germany: Federal Fiscal Court Revokes Nonprofit Status of ATTAC

(Mar. 20, 2019) In a decision published on February 27, 2019, the German Federal Fiscal Court (Bundesfinanzhof, BFH), Germany’s supreme court for tax and customs matters, held that the activist group ATTAC was no longer eligible for nonprofit status due to its general political activity and its calls for concrete actions and demands. The BFH remanded the case back to the lower court. (BFH, Jan. 10, 2019, Docket No. V R 60/17, ECLI:DE:BFH:2019:U.100119.VR60.17.0, BFH website.)

Facts of the Case

ATTAC has been registered in the German Register of Associations since 2003. According to its bylaws, which were amended in November 2010, it pursues the following objectives: “promotion of education, science, and research; promotion of the protection of the environment and of communities, democracy and solidarity with a particular focus on the economic and social impact of globalization. The association supports international understanding and peace.” (BFH para. 1.) Between 2010 and 2012, the association publicly presented its view on a variety of topics, among them the financial and economic crisis, taxation of financial markets, redistribution of wealth, a financial transaction tax, taxes to fight poverty, Blockupy, the Arab spring, feminist economics, the Euro crisis, climate protection, and global climate justice. (Id. at 2.)

The plaintiff started various political campaigns to present its views on, among other things, a government austerity package, the financial transaction tax, a double tax treaty with Switzerland, combating tax evasion, tax advantages for investment funds, a railway project, weekly working hours, an unconditional basic income, and wage inequality. (Id. at 3–6.)

In the spring of 2014, the plaintiff received notice from the tax office that its public-benefit status had been revoked retroactively as of the year 2010. In justifying this decision, the tax office argued that ATTAC had pursued activities of a political nature beyond its prescribed public-benefit purposes. (Id. at 7.)

Relevant Law

The German Fiscal Code provides that companies that directly and exclusively serve public-benefit, charitable, or religious purposes qualify for tax-exempt status. A corporation serves public-benefit purposes “if its activity is dedicated to the altruistic advancement of the general public in material, spiritual, or moral respects.” The law provides an exhaustive list of public-benefit purposes which include, among other things, “the general advancement of democratic government,” but explicitly excludes “endeavours which are solely in pursuit of specific individual interests of a civic nature.” (Id. at 17; ABGABENORDNUNG [AO] [FISCAL CODE], Oct. 1, 2002, BUNDESGESETZBLATT [BGBl.] [FEDERAL LAW GAZETTE] I at 3866; 2003 BGBl. I at 61, as amended, § 52, German Laws Online website.)

Ruling

The Court reiterated that, according to its established case law, “the altruistic advancement of the general public” does not include engaging in political purposes. (BFH at 18.) In citing its case law it stated that “a political purpose cannot be the sole or main purpose specified in the bylaws of a corporation,” “nor can the association solely or mainly pursue a political objective with its actual management.” (Id. (translation by author).) Neither “influencing the development of political opinion” nor “forming the people’s political will” are part of the “advancement of the general public.” (Id.)

However, the Court stated that general political activity must be differentiated from influencing the forming of political will and public opinion in order to pursue one of the public-benefit purposes listed in the German Fiscal Code. According to established BFH case law, nonprofit status is not affected if one of the tax-privileged activities is “on a case-by-case basis necessarily combined with a political objective” or a critical public discussion and information. (Id. at 20, 21; see also Jenny Gesley, Germany: Nonprofits May Engage in Non-Partisan Politics Without Losing Tax-Exempt Status, GLOBAL LEGAL MONITOR (Sept. 8, 2017).) The Court added that within the framework of allowed political activity to further the public-benefit goals codified in the Fiscal Code, the organization must remain nonpartisan. (BFH at 22.)

The Court held that the activities of ATTAC did not constitute the “advancement of adult education” as the lower court had ruled. (Id. at 31.) Adult education in connection with the general advancement of democratic government includes political education. However, according to the BFH, furthering adult education must be limited to education policy issues and requires discussing political questions “with an open mind.” Political education is not covered if the forming of political will and public opinion is used to advance an organization’s own agenda in the form of a “general political mandate.” (Id. at 23, 24, 28; FISCAL CODE § 52, para. 2, nos. 7, 24.) It concluded that the lower court had erred when it ruled that furthering political education entitles a nonprofit organization to call for concrete actions or to make demands regarding current political matters. (BFH at 31.)