Hungary Adopts the Law on the National Civil Fund

7 July 2003

The Hungarian Parliament enacted the Law on the National Civil Fund on June 23, 2003.

The law establishes the National Civil Fund, an instrument designed to help provide institutional support to Hungarian NGOs. To finance the Fund, the Hungarian government will provide matching funds based on the amount of actual taxpayer designations under the 1% tax designation law each year. The 1% Law permits every Hungarian taxpayer to designate 1% of his or her tax liability to a qualified NGO of their choice each year. Under the Civil Fund Law, the government will match the amount of actual tax designations each year, and will in no case contribute less than the 0.5% of personal income taxes collected. Thus, the more money that taxpayers designate, the more money will be contributed by the government to the Fund.

At least sixty (60) percent of the Fund’s resources each year will have to be dedicated to providing institutional support to NGOs in Hungary. Besides covering the costs of the Fund’s administration, the remaining funds may be directed towards the support of various programs related to the development of the NGO sector, including e.g. sector-wide events, festivals, international representation, research, education or publications.

The highest governing body of the Fund will be a Council, consisting of 17 members, the majority of which (12) are delegated by nonprofit organizations. The law prescribes a mechanism of delegation called “the civil nomination mechanism”. Implementation regulations will detail the procedure for achieving a balanced representation among the Council members according to geographic and professional areas in which civil society organizations in Hungary operate. Actual grant decisions will be made by regionally delegated Colleges.

While questions remain about how exactly the Council and College members will be delegated and how this mechanism will relate to an emerging national NGO representation, and how will “institutional support” be defined, the Civil Fund is yet another milestone in the legislation concerning the not-for-profit sector in Hungary.

The law will provide a new opportunity for NGOs to apply for much needed institutional support, and at the same time it will present an additional incentive for NGOs to increase their efforts at reaching out to citizens for the 1% designations.