Consul­ta­tion findings slam the brakes on the revi­sion of foun­da­tion law.

The Lugin­bühl parlia­men­tary initia­tive propo­sed eight amend­ments to foun­da­tion law. The findings of the Coun­cil of States’ Legal Affairs Commit­tee are sobering, with just two of these points to be pursued further.

The consul­ta­tion report and the conclu­si­ons of the Coun­cil of States’ Legal Affairs Commit­tee (LAC‑S) rela­ting to the Lugin­bühl parlia­men­tary initia­tive (Pa. lv. Lugin­bühl), ‘Streng­thening Switz­er­land as a Home for Foun­da­ti­ons’, have been available to the public since 4 Septem­ber 2020. From the perspec­tive of the chari­ta­ble sector, the current situa­tion is sobering. Just two of the eight measu­res propo­sed are to be pursued further, accor­ding to LAC‑S. And the reason for this? During the consul­ta­tion, most of the propo­sals appar­ently met with a good deal of controversy.

Now, the phil­an­thro­pic sector is strugg­ling to keep its compo­sure. This is true of proFonds, above all. The orga­ni­sa­tion was invol­ved in draf­ting the Pa.lv.: expres­si­ons like ‘a missed oppor­tu­nity’, ‘a devas­ta­ting blow’, or ‘cut back so much that it’s unre­co­g­nisable’ summa­rise the tone of the press release issued by this umbrella asso­cia­tion for Swiss chari­ties. The Centre for Foun­da­tion Law at the Univer­sity of Zurich complains of the ‘ques­tionable reduc­tion of the propo­sal’, which does ‘not show poli­tics in a good light’. Swiss­Foun­da­ti­ons respon­ded in rather more muted terms; the asso­cia­tion has often distanced itself from some of the objec­ti­ves of Pa.lv. Lugin­bühl over the past few years.

Looking back

Pa.lv. Lugin­bühl was origi­nally concei­ved as a measure to combat the ‘Euro­pean Foun­da­tion’ plan­ned by the Euro­pean Union. Foun­da­ti­ons within Switz­er­land, along with Lugin­bühl, a former member of the Coun­cil of States, saw this Euro­pean legal instru­ment as a poten­tial compe­ti­tor for Switz­er­land as a home for foun­da­ti­ons. When the EU aban­do­ned this approach in 2015, Pa.lv. Lugin­bühl suddenly lost a key narra­tive that had explai­ned why it was important. Lugin­bühl hims­elf left the Coun­cil of States in 2019, and this poli­ti­cal issue has been lack­ing a ‘patron’ ever since. 

If you felt like being some­what mali­cious, you could argue that this call for medi­ca­tion is some­what contra­dic­tory, given that foun­da­ti­ons praise the health and capa­city of Switzerland’s phil­an­thro­pic set-up time and again. Lugin­bühl, who laun­ched the initia­tive, proba­bly went a little over­board in terms of its diver­sity, or at least wande­red down the wrong path in terms of the topics he chose. Howe­ver, that is not to say that the Pa.lv. does not include some good approa­ches that should be pursued further. In this regard, LAC‑S wants to take its cue from the findings of the consul­ta­tion. Unfort­u­na­tely, howe­ver, they are not making full use of the leeway that the consul­ta­tion findings provide them with. 

What does LAC‑S recommend?

Two of the eight measu­res made it through the consul­ta­tion and LAC‑S with success: ‘the opti­mi­sa­tion of foun­ders’ rights rela­ting to orga­ni­sa­tio­nal chan­ges by means of exten­ding the founder’s right of modi­fi­ca­tion within the deed of foun­da­tion, and the simpli­fi­ca­tion of chan­ges to the deed of foun­da­tion.’ If these propo­sals were to enter into force, they would bring important chan­ges with them, such as poten­ti­ally incre­asing the attrac­ti­ve­ness of the situa­tion for foun­ders and possi­bly crea­ting a slightly quicker pace within foundations,which could reli­eve stake­hol­ders within the chari­ta­ble sector from the sense of the burden of obligation.

LAC‑S took a rather incon­sis­tent stance on the six other sugges­ti­ons, some­ti­mes siding with the majo­rity opinion, some­ti­mes against it, and in case of doubt, coming down on the side of the canto­nal majo­rity (which, when it comes to the Coun­cil of States, should not really be a surprise). Not all the conclu­si­ons drawn by the Commit­tee have a plau­si­ble ring to them, by far. For exam­ple, it missed an oppor­tu­nity by turning down the option of the ‘clea­rer regu­la­tion of complaints made to the super­vi­sory autho­rity for foun­da­ti­ons’, despite the fact that two-thirds of parti­ci­pants in the consul­ta­tion were in favour of this. The exis­tence of the option to file a complaint with the super­vi­sory autho­rity for foun­da­ti­ons could play a part in impro­ving the repu­ta­tion of Switzerland’s chari­ta­ble sector.

LAC‑S sided with the dissen­ting majo­rity opinion for the propo­sal rela­ting to the initia­tive for a ‘limi­ta­tion of liabi­lity for volun­t­ary members of execu­tive bodies’, such as the members of a board of trus­tees. This can be inter­pre­ted as a ‘verdict’ against foun­da­ti­ons, suggest­ing that they are not to enjoy special treatment. 

The three provi­si­ons rela­ting to tax law fared worse of all: LAC‑S was not inte­res­ted in pursuing them further, predo­mi­nantly in line with the findings of the consul­ta­tion. These provi­si­ons include the ‘regu­lar publi­ca­tion of data about tax-exempt chari­ta­ble orga­ni­sa­ti­ons’. This is an old, important postu­late, though 21 out of 26 cantons rejec­ted it, mostly due to fears of addi­tio­nal bureau­cracy. If it remains rejec­ted, this would be good news for private firms who operate charity data­ba­ses behind paywalls, such as StiftungSchweiz, publisher of this maga­zine: they would not have to worry about compe­ti­tion from the public sector in the future. 

The Commit­tee also agreed with the cantons’ clear majo­rity opinion on the issue of the ‘privi­le­ged tax status of dona­ti­ons made from an individual’s estate and the possi­bi­lity of conclu­ding a dona­tion agree­ment for subse­quent assess­ment peri­ods, along with the possi­bi­lity of provi­ding stra­te­gic manage­ment bodies with appro­priate recom­pense, without this leading to the rejec­tion or removal of the tax exemp­tion that goes with their non-profit status’. In this instance, the risk of disin­cen­ti­ves is viewed as being too great.

Inte­rim summary

To date, the Lugin­bühl parlia­men­tary initia­tive has not met with roaring success. In light of this assess­ment by LAC‑S, it will be a chall­enge to convince a parlia­men­tary session of the bene­fits of the six propo­sals it rejec­ted. I believe that the indi­vi­du­als who laun­ched the initia­tive have exhaus­ted their resour­ces too early. They need to admit that they will not be able to win any argu­ments with the doomsday scena­rios they describe. People may well still believe that cantons are only too happy to accept payments from foun­da­ti­ons’ profits for projects and all kinds of funding objec­ti­ves, while canto­nal tax offices and finance depart­ments perceive the chari­ta­ble orga­ni­sa­ti­ons offe­ring this third-party funding to be orga­ni­sa­ti­ons enjoy­ing trou­ble­some tax privileges.