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Germany: Nonprofits May Engage in Non-Partisan Politics Without Losing Tax-Exempt Status

(Sept. 8, 2017) In a decision published on August 9, 2017, the German Federal Financial Court (Bundesfinanzhof, BFH) held that nonprofit corporations may engage in non-partisan politics without losing their tax-exempt status. (Bundesfinanzhof [BFH] [Federal Financial Court], docket no. X R 13/15 (Aug. 9, 2017), BFH website in German).) The Court stated that a nonprofit corporation for the advancement of environmental protection is allowed to engage in general politics if it remains non-partisan, if the political engagement is limited to and necessary for the advancement of its public benefit purposes as set out in the statutes, and if its views are objective and factually substantiated. (Id. at 88.) If these requirements are fulfilled, the company can still be seen as “exclusively” serving the public interest for tax-privileged purposes.  The Court further held that this ruling especially applies to companies dedicated to environmental protection as in the case at hand, because most measures to protect the environment cannot be achieved by individuals but only by the legislature, so that political engagement is necessary to advance the public-benefit goals. (Id. at 85, 86, & 92.)

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.” (Abgabenordnung [AO] [Fiscal Code], Oct. 1, 2002, BUNDESGESETZBLATT [BGBl.] [FEDERAL LAW GAZETTE] I at 3866; 2003 I at 61, as amended, §§ 51-57, GERMAN LAWS ONLINE.) The beneficiaries cannot be limited to a closed circle of people, such as members of one family or employees of one corporation. (Id.)