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.
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.
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.