Poland Adopts New Law on Public Benefit Activity and Volunteerism

9 May 2003

On April 24, 2003 the Polish Parliament adopted the Law on Public Benefit Activity and Volunteerism. This is a long-awaited law that will enable Polish NGOs to develop closer working relationships with the public administration and provide new opportunities for the nonprofit sector to diversify its resource base. According to Polish NGOs and lawmakers, it is to be seen as an “NGO sector Constitution,” which regulates relationships between the public sector and the Third sector.

Among other features, this new law defines the criteria for public benefit status of Polish NGOs, provides a procedural framework for NGO cooperation with local governments, establishes an NGO Council (an advisory body to decision-makers on issues concerning public benefit status), sets forth basic provisions relating to volunteering, introduces a version of the “1% law” in Poland, and provides for more liberal investment opportunities for public benefit organizations.

The new law does not change the existing laws on associations and foundations. It does not address NGO legal forms, nor does it take away any privileges that exist at the time of the adoption the new law.

Cooperation between NGOs and government. A main purpose of the Law is to create a system of contracting and subsidizing the realization of public tasks by NGOs. The tendering mechanism that was accepted could lead to the privatization of public tasks to NGOs and consequently increase the role of NGOs providing public services.

Economic activities. The Law introduces the possibility for NGOs to conduct “payable statutory activity of public benefit”. Until now, NGOs were restricted from charging fees on their services unless conducted as taxable economic activity. The new law provides for the payable statutory activities (mission-related activities that generate income) to be tax-exempt as long as they charge no more than the direct cost of the services or goods provided and comply with salary limitations.

Public benefit status. Any NGO that meets conditions specified in the Law may apply for the status of a public benefit organization. The main purpose of these conditions is to ensure transparency of management and financial policy. Public benefit status is connected with significant privileges, primarily tax benefits.

1% Law. Similar to the example in other CEE countries, the Law introduces the possibility of transferring 1% of the personal income tax to public benefit organizations.

Volunteerism. The Law regulates the terms for engaging volunteers in the work of NGOs and public administration bodies. According to the Law, a volunteer is an individual who provides his or her services voluntarily and without remuneration. Volunteers provide services based on an agreement with the institution that engages them. Organizations may opt to pay health insurance for their long-term volunteers. An organization should ensure a safe and hygienic workplace for its volunteers and inform them about the possible dangers related to their work.

Investment opportunities. Finally, the rules of the Implementation Act provide an opportunity for NGOs to invest tax-free not only into state and municipal bonds or obligations, but all possible securities through specialized companies for portfolio management. Any income should be intended for and spent on the statutory activity but without a deadline. (The Polish tax authority in the Polish Science Foundation case earlier interpreted investment as income not spent on statutory activity and therefore, taxable. The position was overturned by the Supreme Court in 2002. This amendment aims to prevent restrictive interpretations in the future.)

The government worked on the draft law in cooperation with NGO sector representatives who also participated in parliamentary commission sessions. On condition that the law is implemented properly, it may have an extremely positive influence on the development of civil society in Poland. It is expected that the Law will be signed by the President and published in the Law Journal at the turn of May and June 2003. ICNL is proud to have contributed to the adoption of this law through its work with the Forum of Non-governmental Initiatives (FIP).

This Press Release is based on information provided by Igor Golinski, Legal Advisor at FIP.