IRINA TOLMACHEVA TOOK PART IN PUBLIC HEARING “PRIORITY MEASURES TO SUPPORT NPO ENDOWMENT HOLDERS"
On April 29, Irina Tolmacheva, Head of Legal Department of the Gaidar Institute, took part in the hearing titled “Priority measures to support NPO Endowment holders” held at the Civic Chamber of the Russian Federation.
The relevance of the agenda relates to the economic situation in Russia against the sanctions imposed by unfriendly countries. According to experts, endowment funds in the non-profit sector have suffered the most due to the specific nature of their activities. A total of 224 endowment funds operates in Russia with an overall value of Rb 40bn. Endowment (from English endowment - a gift, donation) is a special- purpose fund intended for non-profit purposes, as a rule, to finance educational, medical, cultural organizations.
In her speech, Irina Tolmacheva stressed that endowments are an instrument of long-term support for non-profit organizations operating in socially beneficial areas such as education and science, culture, health and social care, sports and others.
The effectiveness of endowments as a reliable source of financial sustainability for NPOs was evidenced during the pandemic. Amid reduced opportunities to raise the ongoing funding, many NPOs that already had endowments in place were able to make up the shortfall using its income. At the same time, there was an active surge of interest in the topic and basically in the formation of new endowments during the pandemic, said the Gaidar Institute expert.
The vast majority of endowments have been established as specialized endowment management funds. These are separate legal entities with a sole task to receive donations for establishing and replenishing the endowment, transfer in trust to the management company, receive income from the endowment and transfer it to the beneficiary, i.e. the university or school, museum or theatre, etc. Endowment funds are a full-fledged entity of the nonprofit sector, however, their legal status is stipulated only in a special law No. 275-FZ. However, endowments cannot qualify for support measures provided by the state to charity organizations, the Head of the Legal Department of the Gaidar Institute pointed out.
In this respect, endowment funds request that support SONPO measures be extended to them for the purpose of implementing subparagraph 19.6, paragraph 1, Article 265 of the Tax Code (legal entities have been given the opportunity to treat donations to endowments as non-operating expenses in an amount not exceeding 1% of sales revenue).
The register of SONPOs includes recipients of state subsidies, property support and grants, public service providers, social service providers, private educational organizations and charities, however, excluding endowment funds. However, donors of endowment funds, whose beneficiaries are state and municipal cultural institutions, can claim an investment tax deduction (up to 100%) at the regional level. There are such examples already. In this regard, it is proposed to expand the scope of the investment tax deduction when calculating corporate profit tax, providing for the right to reduce the amounts of tax (advance payment) to be credited to the revenues of the RF subjects’ budgets pursuant to Article 286.1 of the Tax Code, based on other socially beneficial areas of activity, rather than just the sphere of culture.
According to Irina Tolmacheva, the legal status of endowment funds needs to be reviewed and existing legislation harmonized. In fact, certain activity is already underway in such areas. Similarly, the endowment funds could benefit from reduced tariffs of insurance contributions same as charity organizations. After all, endowment funds are specialized organizations and cannot be engaged in any fee-based activities. All administrative and management costs are usually covered precisely by endowment income, which is critically important in the current situation, especially for small regional funds.
Participants of public hearing supported the proposal to provide endowment funds with the same conditions as socially oriented (SO) NPOs, primarily in terms of tax preferences for donors and reduced rates of insurance contributions.
Based on results of the public examination, the CC RF will prepare an opinion summarizing the wishes and suggestions and forward them to the relevant legislative and executive authorities.
In her speech, Irina Tolmacheva stressed that endowments are an instrument of long-term support for non-profit organizations operating in socially beneficial areas such as education and science, culture, health and social care, sports and others.
The effectiveness of endowments as a reliable source of financial sustainability for NPOs was evidenced during the pandemic. Amid reduced opportunities to raise the ongoing funding, many NPOs that already had endowments in place were able to make up the shortfall using its income. At the same time, there was an active surge of interest in the topic and basically in the formation of new endowments during the pandemic, said the Gaidar Institute expert.
The vast majority of endowments have been established as specialized endowment management funds. These are separate legal entities with a sole task to receive donations for establishing and replenishing the endowment, transfer in trust to the management company, receive income from the endowment and transfer it to the beneficiary, i.e. the university or school, museum or theatre, etc. Endowment funds are a full-fledged entity of the nonprofit sector, however, their legal status is stipulated only in a special law No. 275-FZ. However, endowments cannot qualify for support measures provided by the state to charity organizations, the Head of the Legal Department of the Gaidar Institute pointed out.
In this respect, endowment funds request that support SONPO measures be extended to them for the purpose of implementing subparagraph 19.6, paragraph 1, Article 265 of the Tax Code (legal entities have been given the opportunity to treat donations to endowments as non-operating expenses in an amount not exceeding 1% of sales revenue).
The register of SONPOs includes recipients of state subsidies, property support and grants, public service providers, social service providers, private educational organizations and charities, however, excluding endowment funds. However, donors of endowment funds, whose beneficiaries are state and municipal cultural institutions, can claim an investment tax deduction (up to 100%) at the regional level. There are such examples already. In this regard, it is proposed to expand the scope of the investment tax deduction when calculating corporate profit tax, providing for the right to reduce the amounts of tax (advance payment) to be credited to the revenues of the RF subjects’ budgets pursuant to Article 286.1 of the Tax Code, based on other socially beneficial areas of activity, rather than just the sphere of culture.
According to Irina Tolmacheva, the legal status of endowment funds needs to be reviewed and existing legislation harmonized. In fact, certain activity is already underway in such areas. Similarly, the endowment funds could benefit from reduced tariffs of insurance contributions same as charity organizations. After all, endowment funds are specialized organizations and cannot be engaged in any fee-based activities. All administrative and management costs are usually covered precisely by endowment income, which is critically important in the current situation, especially for small regional funds.
Participants of public hearing supported the proposal to provide endowment funds with the same conditions as socially oriented (SO) NPOs, primarily in terms of tax preferences for donors and reduced rates of insurance contributions.
Based on results of the public examination, the CC RF will prepare an opinion summarizing the wishes and suggestions and forward them to the relevant legislative and executive authorities.