DevelopingThe Global Guideto What CountsExpanding the Boundaries of Corporate GivingDiffering country standards create obs...
CECP & DeloitteTo create a global measurementframework, CECP leveraged ten yearsof expertise with the Corporate GivingStan...
PrefaceC             ommunities around the world     This report establishes a valuation guide,             continue to fa...
Table of ContentsReport Overview . .................................................................................. 1Pro...
ReportoverviewGiven the absence of international standards fordefining and measuring charitable giving, CECPand Deloitte s...
Project Motivation:Filling a GapC          orporate contributions to                       Figure 1: the Transformative Po...
P r o j ec t M o t i v a t i o n c o n t i n u e dWhat the Global Guide                           What the Global Guide   ...
Methodology Figure 4: Developing the global Guide: Milestones   Project          Country     Draft       Advisory      Pro...
m e t h o d o l o gy c o n t i n u e d■■ The types of activities by those organi-        ■■ Financial reporting valuation ...
m e t h o d o l o gy c o n t i n u e d                                                                                    ...
The                                                            1        Must be formally organized        Global          ...
2        Must Exist for a Charitable Purpose	 The purpose of this criterion is to                     Included   distingu...
Decision Tree        Applying                                                                         C ri teri o n #1    ...
Decision Tree             continued                      C ri t eri o n # 2                                           Crit...
InternationalResearchFindingsI. 	Legal Structures...........................................................13II. 	Annual ...
FindingsT            he first step toward develop-     in seventeen countries with the highest        This visual mark dis...
F i n d i n g I . Leg a l S t r u c t u re sCharitable organizations must have approvedlegal structures in some jurisdicti...
F i n d i n g I . Leg a l S t r u c t u re s c o n t i n u e dCategory 2                                     stated in its...
Spotlight on China  Unique Institutions in the Civil Sector Contributor:                                     China also ha...
F i n d i n g II . A n n u a l R ep o r t i n gAnnual reports (usually financial) are requiredin a majority of jurisdictio...
F i n d i n g III . G o v er n m e n t R eg i s t r a t i o nRegistration and oversight of charitable organizationsis cond...
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
Developing the global_guide_to_what_counts_webpdf
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Developing the global_guide_to_what_counts_webpdf

  1. 1. DevelopingThe Global Guideto What CountsExpanding the Boundaries of Corporate GivingDiffering country standards create obstacles to consistent globalreporting. This report details the research results to create aframework which overcomes those obstacles, empowering the businesscommunity to capture and compare contributions.
  2. 2. CECP & DeloitteTo create a global measurementframework, CECP leveraged ten yearsof expertise with the Corporate GivingStandard, but also required additionalproficiencies. Deloitte member firms’invaluable experience in designing globalbusiness impact standards, as well as theDeloitte network’s extensive consulting,audit, and tax knowledge, made it an idealconsultant for researching and synthesizingthe applicable tax codes, regulations,and reporting practices of firms aroundthe world. Deloitte member firmswere engaged by CECP for the GlobalCorporate Giving Initiative on a pro bonobasis. Barry Salzberg, CEO of DeloitteTouche Tohmatsu Limited, served as amember of CECP’s board of directorsfrom 2009-2012.This report is the companion pieceto The Global Guide to What Counts,released in June 2012 and available atCorporatePhilanthropy.org/Global.© 2012 Committee EncouragingCorporate Philanthropy.Download additional copies of this reportat CorporatePhilanthropy.org/Global.
  3. 3. PrefaceC ommunities around the world This report establishes a valuation guide, continue to face a grow- which will serve as an internationally ing number of increasingly relevant measurement framework by complex challenges on a daily which companies can track, report, andbasis. And while the business community benchmark their multinational cash andis actively working to help address these non-cash giving. While the multiyearchallenges, we need a common language: project to establish the valuation guid-a way to identify and clarify the cross- ance is coming to an end, it’s the starting Barry Salzbergindustry, cross-border efforts currently point for a larger global measurement Chief Executive Officerunder way to support communities. effort as the corporate community begins Deloitte Touche Tohmatsu LimitedTo encourage the expansion of inter- implementing this guidance.national business engaging with society, This work will influence importantthe corporate giving field must unite to changes in the way the corporate socialdevelop and leverage better methods investment field currently measures theto guide and measure social investment commitments of the largest companiesstrategies. The questions remain: Can in the world. The other benefits expectedthe business community speak as a from this project include increasedsingle voice about where the investment transparency, sharing of best practices,is going, what programs and issues are and an aggregation of total giving across Doug Conantbeing funded, and which programs are companies to better illuminate giving Chairmanmost effective? trends of the business community. Committee Encouraging Corporate PhilanthropyTo answer these questions, we need a The results are yours. Throughout theshared understanding of what consti- project, we listened to the needs oftutes charitable giving and charitable corporations engaged in solving society’sorganizations. The mission of the most pressing issues. This report presentsproject, and the subject of this report, our current thinking and progress tois to provide more robust answers to date. The measurement tools producedcorporations’ important questions about by this initiative will be designed for prac-measurement. tical use, and we continue to be open toThe Committee Encouraging your input and feedback on how to makeCorporate Philanthropy (CECP) in this inclusive effort representative of yourcollaboration with Deloitte Touche company, your industry, and the field asTohmatsu Limited (DTTL) and the a whole. We thank you for your engage-assistance of its member firms (Deloitte) ment and invite you to join us in the nextbrings together the decade of measure- phases of work.ment expertise of CECP, as one of the Sincerely,strongest international forums of CEOswith a sole focus on corporate socialengagement, along with the tax andconsulting knowledge and experience of Barry Salzbergthe Deloitte global network. Doug Conant
  4. 4. Table of ContentsReport Overview . .................................................................................. 1Project Motivation: Filling a Gap. .....................................................................2 .Methodology........................................................................................................... 4 .The Global Guide: Three Criteria..................................................7 .Applying the Global Guide: Decision Tree................................................... 9International Research Findings ...............................................11 I. Legal Structures................................................................................... 13 . “CECP’s global II. Annual Reporting................................................................................. 16 efforts to advance III. Government Registration.................................................................. 17 transparency IV. Mission, Purpose, and Activities..................................................... 19 around reporting V. Inurement................................................................................................ 21 and benchmarking VI. Commercial Activities....................................................................... 22 . VII. Private Schools.................................................................................... 24 . of corporate social VIII. Political Participation........................................................................ 25 . investment are crucial IX. Monetary Contributions................................................................... 26 . to mounting an X. Property and Product Contributions........................................... 28 effective response to XI. Service Contributions........................................................................ 29 the challenges facing XII. Cross-Border Giving Agreements................................................30 . business and society. The Global Compact Spotlight on China............................................................................... 15 strongly supports Spotlight on France........................................................................... 23 . CECP’s work, which is Spotlight on Russia............................................................................ 27 . Spotlight on Brazil.............................................................................. 29 fully aligned with our universal principles.” Georg Kell Executive DirectorNext Steps: In Your Hands ............................................................... 31 UN Global CompactAppendicesAcknowledgements ........................................................................................... 35Regulatory Environment Survey (RES) Sample Questions................. 37
  5. 5. ReportoverviewGiven the absence of international standards fordefining and measuring charitable giving, CECPand Deloitte set out to build the foundationrequired to establish one with authority.The results include three key criteria bywhich global giving recipients are defined.Designed for simple, practical application by allinternationally philanthropic companies, thesecriteria should prove vital to improving andharnessing your giving-measurement processes.The Global Guide criteria were originallypresented to the CECP community in June2012, in the companion piece to this report: TheGlobal Guide to What Counts (see page 7). For Filantropia Corporatívareaders who prefer to see the results withoutthe supporting research, the Global Guide is a Corporate Givingsuccinct summary. For those interested in thedetailed international findings that determined Filantropia Aziendalethose criteria, the present report tells the fullstory of how the criteria were established: theresearch undertaken, the complexity traversed,and the lessons learned.Framed by sections that seek to describe the Mécénat d’Entreprise“bigger picture,” this report’s findings detailmany of the exceptions and nuances that makecountry regulations so difficult to standardize.Introductory text highlights gaps in the Investimento Social Corporativocurrent system and presents the researchmethodology. Some findings informed thecriteria directly; others provided illuminatingcontext. At the beginning of each findingthat directly informed the establishment ofone or more criteria, the reader will see aninfographic.In conclusion, the report predicts the benefitsof the Global Guide’s implementation, namelyallowing us to capture and compare—in a trulymeaningful way—the data on global giving.
  6. 6. Project Motivation:Filling a GapC orporate contributions to Figure 1: the Transformative Power of Measurement social causes are growing all the time. More than ever, Benchmarking and analysis Where Improved companies require a strategic does Solutions yourmeasurement framework that will enable Data Collection Survey What’s company for Global Societal yourthem to report clearly on these contribu- company fit? Issuestions’ magnitude and significance. Global Guide What doing? counts?Global measurement has three com-ponents: 1) consensus-driven valuationguidance (What counts?), 2) globalcorporate survey data collection (What’s Divergent Practices may allow a company to expand moreyour company doing?), and 3) global Achieving a complete understanding of broadly, geographically speaking, but itbenchmarking and analysis (Where does all companies’ internal procedures for also requires a commitment to expendyour company fit?). tracking international giving is beyond internal knowledge and other resources the scope of this project. However, on understanding a wide range ofInherently, tax laws are developed domestic policies and ensuring that the recent research has unearthed two gen-domestically and reflect the local company’s own practices remain cur- eral, divergent practices among compa-conditions of civil society, or the “third rent and adaptable. As seen in Figure 2, nies engaged in international giving.sector.” This is a problem for multina- 32% of companies indicated followedtional firms that endeavor to measure One is to use one country’s determina- the first practice, whereas 29% followedand plan their global giving. The Global tion of a qualified recipient and to give the second. The poll also indicatedGuide serves as a basis for international only to that type of recipient, or per- that a significant number of companiesvaluation guidance where the necessary haps also to its international equivalent. (20%) have not yet determined which ofstandards for such measurement previ- The second is to seek to incorporate these practices they may apply.ously did not exist. country-specific policies for every juris- diction in which the company wishes to Problematic Benchmarking be philanthropic. This second method Companies aspire to baseline their pro- grams in order to measure and analyze Figure 2: Corporate Methods for Tracking International Giving their performance based on comparison data from peer firms. Benchmarking is When you track global giving, how do you an important method, among others, decide what to include and what to exclude? for determining success and opportuni- ties for realignment. Without a common 32% baseline like the Global Guide, however, 29% truly comparable global giving data cannot exist. Many companies choose 20% not to aggregate their global giving 19% figures, or they are unsure of their results. Tracking and reporting are done in an uncoordinated manner, sometimes resulting in incomplete data. In short, We capture the We capture the We do not have Not applicable - we internally developed policies result in amount deemed amount deemed a policy for do not participate numbers that to other companies are all charitable under charitable under measuring this in global giving the U.S. standards the local country amount but unusable for benchmarking. standards Source: CECP Corporate Philanthropy Summit, Attendee Poll, June 2011, N=104 Committee Encouraging Corporate Philanthropy | developing the global guide to what counts | 2
  7. 7. P r o j ec t M o t i v a t i o n c o n t i n u e dWhat the Global Guide What the Global Guide The Global Guide creates a measurementDoes NOT Do: DOES Do: standard based on three criteria inde-While the Global Guide creates an inter- The Global Guide improves philanthropy pendent of any one country or region’snational standard for specific purposes, measurement by proposing an interna- regulations. Currently, such a standardthe standard is not intended to have tional standard by which companies can does not exist. These criteria also makepolicy implications or legal repercus- track and report their giving. Companies an affirmative and definitive (thoughsions. It should also not be construed that uniformly report using the Global not exhaustive) statement on the currentas a standard that dictates internal Guide will produce truly comparable industry standard for what recipientscompany policy or procedure, as the figures, thus moving toward transparency contribute to societal benefit.focus is on agreement among companies for all consumers of this data. Increasedand not on redefining one company’s transparency responds directly to con-specific, strategic priorities. sumer demands (see Figure 3). Data Global Collection Guide SurveyNor does the Global Guide provide adviceon how to create or expand an inter-national giving program, whether in aparticular jurisdiction or within a com-pany’s own cultural environment. The The Global Guide focuses on being cur-guide does not recommend recipients rent and relevant, so that the Globalor partners. However, there are many Guide criteria can be applied year-over-excellent organizations equipped to help year to capturing global giving datacompanies start or expand their inter- through a corporate survey.national giving, and several of these are Figure 3: CEO Perspective, The Importance of Transparencylisted in the guide’s acknowledgments.Finally, how to measure giving’s impact Are consumers demanding greater transparencyis not an aspect of this project, either— regarding your company’s community-engagementalthough impact measurement is a vigor- initiatives than they were five years ago?ous and important ongoing conversation.Please refer to CECP’s report Measuring 19% Significantly 40% Noticeablythe Value of Corporate Philanthropy1 for more greater demand greater demandinformation on this topic. 36% Demand unchanged 5% Not sure 0% Noticeably less demand 0% Significantly less demand Source: CECP Board of Boards CEO Conference, Attendee Poll, February 20121 http://www.corporatephilanthropy.org/research/thought-leadership/research-reports/measuring-the-value.html3 | Committee Encouraging Corporate Philanthropy | developing the global guide to what counts
  8. 8. Methodology Figure 4: Developing the global Guide: Milestones Project Country Draft Advisory Proposal Public Working Global Research Launch Research Guidance Comment Release Comment Group Guide Report Feb. 2011 June 2011 Nov. 2011 Jan. 2012 Feb. 2012 April 2012 May 2012 June 2012 Aug. 2012 (Completion date is shown) A thorough review and analysis ent geographical regions. The countries of the factors that would selected were Australia, Brazil, Canada, likely influence global cor- China, France, Germany, India, Italy, porate giving was a funda- Japan, Mexico, the Netherlands, South mental step in addressing the unique Korea, Spain, Switzerland, Russia, the challenges of developing a standard United Kingdom, and the United States. measurement framework. The primary Countries that did not have at least two goal was to analyze corporate giving Global Fortune 500 companies were practices across multiple country jurisdic- automatically removed from consider- tions, thus finding areas of synthesis ation. After selecting the jurisdictions to and discrepancy that would inform the be sampled, Deloitte then assisted CECP criteria established in the Global Guide. to develop and administer the Regulatory Environment Survey (RES). CECP worked with assistance from Deloitte to develop and implement The survey was divided into three cat- comprehensive survey research on the egories of questions designed to inform current conditions affecting global the team on current conditions and chal- corporate giving. Deloitte’s invalu- lenges existing in the field: able experience in designing global Comparing Jurisdictional business impact standards such as the Definitions of “Charitable” Impact Reporting and Investment Standards Giving. Because different jurisdictions (IRIS) and the Global Impact Investing have different definitions on what con- Ratings System (GIIRS), together with stitutes a “charitable” organization and the company’s extensive consulting, donation, it was necessary to reconcile audit, and tax knowledge and experi- the discrepancies that existed among the ence, made Deloitte the ideal consultant jurisdictions regarding how each defined for this project. a reportable donation. Several cat- the Regulatory Environment egories were identified to obtain more Survey (RES) detailed information from the foreign jurisdictions, by determining the follow- The seventeen countries with the ing data points: highest concentration of 2010 Fortune Global 500 companies’ headquarters ■■ The types of organizations that qualify were selected to be the focus of this as charitable within each country; study, ensuring balance among differ- Committee Encouraging Corporate Philanthropy | developing the global guide to what counts | 4
  9. 9. m e t h o d o l o gy c o n t i n u e d■■ The types of activities by those organi- ■■ Financial reporting valuation methods, Development of the zations that qualify as charitable; and including how non-cash contribu- Valuation Guidance■■ The types of activities that prevent tions are valued for financial reporting The responses collected from the RES an organization from becoming a purposes. were analyzed and quantified for consis- charitable organization or that result Examining Cross-Border Issues. tency to identify the level of consensus in the disqualification of an otherwise Cross-border giving is giving made by and to reconcile discrepancies as to what charitable organization (termed a a corporate headquarters in a jurisdic- constitutes a “charitable” organization “disqualifying event”). tion foreign to its headquarters country. and donation—also as to how jurisdic-After a first phase of country-by-country To understand the effects that national tions handle donor and cross-borderinquiry, Deloitte prepared a list of vari- variances would have on developing a issues. To ensure that sufficient andous activity types based on the National global measurement framework, the appropriate evidence was collected toTaxonomy of Exempt Entities (NTEE), team sought first to gain an understand- provide a reasonable basis for the surveypublished by the National Center for ing of how cross-border issues are typi- findings and conclusions, the team per-Charitable Statistics (NCCS). Using the cally handled in each of the seventeen formed secondary research and follow-upmatrices completed in the first phase of jurisdictions. Deloitte member firms work as necessary to obtain the mostresearch, Deloitte sorted each country’s locally advised on certain cross-border complete and accurate assessment of theresponses against the list of activities and issues such as the permissibility of cross- current conditions present within eachthen prepared and filled a second matrix border donations, the availability of tax jurisdiction.outlining whether certain types of activi- benefits, and specific rules for cross- Key findings from the RES are presentedties should be considered as “charitable.” border donations. in the International Research FindingsIdentifying Legal Factors: To engage qualified and knowledgeable section of this report. These findings areTax Laws and Regulatory survey respondents, the Deloitte team organized by topical areas that the teamEnvironment. The team also col- leveraged their access to specialists with observed as having either a high degreelected information on legal factors knowledge and experience of the tax of consensus or discrepancy among theinfluencing corporate donors in the laws and regulatory environments of respondents. After the survey findingsseventeen selected jurisdictions. These each country surveyed. To complete the were applied to establishing the proposedquestions focused on determining how country surveys, Deloitte’s consultants global valuation guidance, a first draft ofthe tax laws and regulatory environment reviewed the survey matrices, referred this proposal was shared with, and cri-affected corporate donors’ decisions on to Deloitte professionals located in the tiqued by, hand-selected non-governmen-giving. Deloitte sought to determine: jurisdictions studied, and assisted CECP tal organizations (NGOs) and companies when necessary with follow-up questions. in the Advisory Group (see page 35).■■ The types of tax benefits and incen- tives available to corporations that Refining the Guidance: donate to qualifying charitable organi- Online Public Comment zations or activities; After this analysis, an exposure draft of■■ Whether tax laws governing donations the proposed global valuation guidance to charitable organizations fluctuated was published online from February 27 or were frequently changed; through April 9, 2012. As part of the■■ Restrictions and caps on giving (relat- refinement process, industry leaders and ing to tax benefits and other benefits professionals were invited to participate that corporations might receive); in a public comment period and asked to provide feedback to the proposed guid-■■ Other fiscal, social, and political regula- ance by responding to questions on an tions that might influence donors; and online feedback form.5 | Committee Encouraging Corporate Philanthropy | developing the global guide to what counts
  10. 10. m e t h o d o l o gy c o n t i n u e d Respondents were asked a total ofFigure 5: engagement by region eighteen questions about the content ofBreakdown of Practitioner Respondents the proposed global valuation guidance and were requested to select from among multiple-choice answers. Responses 16% Europe 49% United States and Canada to the feedback form were compiled, analyzed, and quantified when possible; four especially representative queries are 17% Asia presented in the International Research Findings section of this report. In gen- eral, feedback from the public comment period indicated strong support of the three Global Guide criteria. Figures 5 and 18% Latin 6 provide detail on respondents. America Finalizing the Guidance: Working GroupSource: Public Comment Period, Spring 2012, N=79 Finalizing the Global Guide required a fresh collaborative effort, which weFigure 6: engagement by sector called the Working Group. The Working Group’s goal was to consider all projectBreakdown of Practitioner Respondents inputs and then determine the final text of the guide. 20% Non- Governmental The Working Group was made up of Organizations CECP staff, Deloitte International Tax Services, Deloitte Sustainability, and the Johns Hopkins Center for Civil Society Studies. Over a series of meetings, the Group agreed on various edits to the pro- 80% Corporate posed global valuation guidance—edits designed to ensure that the resulting final criteria best reflect the scope of work achieved, as well as its intended purpose and audience.Source: Public Comment Period, Spring 2012, N=79 Committee Encouraging Corporate Philanthropy | developing the global guide to what counts | 6
  11. 11. The 1 Must be formally organized Global  The purpose of this criterion is to specifically exclude individuals and ad hoc groups that Guide lack structure or organizational identity.  The primary method by which to satisfy this Determining which criterion is through recognition as a legal recipients to include entity by the standard of the country in when reporting corporate which it is headquartered. The type of legal entity is immaterial; it could be a corporation, charitable giving. association, or any other valid legal form.  In many countries, recipients that are formally organized nonetheless face significant Three Criteria obstacles in establishing legal recognition. In Eligible for Inclusion. A recipient the absence of legal recognition, a recipient (institution, organization, or entity) must must produce evidence that it has liabilities that meet all of the following criteria: are distinct from those of its members, such as proof of formal leadership (e.g., the presence of 1 a governing board) as well as structured rules of operation (e.g., a charter or bylaws). The recipient must be  Government or state-run recipients must be formally excluded. See one exception in Criterion #2, organized; “Education and Research.” + 3 Must never distribute profits 2 The recipient must exist for  The purpose of this criterion is to distinguish a charitable commercial motives from non-commercial purpose; and, motives as the purpose for which a recipient is formally organized. +  To satisfy this criterion, a recipient’s finances must be managed exclusively to produce a charitable benefit: - All sources of revenue must always 3 be reinvested in achievement of the organization’s mission. The recipient - Surplus revenue must not be distributed to must never entities or individuals. An example of this distribute is when those with a financial share in the profits. organization, such as owners, members, founders, investors, shareholders, or a governing board receive dividends based on the institution’s performance. - Excessive salaries or perquisites are grounds for excluding a recipient.7 | Committee Encouraging Corporate Philanthropy | developing the global guide to what counts
  12. 12. 2 Must Exist for a Charitable Purpose The purpose of this criterion is to Included distinguish charitable purposes from all Charitable Activity Categories other purposes for which a recipient entity Culture and Recreation: Culture and Arts; Sports; and Other Recreation is formally organized. and Social Clubs. Include recipients whose institutional Examples: Visual and performing arts; architecture; historical societies; purpose falls within one or more of the museums; publications and broadcast media; zoos and aquariums; social major activity and purpose categories listed and service clubs; recreational facilities; and amateur sports clubs. and described in the “Included Charitable Education and Research: Primary, Secondary, Higher, and Other Activity Categories” section. Education; Research. - The categorical system used here is drawn Examples: Elementary and primary education; higher learning; pre-schools; from the International Classification of technical and vocational schools; and medical, scientific, and social science Nonprofit Organizations (ICNPO). This is a research institutions. Government or state-run education institutions (in some countries, these are called “public schools”) are included. global standard endorsed and promoted by the United Nations. The examples Health: Hospitals and Rehabilitation; Nursing Homes; Mental Health and listed under each category are suggestive, Crisis Intervention; and Other Health Services. not exhaustive. Examples: Institutions providing inpatient and outpatient care; rehabilitation centers; public health and wellness education; and - To be included, a recipient’s institutional emergency medicine. purpose is evidenced by more than half of its total expenditures being directed Social Services: Social Services; Emergency and Relief; and Income toward an activity or activities. Support and Maintenance. Examples: Child and youth welfare; daycare centers; services for families, Exclude recipients whose institutional the handicapped, or the elderly; domestic disaster prevention; temporary purpose falls within one or more of shelters; domestic refugee assistance; organizations that provide direct the categories listed in the “Excluded income support and material assistance; and self-help programs. Charitable Activity Categories” section. Environment: Environment and Animal Protection. Examples: Pollution abatement; natural resource conservation; environmental beautification; animal protection; and wildlife preservation. Development and Housing: Economic, Social, and CommunityExcluded Development; Housing; and Employment and Training.Charitable Activity Categories Examples: Organizations working to improve quality of life or improve economic infrastructure within communities; entrepreneurial programs; jobPolitical Parties and Organizations: Political Parties training programs; vocational counseling and rehabilitation; and housingand Political Organizations. assistance.Examples: Political parties; organizations to registervoters; and organizations that distribute political Law and Advocacy: Civic and Advocacy Organizations; Law and Legalliterature. Services. Examples: Civil rights associations; organizations that advocate for theBusiness and Professional Associations; Unions: rights and protection of specific groups (such as women, the elderly, andBusiness Associations; Professional Associations; children); and organizations that rehabilitate offenders or provide victimand Labor Unions. support.Examples: Professional associations (such as anorganization for lawyers) and business associations Philanthropic Intermediaries and Voluntarism Promotion: Grant Making(such as a chamber of commerce). Foundations; Other Philanthropic Intermediaries; and Voluntarism Promotion.Religion: Religious Congregations and Associations. Examples: Private foundations; organizations that recruit, train, andExamples: Any institution promoting religious beliefs place volunteers and promote volunteering; and collective fund-raisingand administering religious services or rituals, organizations.including churches, synagogues, temples, mosques,shrines, and monasteries. • Exception: Grant Making institutions that direct more than half of their funds toward one or more of the excluded activities and purposes• Exception: Contributions coordinated or outlined in “Excluded Charitable Activity Categories” are excluded. implemented by a religious institution but which fund one or more included charitable activities or International: International Activities. purposes are included. Examples: Exchange/cultural programs; international development assistance; international disaster recovery and relief; and international human rights.Not Elsewhere Classified. Committee Encouraging Corporate Philanthropy | developing the global guide to what counts | 8
  13. 13. Decision Tree Applying C ri teri o n #1 The Global Is the recipient formally organized as a legal entity (type of entity is immaterial)? Guide YES NO Which of your grant recipients would be included? Is it government- or state-run? YES NO Is it an Can it produce educational evidence that it has institution liabilities distinct (school)? from its members, such as proof of YES NO formal leadership as well as structured rules of operation? Exclude YES NO Exclude Proceed to Criterion #29 | Committee Encouraging Corporate Philanthropy | developing the global guide to what counts
  14. 14. Decision Tree continued C ri t eri o n # 2 Criterio n #3 Does its institutional purpose fall within Does it ever one or more of these included categories? distribute profit? • Culture and Recreation • Education and Research • Health YES NO • Social Services • Environment • Development and Housing Exclude • Law and Advocacy • Philanthropic Intermediary and Voluntarism Promotion • International YES NO Is it a philanthropic Is it a religious intermediary? institution? YES NO YES NO ExcludeDoes it direct more than Is the contributionhalf its funds toward: designated to fund one or more included• Political Parties charitable activities and Organizations or purposes?• Business and Professional YES NO Associations; Unions• Religion Exclude YES NO Exclude Proceed to Criterion #3 Include Committee Encouraging Corporate Philanthropy | developing the global guide to what counts | 10
  15. 15. InternationalResearchFindingsI. Legal Structures...........................................................13II. Annual Reporting........................................................16III. Government Registration......................................... 17IV. Mission, Purpose, and Activities............................19V. Inurement.......................................................................21VI. Commercial Activities. ............................................. 22 .VII. Private Schools............................................................24VIII. Political Participation................................................25IX. Monetary Contributions...........................................26X. Property and Product Contributions..................28 Filantropia CorporatívaXI. Service Contributions...............................................29 Corporate GivingXII. Cross-Border Giving Agreements....................... 30 Filantropia Aziendale Spotlight on China......................................................15 Spotlight on France...................................................23 Spotlight on Russia.................................................... 27 Spotlight on Brazil.....................................................29 .
  16. 16. FindingsT he first step toward develop- in seventeen countries with the highest This visual mark displays the connec- ing internationally relevant concentrations of Fortune Global 500 tion between findings and criteria. The and inclusive Global Guide companies as shown in Figure 7. remaining seven findings served as criteria was rigorous research. invaluable context to determining the To engage qualified and knowledge-The objective of this research was to criteria, although they did not inform the able survey respondents, the Deloitteuncover descriptive factors for corporate criteria directly. team leveraged their access to specialistsgiving recipients that had the highest with knowledge and experience of the All findings were not covered in thelevel of agreement among the surveyed tax laws and regulatory environments public comment questionnaire becausecountries. The research process was of each country surveyed. CECP then it was built to assess support for thedeveloped with awareness that tax law, published the proposed global valuation proposed global valuation guidance.regulatory environments, and cross-bor- guidance online and hosted a public Therefore, a sampling of four publicder regulations vary across international comment period. The “Methodology” comment results that do connect tojurisdictions and that this variability section of this report describes this pro- a particular finding have also beenpresents major challenges for measuring cess in more detail. included (Findings I, III, IV X). ,corporate giving in a global context. Although tax incentives and legal clas- In order to understand how countriesCECP with the assistance of Deloitte sifications are subject to change, most define or classify recipients (institutions,created and distributed a ninety-question countries demonstrate stable regulatory organizations, or entities) that they con-Regulatory Environment Survey (RES) environments in which the tax laws sider “charitable,” the RES began with ato gather data on the current conditions governing donations and the tax status series of questions related to the activities, of charitable organizations have not organizational structure, and regulatory Figure 7: 2010 Fortune changed significantly in the last ten years. mechanisms that governments use to global 500 Concentration Approximately 88% of the surveyed define and classify entities that they con- jurisdictions reported that there had been sider of societal benefit. The survey then Number of Companies per Country no significant legislative changes that shifted its focus to contribution types. Brazil 7 have considerably affected qualification criteria for charitable status. Some juris- Canada 11 “Even within our dictions did note less significant changes, China 46 such as alterations to annual reporting company there often requirements, but these changes did little France 39 to affect the general stability. times may not be full Germany 37 consensus on how to This section presents the results of the India 8 RES survey. The survey generated twelve measure certain types of Italy 11 key findings with respect to the tax laws, giving when reporting. Japan 71 regulatory environments, conditions, and challenges present in the surveyed With each foundation Mexico 2 jurisdictions. These results are the source operating independently, Netherlands 13 data used to standardize a definition for what constitutes a “charitable organiza- there is a particular Russia 6 tion,” otherwise commonly recognized as challenge in gathering South Korea 10 a recipient of corporate giving. relevant information to Spain 10 Five of the twelve findings had a direct share as we seek Switzerland 15 and fundamental influence United Kingdom 29 Influenced on the development of the Global 1 collaborative partners in Global Guide criteria—as Guide Criterion #1 our efforts.” United States 139 indicated by the presence Orange Foundation (France) Source: www.forbes.com of an infographic (right). Committee Encouraging Corporate Philanthropy | developing the global guide to what counts | 12
  17. 17. F i n d i n g I . Leg a l S t r u c t u re sCharitable organizations must have approvedlegal structures in some jurisdictions, butrequirements vary across jurisdictions. Influenced Global 1 “Legal structure” refers to an entity structure may best accommodate and describe its purpose. However, this does Guide type, separate not mean that all associations are chari- Criterion #1 from an individual table organizations or vice-versa. person, recognized by the government. Requirements vary for charitable entities to A majority of the countries surveyed organize as government- recognize and approve specific types of approved legal structures. legal structures, such as associations or foundations. Some jurisdictions require Survey responses revealed that while a all charitable entities to organize into majority of jurisdictions require entities specific legal structures, generally as a to organize as a specific type of legal means of classifying them for regulatory structure, others are more flexible or and tax purposes. do not have any specific requirements. Country responses were broken down Figure 8: practitioner response, Legal structures into three categories according to their requirements: There are two key requirements: 1) That the recipient is Category 1 government-registered, and 2) that it does not distribute Specific Legal Structures profits. How do these requirements compare to your company’s current policies and practices? Required. A majority (65%) of the surveyed jurisdictions require enti- ties to be organized into a recognized, 75% These requirements match our policies approved legal structure based on its mission, purpose, or the types of 11% These requirements do activities in which it intends to engage. not match our policies, but In those jurisdictions, the type of legal they are not in conflict structure is generally dependent upon the nature of the organization’s activi- 8% These requirements ties. For example: conflict with our policies ■■ The United Kingdom has four 6% Partial agreement primary forms of not-for-profit, non- governmental organizations (NGOs): Source: Public Comment Period, Spring 2012, N=73 companies limited by guarantee, unincorporated associations, trusts, Certain common legal structures are not and industrial and provident societies. exclusive to charitable organizations. In An NGO in any of those categories these cases, filing for charitable status can qualify as a “charity.” A charity can be done separately from establish- is eligible for significant tax benefits ment as a legally recognized entity. and is also subject to a series of A commonly known entity of regulations relevant to an equivalency this description is a corporation. determination. Corporations can be charitable or non- ■■ In France, the government recognizes charitable in Australia, India, South two primary forms of NGOs—asso- Korea, and the United States. Likewise, ciations and foundations—and further if an organization has a membership breaks down the classifications into focus, it may be required to organize sub-classifications that correspond with itself as an association, since that legal different categories of activities.13 | Committee Encouraging Corporate Philanthropy | developing the global guide to what counts
  18. 18. F i n d i n g I . Leg a l S t r u c t u re s c o n t i n u e dCategory 2 stated in its statutes using capital allo- A few jurisdictions have unique types ofFlexible Legal Structures. Twenty- cated to such purpose.” Dutch founda- legal structures available for some typesnine percent of the surveyed jurisdictions tions may be used for different purposes. of charitable functions not commonlyrecognize certain types of legal organiza- seen elsewhere. China has one form of There are no universal characteris-tions as common classifications for enti- legal structure called a “Government- tics for defining and classifying eventies that perform charitable activities, but organized NGO,” which is a quasi-gov- common legal structures.do not restrict entities to those categories ernment agency that is generally formedas a prerequisite for obtaining charitable The most common types of legal by the government and staffed with gov-status or tax benefits. structures found in the surveyed jurisdic- ernment employees. Public institutions tions are associations and foundations. may receive grants from foreign donors■■ In Italy, charitable organizations About 80% of the countries list them and are subject to some of the same are not required to have a specific among their classifications for charitable tax rules as nonprofit organizations. legal status or type of organization organizations; they also generally define Japan currently has a transitional type (they can be associations, founda- them in similar ways. of entity called a Public Interest Legal tions, committees, cooperatives, etc.) Person (PILP), generally comprised of However, the activity performed For example, associations are generally only one or a few individuals. This is a must be in strict compliance with defined and understood to be mem- transitional organizational form that is legal requirements in order to obtain bership-based organizations open to being phased out due to laws established beneficial tax treatment. members of the public with a common in December 2008.■■ In Mexico, there is no federal law interest and organized by a written establishing a definition for the types agreement to achieve a non-economic of legal institution that qualify as purpose. A foundation is commonly “With a new standard, “charitable organization,” but some understood to be an organization or states within Mexico have established a institution that engages in charitable we would have the definition for local purposes. activities or finances other organizations ability to quickly for that purpose. assess philanthropic■■ Similarly, in Canada, membership corporations, trusts, and unincorpo- Despite commonly used terms for some value regardless of the rated organizations and associations legal structures, classifications and form the most common types of char- terminologies for legal structures are country. itable organizations; however, Canada not always interpreted in the same way has no statutory requirements (under across all jurisdictions. For example, Often times the either federal or provincial laws) that Spain uses the term “foundation” inter- legal definition of specifically govern the legal form changeably with its general definition for what constitutes under which a not-for-profit entity “charitable organization” and applies a must be organized. broader meaning to the term “founda- public and charitableCategory 3 tion” than is used or interpreted in the institutions is difficultNo Legal Requirements. The United States. In the United States, to understand, even for a foundation is defined as a formalNetherlands (which represents 6% of structure consisting of a corporate body those working on thesurvey responses) is the only jurisdictionthat has no specific legal requirements created by a dedication of assets for a inside.”or defined categories for recognizing specific charitable purpose. In Japan, Dynamo/KME (Italy)charitable organizations. In the Dutch foundations aren’t necessarily legal enti-Civil Code, a foundation (stichting) is ties that have a societal benefit. There isdefined as “a legal person created by a separate designation used to denote aa legal act which has no members and “foundation of public interest.”whose purpose is to realize an objective Committee Encouraging Corporate Philanthropy | developing the global guide to what counts | 14
  19. 19. Spotlight on China Unique Institutions in the Civil Sector Contributor: China also has some country-specific nuances related to nonprofit registration. Historically, grassroots nonprofits had to identify a government department Business for Social Responsibility (BSR)’s or institution that would be responsible CiYuan initiative builds innovative cross- for their sponsorship and supervision. sector partnerships to enhance the value While recent regulation gives nonprof- of social investment in China. Through its in selected cities or provinces that this initiative, BSR has deepened its work across specific issue areas the professional knowledge about the current ability to register directly via local civil nonprofit sector environment in China, affairs bureaus, there are still challenges including understanding the nuances of associated with the implementation of institutional structures there. this regulation and related issues such as whether NGOs can publicly fundraise and Understanding the full landscape, including One specific example is government-orga- enjoy the same tax benefits as GONGOs. different types of NGOs, has been instru- nized NGOs (GONGOs),a type of non- profit unique to China. While not officially Given the challenges nonprofits experience mental to CiYuan in its work in China to considered to be a government authority, in both registration and public fundraising, help business integrate philanthropy with GONGOs are usually set up by a specific it can be difficult for these organizations core business strategy, foster collaboration, government department and adopt similar to hire staff, accept funding from founda- and inspire innovation. tions or companies, or tender for proposals or contracts. However, such barriers have GONGOs typically also inspired these organizations to seek more entrepreneurial approaches in their focus on issues operations and in revenue generation. In traditional to the addition, some GONGOs are helping grass- roots nonprofits overcome some of these charitable sector, such financial hurdles by allowing the nonprofits as poverty alleviation, to register a fund beneath them. education, and women and children’s systems of operation. GONGOs typically focus on issues traditional to the charitable CiYuan Manager Brooke Avory speaks development. with a participant. sector, such as poverty alleviation, educa- tion, and women and children’s develop- ment. GONGOs usually have between 30 and 100 employees but are able to use government agencies and networks to implement programs nationwide. Aside from their close ties to the government, GONGOs have the legal ability to solicit funds from the public (which other non- profits are not permitted to do), a status that has also given rise to the name “public foundations.” They are also able to provide a receipt allowing donors to claim a tax deduction from their contribution. This provides them with a financial advantage over other types of nonprofit organizations such as “private foundations,” associations, and other types of grassroots NGOs.15 | Committee Encouraging Corporate Philanthropy | developing the global guide to what counts
  20. 20. F i n d i n g II . A n n u a l R ep o r t i n gAnnual reports (usually financial) are requiredin a majority of jurisdictions, but filingrequirements and processes vary. Influenced Global 1 To ensure that charitable organiza- Journal Officiel 2. Spain requires external audits for larger organizations that meet “Zurich operates on Guide tions comply with certain asset and employee thresholds. a truly global basis, Criterion #1 laws and regulations serving customers governing their In lieu of annual filing requirements, audits or in more than 170 operations, 82% ofthe surveyed jurisdictions require them other reporting obligations countries. And about are used to ensureto provide annual financial reports by compliance. as many disparatefiling documentation with the appropri- definitions seemate regulatory authority. Twenty-four percent of jurisdictions have no annual filing requirements, but to exist as to whatFiling requirements generally include still hold organizations accountable forsome type of annual financial state- constitutes a charitable conforming to laws and regulations. Forment that provides an accounting of the example, while Switzerland does not organization; some,organization’s finances, usually for an require charitable organizations to file for example, imposeannual period. Annual reports may also annual documentation, they are subjectinclude supplementary information such income thresholds. to a yearly audit at the discretion of theas descriptions of the organization’s regulatory authority responsible for theiractivities and accomplishments, direc- As we continuously oversight. In India, once an institution istors’ reports, audit reports, performance registered, it continues to operate for as endeavor to betterreports, and fundraising receipts. long as it continues to fulfill the condi- track and measure tions of its registration—or it disbands, our global communitySome jurisdictions have owing to the completion of its objective.more stringent annual investments, utilizingreporting requirements for A few jurisdictions have unique require-different sizes or types of ments for ensuring compliance with a single measurementcharitable organizations. regulatory requirements. Germany is across our group couldIn 18% of jurisdictions, the reporting one example. It has a unique require- significantly reducerequirements depend on the size of the ment for organizations to file financialentity’s annual revenues or the scope of reports every three years instead of the time invested intoits operations. Australia classifies eligible annually. German organizations must consolidating this dataorganizations into three tiers based apply to local tax offices that issue an for our reporting.”upon annual revenues and tax deduct- exemption certificate upon application, Zurich Financial Servicesibility status; each tier has different filing stating that the applicant qualifies as (Switzerland)requirements. In the Netherlands, some a nonprofit organization (NPO) and isorganizations can be exempted from the thus tax-exempt. The certificate is validfiling process based on the size or level for three years.of their operations. Mexico provides another uniqueFiling requirements in some jurisdic- example. In lieu of financial statements,tions, such as France and Spain, depend Mexico only requires organizations toon the legal structure or size of the submit financial reports at the pointorganization, with some types of entities of registration. For subsequent years,subject to a more formal or comprehen- only an “annual notice” is required thatsive filing process and others permitted asserts, under oath, that the organiza-to follow a more streamlined process. In tion continues to comply with all appli-France, all foundations are required to cable requirements.file and publish an annual report andbudget, and associations with budgets ofmore than 150,000 Euros must publishtheir accounts on the public website 2 http://www.journal-officiel.gouv.fr/ Committee Encouraging Corporate Philanthropy | developing the global guide to what counts | 16
  21. 21. F i n d i n g III . G o v er n m e n t R eg i s t r a t i o nRegistration and oversight of charitable organizationsis conducted by at least one government agency ordepartment in all jurisdictions.R egistration is the process by Figure 9: practitioner response, government registration which governments recog- nize, approve, and certify Must a recipient organization be registered as charitable organizations a charitable organization with the governmentwithin their jurisdictions and allow them in which it is headquartered in order to receiveto engage in activities that support their contributions from your company?mission, such as education or health care.Registration sometimes occurs at the 75% Yessame time that an entity is formalizingas a legal structure; other times these areaccomplished separately. Agencies thatregister charitable organizations have the 25% Nofunction of ensuring that any entity thatapplies for designation as a charitableorganization meets the domestic jurisdic-tion’s legal criteria governing the require-ments for charitable organizations. Source: Public Comment Period, Spring 2012, N=57In all of the surveyed jurisdictions, thereis at least one designated governmentdepartment, agency, or office respon- that they receive is usually applied to (CIO). In addition to meeting criteriasible for the registration and oversight income taxes, but some jurisdictions also for registering as a charity, CIOs mustof charitable organizations. An entity provide charitable organizations relief meet a separate, additional set of criteriathat seeks charitable status is required to from other types of taxes, such as value- to obtain tax-exempt status, such asregister and obtain certification that gives added-tax (VAT). submitting an annual return and addi-it the right to operate within a defined tional financial reports regardless of thescope and raise funds for its charitable In 71% of jurisdictions, the same author- amount of its annual revenues.mission. Across jurisdictions, the registra- ity that regulates charitable status alsotion process for charitable organiza- regulates an organization’s tax-exempt While some countriestions accomplishes different things, and status (or its qualification for favorable regulate solely nationally,is applied and understood differently, tax treatment) and thus registration and others have more than tax-exemption are part of the same one level of regulatoryparticularly when it comes to tax benefits process. As a result of its registered chari- authority.and/or how charitable organizations willbe regulated. table status, the organization is automati- National Approaches cally exempted from income taxes on all Sixty-five percent of the surveyed juris-Registration almost always expenditures that support its mission. dictions register and regulate charitableleads to tax benefits, organizations at the national level. Inalthough some jurisdictions There are a few jurisdictions that have a separate process for charitable status most cases, they are required to regis-have a separate process and tax exemption. In France, registra- ter through a national level authorityfor registration and tax-exemption. tion is a necessary legal prerequisite for such as a Tax Office, Internal Revenue obtaining tax benefits, but an additional Agency, or the Ministry of Finance ofAcross all jurisdictions in the study, each country. questionnaire must be completed withnational governments provide some tax authorities to determine if the orga- For example, Canada, Australia andform of tax benefit or tax relief to nization can qualify for tax benefits. The the United States require all charitableregistered charitable organizations. For United Kingdom, which makes a legal organizations to register through federalcharitable organizations to enjoy special distinction between a “charity” and a revenue authorities; the oversight oftax benefits, all jurisdictions require “charitable organization,” has a special registered organizations’ activitiesentities to register with the proper type of incorporated charity called a is also managed at that level. Indiaregulatory authority. The tax benefit “Charitable Incorporated Organisation”17 | Committee Encouraging Corporate Philanthropy | developing the global guide to what counts

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