Introduction | 5 | Regulation of the Voluntary Sector | Mark Sidel

ABSTRACT

This volume focuses on the legal and political environment for civil society in an era in which counter-terrorism policy and law have challenged civil society and civil liberties in a number of countries. The ways in which counter-terrorism law and policy aﬀect civil society can and do diﬀer dramatically by country and region. So in this book I am seeking to provide some comparative analysis of the impact of counterterrorism policy and law on civil society in several countries in which the ‘war on terror’ is being fought, with a focus on how the enabling environment for civil society – laws, regulations, policies, and practices – inﬂuences or has the capacity to signiﬁcantly inﬂuence the existence, structure, activities, and vibrancy of civil society and the freedoms it enjoys. I address these issues in the United States, the United Kingdom,

Canada, and India, with comparative reference to Australia, the Netherlands, the European Union, and other countries and regions. Certainly other countries and regions could and should be discussed, but limited space forces a focus on some of the countries in which the ‘war on terror’ has been waged most vigorously and where the impact of counter-terrorism law and policy on civil society has been most widely contested. But, to begin, it is important to note that the ways in which govern-

ment regulates and relates to the nonproﬁt sector and civil society, particularly in legal terms, diﬀers dramatically from country to country and that those baseline diﬀerences also aﬀect the points of inﬂuence and the impact of counter-terrorism law on civil society in those countries. In the United States, regulation of the voluntary sector is primarily carried out through two distinct areas of government. The states regulate the incorporation, registration, and governance of most voluntary sector organizations, with the exception of a very small number that are directly chartered by the federal government. But for the vast majority

of American nonproﬁts, large and small, the state is the starting point. So the largest American private foundation, the Gates Foundation, is organized in the State of Washington, for example. The other key point of regulation is the federal government, primarily through the Internal Revenue Service, the US tax authority, a branch of the Department of the Treasury. The Internal Revenue Service regulates the tax status and tax treatment accorded to voluntary sector organizations in the United States based on the provisions of the Internal Revenue Code. While states (for incorporation, registration, governance, fundraising,

and many other governance and management issues) and the federal government (through the Internal Revenue Service for tax issues) are the primary regulators and government interlocutors for the American voluntary sector, other regulators certainly play a role. Other divisions of the Treasury Department, for example, govern prohibited transactions and foreign assets control (Simon et al 2006; Fremont-Smith 2008). In the United Kingdom, charity law is approached diﬀerently, a result

of divergent history and governmental structures. The four key types of nonproﬁt organizations are companies limited by guarantee, unincorporated associations, trusts, and industrial and provident societies. A large number of those are registered as charities, which confers certain tax exemptions and allows donors to deduct certain gifts from income. A national statute, the Charities Act 2006, regulates the charitable sector. The Charity Commission for England and Wales registers and regulates charitable organizations in England and Wales, focusing on charities’ compliance with legal requirements, conﬁrming and investigating that they are operated for charitable purpose and provide a public beneﬁt, as the Charities Act requires, and not for private purposes,1 determining that they are maintaining required independence and that charitable trustees are exercising property controls, and investigating and mandating solutions for mismanagement or abuse of charities. Similar organizations exercise such functions for Scotland and Northern Ireland. As in the United States, other government institutions regulate charities and other voluntary sector organizations as well. HM Revenue & Customs, the British government’s tax authority, regulates tax exemption and tax relief for certain donors. The Home Oﬃce and British security services play a role in the security and terrorist aspects of charitable regulation (USIG 2008a). Canada is also complicated, for it is a federal state that includes 10

provinces and three territories. Nonproﬁt organizations are generally formed as ‘non-share’ membership corporations under federal or provincial law, as trusts under provincial law, or as unincorporated organizations or associations. In general, most nonproﬁts are formed under

provincial law. Beyond these formation and governance issues, Canadian tax legislation at the federal (national) level diﬀerentiates between non-proﬁt organizations and charities, each with their own tax exemption beneﬁts. In recent years security concerns about Canadian charities have been dealt with through the Canada Revenue Agency (CRA) under the auspices of the Charities Registration (Security Information) Act and other relevant national legislation; the provincial legislation and the common law powers of the provincial Attorneys General are conﬁned largely to certain establishment and governance matters (Phillips et al 2001; USIG 2008). In India, like the United Kingdom, diﬀerent kinds of voluntary sector

organizations can qualify as charitable for purposes of tax relief. These include societies, trusts, and what are termed the ‘Section 25 company’, which is ‘a company with limited liability that may be formed for “promoting commerce, art, science, religion, charity or any other useful object”’ (USIG 2008c). Tax exemptions for charitable organizations, and tax beneﬁts to donors, are available for registered and approved groups and donations if they meet the deﬁnition of ‘religious or charitable purposes’. But regulatory authority is widely dispersed. As the well-known

Indian commentator Noshir Dadrawala notes:

… many state and central government agencies have regulatory authority over these not-for-proﬁt entities. … [N]ot-for-proﬁt organizations are required to ﬁle annual tax returns and audited account statements with various agencies. At the state level, these agencies include the Charity Commissioner (for trusts), the Registrar of Societies (referred to in some states by diﬀerent titles, including the Registrar of Joint Stock Companies), and the Registrar of Companies (for section 25 companies). At the national or federal level, the regulatory bodies include the income tax department and Ministry of Home Aﬀairs (only for not-for-proﬁt organizations receiving foreign contributions).