15.3 - Tax law as an instrument to strengthen the corporate governance of the nonprofit sector

Summary

Introduction: Tax cobbler, stick to your last

Professor Colombo has given us a clear list of issues that the US taxing authority of charities will review critically, and he has told us where the substantive areas of IRS emphasis lie and where the tax authorities should not intervene. This report will only briefly repeat this line of thought for German law, and change the focus by asking whether tax law can be a legitimate and viable instrument for legal reform, especially in the field of corporate and foundation governance. When tax law reform is compared to other legal measures, especially in the civil law area, are there specific comparative benefits to be obtained? Or should we – as a matter of policy – constrain tax law exclusively to fiscal considerations?

Tax review

Procedure of tax review

The specific characteristics of German charities that the tax authorities will have to review are contained in a statute with the German name Abgabenordnung (free translation: “General Tax Act”), devoted mainly to tax administration and tax procedure. There is no specific formal procedure for the granting of public benefit status. It is only when the yearly corporation tax is assessed, or when this assessment results in a liberation from taxes, that the tax authorities issue a reliable official decision about the public benefit status of the organization.