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Explaining Percentage Philanthropy: Legal Nature, Rationales, Impacts
Nilda Bullain *

Introduction
The central idea of percentage philanthr opy is that taxpayers may designate a
certain percentage of their income tax paid to a specific non-profit, non-
governmental organization (NGO), and in so me cases to other organizations, mainly
churches. Percentage philanthropy laws gene rally have the following characteristics:

Taxpayers themselves decide on the use of a portion of the taxes paid;
Consequently, only a taxpayer may take advantage of the legislation
(depending on the country, students, reti red people, or citizens who pay their
taxes in another country may not be eligible);

The use of the designated funds is restricted to supporting certain non-profit
organizations (usually those that conduct public benefit activities), public
institutions, state objecti ves, or churches; and

The implementation of the law, and ther efore its impact, will vary according
to:

the level of percentage that may be designated,
the criteria for entitlement of the beneficiaries, and
the administrative proced ures prescribed in the laws and regulations.
With this in mind, we are going to examine the roots and history of this type
of legislation, along with its relationship to philanthropy and “conventional” tax
incentives for philanthropy. In addition, we will look at the underlying rationales for
such legislation as well as its impa ct based on experience to date.

Historical Context
European Roots
The concept of “percentage legislation” originates in policies established
during the 19th century to resolve dilemmas of church financing after the separation
of state and church. Legislative efforts in European countries to separate the powers
of the state from those of the church (mainly the Catholic Church) started after the
French Revolution in 1789 and lasted until the middle of the 20th century. In this
process, the issue of church financing was also addressed.

Under one model, the law essentially imposes a compulsory church tax on all
members of the church. Church tax was introduced in Germany during the 19th
century as a law of the church that later became authorized by the state. Today the
state collects the tax, in addition to person al tax, from registered church members in
the name of the churches (four registered major denominations) and transfers it to
them. In Germany such taxes may amount to 8-9% of the income tax. Similar
arrangements exist in Austri a, where such taxes represent 1.25% of gross income.
[1]

Another type of law permits a voluntary contribution by the taxpayer and
accommodates contributions for secular aims as well as religious ones. Currently,
there are laws in Italy and Spain that a llow for “percentage mechanisms” similar to
the model followed by Hungary and othe r CEE states, albeit with significant
differences in terms of the amount of th e designation allowed and the permissible
beneficiaries. In fact, when the idea of 1% legislation first emerged in the Hungarian
Parliament (within the context of a debate on church financing), the Italian law was
specifically referenced as a model.
[2] In Italy, the Parliament adopted an Act in 1985 [3] that established a new
system of financing for the Catholic Church effective from January 1, 1990.
According to this law, 0.8% of the personal income tax of taxpaying physical persons
due in each year may be transferred to the Catholic Church or to the state, to enable
performance of socially important activiti es. In 1998, a Presidential Decree expanded
the permissible beneficiaries to in clude other registered churches.

Where taxpayers designate funds for st ate objectives, the designations are
transferred to a special fund. All not-for-prof it legal entities may apply to this fund,
including local churches as well as local authorities and their related institutions.
Even government departments and institutions are eligible.

From the experience of Western Europe , we can draw the conclusion that
“percentage legislation” has e ssentially served the purpose of a specific, non-political
way of financing the Catholic Church and other churches. In Spain and Italy, an
additional objective has been to provide some citizen-allocated funds to finance
state-determined objectives of public interest. In a way, this second function of the
legislation may be viewed as a concession made to provide a fair choice to non-
religious taxpayers. In the case of Ital y, which is the closest example to the
Hungarian model, while the intent behind th e law may have been to channel funds to
NGOs, in practice this does not seem to happen.

The CEE Model of Percentage Legislation
In the case of CEE, the intent behind introducing percentage legislation has
been somewhat different. In these countrie s–and specifically in Hungary, where
such legislation was first introduced–the intent of the laws to support the so-called
civil sphere, i.e., non-profit, non-govern mental organizations, has been clearly
articulated. Political, economic, social, and cultural factors all contributed to the
creation of this distinct legal product.

In Hungary, the initial idea of the “one percent law” was brought into the
political debate in the context of church financing, when in the early 1990s the
restitution of churches required a solution regarding their public support. In 1991,
liberal politicians proposed ab andoning direct state support to churches in favor of a
scheme that resembled the It alian and Spanish systems described above (a portion
of tax revenues designated by citizens towards churches). At that time, Parliament
was not ready to make a decision on th e proposal, but the idea of tax income
redirected to finance churches was included in the programs of parties that formed
the government in 1994.
[4] However, an additional dimension to the political debate concerned the
financing of NGOs. In the post-communist revival of civil society, each successive

government in Hungary found it important to stress its genuine commitment to the
strengthening of this sector. In other words, the subject of the debate extended
beyond the separation of church and state: it came to include issues that lie at the
heart of governance in all democratic countries, including the definition of the public
good and the desired or acceptable extent of state redistribution in support of the
public good.

NGOs in Hungary received proportionately less foreign support than in many
other CEE countries. With the exception of the Soros Foundation, no major donor
organizations would have been willing or ab le to finance a good portion, much less
the majority, of the more than 40,000 NGOs created in the five short years after the
political changes. At the same time, stat e support for NGOs never ceased, and the
biggest drawback of such fund ing had been that its distribution was over-politicized.
Under these circumstances, Hungary, perhaps more than any other country in the
region at the time, had an incentive to devi se an innovative solution to help finance
the Third Sector without exposing its organizations to the political implications of
government financing.

This incentive was particularly strong in the case of the liberal party (Alliance
of Free Democrats), the smaller member of the governing coalition. During 1995-
1996, based on a suggestion fr om the Ministry of Education and Culture, headed by
a minister from the liberal party, the ta x designation scheme was again discussed in
Parliament.
[5] The central notion of Act CXXVI of 1996 on the Use of a Specified
Portion of the Personal Inco me Tax (hereinafter the “one -percent law”) thus became
the possibility for party-neutral public financing of NGOs through a tax-designation
mechanism.

Between 1998 and 2003, Slovakia ( 1999-2001), Lithuania (2002), Poland
(2003), and Romania (2003) adopted similar legislation. In these countries, the
initiative came from the NGO sector and wa s based on the positive impacts that the
Hungarian legislation had on the development of the sector.

While the systems differ slightly, the fo cus in these countries has clearly been
on the advancement of civi l society through support of its organizations . In Slovakia
and Poland, which adopted “percentage legislation” based on the Hungarian
example, the church is not even a permissi ble beneficiary, except in the form of
NGOs established by the church.
[6] In addition, the mechanism of the tax designation
has changed from the Italian model. Taxpayers can support a specific organization
with one percent of their own taxes. In the Italian system , by contrast, the taxpayers
“vote” on which theme to support with 0.8% of all taxes, and the concrete support of
the beneficiaries is then exec uted by government committees.

We can observe further changes in the laws adopted later that followed from
this shift in focus. The proportion of tax revenue “passed on” by the state to the
taxpayers for allocation has grown beyond the Hungarian one percent, reflecting in
part the increased need in ci vil society. For example, in Lithuania 2% of personal
income tax paid may be designated to a wide range of beneficiaries, while in
Slovakia from 2004 onwards both individual and corporate taxpayers may designate
2% of their income taxes to an NGO. At the same time, because this legislation is
seen as sufficient public support to NGOs , some governments have been terminating
other benefits. As an example, in both Lithuania and Slovakia, tax benefits for

donations to NGOs have been abolished following the introduction of percentage
legislation.

In short, through building on a mechanism that already existed in Western
Europe but giving it a new purpose, a new fo rm of legislation has evolved in CEE. In
this respect, the CEE percentage model is unique in Europe and internationally.

The Legal Nature of the Designation Mechanism
It is important to spend some time clarifying the legal nature of the
percentage mechanism. There have been grea t expectations in all the countries that
have enacted percentage laws, on the part s of both NGOs and governments, as to
the impact of the law. In order to more clearly see the potential of the law and its
effects on taxpayer behavior, one must un derstand the legal nature of the system
itself.

Most of the expectations regarding the im pact of such a system are related in
some way to the issue of philanthrop y. Among the reasons for introducing
percentage legislation, NGOs and governments alike have emphasized two primary
objectives: to increase resources flowing into the non-profit sector, and to develop a
philanthropic culture among taxpayers.

In order to understand the real potential of this law in fulfilling those
expectations, we are going to examine three main aspects:

Is the percentage designation a form of philanthropy?
Is the percentage designation a donation?
Is the percentage designation a tax benefit or a tax incentive?
Answering these questions wi ll help guide our thinking as to the reasons to
enact such laws and their expected impacts.

Is the Percentage Designation a Form of Philanthropy?
Perhaps the most fundamental question about the nature of the percentage
mechanism is this: To what extent is it related to traditional forms of philanthropy?
Put more simply, is it an incentive for philanthropy?

The answer depends on what we understand as “philanthropy”. Philanthropy
is not usually a legal term, but a sociological one. A commonly accepted definition is
“voluntary private giving for public purposes”
[7] . We can break down this definition as
follows:

Voluntary: intended (with the purpose of making a gift) and uncoerced (which
rules out legal penalties for not giving). [8] Private: giving one’s own money an d time, as opposed to government
spending that gives public money.

Giving: donating resources without ex pectation of receiving comparable
economic compensation. [9]

For the public: intended for public purposes, which encompasses virtually all
social aims beyond helping one’s family and friends.

The act of tax designation in the perc entage mechanism would not satisfy all
of the above criteria. Most of all, it does not involve giving one’s own money and
time–instead, it is disposing of money that belongs to the public. In addition, its
status as voluntary may be debatable. It is true that there is no legal penalty for not
making the designations; however, people on ly “give” because they have to pay the
taxes anyway. On the other hand, the de signation mechanism does meet several
elements of the philanthropy definition as understood above. The designations are
made for a public purpose, and they produc e no economic advantage to the “giver”.

Conscious, planned, and ongoing philanthropic behavior has been missing
from the countries in CEE, where the 1% system was introduced . In these countries
the culture of philanthropy is as yet unde rdeveloped, and few have the wealth to
allow them to engage in philanthropy. With the individual tax allocation, the
government enables people to act as though they were engaging in philanthropy. In
fact, many people consider it philanthropy, which can be seen from the fact that the
designations are often called donations (see below).

The designation mechanism is not philanthropy based on the classic
definition, but it does show a range of el ements similar to philanthropy. Since there
is no single definition of philanthropy, it may even be considered a philanthropic
activity. However, this is a special fo rm of philanthropy, which we may call
“transitional philanthropy” or philanthropy in transitional countries.
[10] If we accept
this argument, we may conclude that alon g with volunteering and giving, a new form
of philanthropy has emerged in CEE through percentage legislation.

Is the Percentage Designation a Donation?
Philanthropy encompasses a wide range of activities, which in turn are often
subject to legislation and therefore usually have a legal definition as well. The most
concrete element of philanthropy that is relevant from our point of view is the issue
of donations. We reasoned that because the culture of philanthropy is not yet
developed in CEE, and because NGOs look at the percentage designations as an
additional source of income, the actual designations are most often understood as a
philanthropic act. Since giving a donation is the most widely known expression of
philanthropy, the percentage mechanism is also often called a donation. Can we say,
however, that the percentage designat ion actually is a type of donation?

The use of the term “one percent donati on” is questionable. There are several
reasons why the term donation (usually interpreted as a gift) may not be appropriate
here.

One reason is that the ta x designation mechanism does not mean transfer of
money or property owned by the “donor”. Ac cording to the dictionary, “donation” is
“to give (property or money) without receiving consideration for the transfer.”
[11] Donation is equal to a “gift” [12] , which in turn is defined as “1. The act of voluntarily
transferring property to another without compensation; 2. A thing so transferred.” [13]

From these definitions, it can be derived that a donation or a gift is made
from the property of the donor, whereas in the case of the percentage designation,
the “donation” is made from the tax liability, which is the property not of the donor
but of the state.

Moreover, in some countries, a “donation” or a “gift” is defined by law in a
specific way that would not apply to the percentage mechanism. For example, in
Slovakia, the “deed of gift” is a bilateral legal act through which one side donates
property without consideration and th e beneficiary accepts this donation.
[14] Therefore, to give a gift, the donor an d the recipient have to be in mutual
agreement. This is not possible in the ca se of the percentage allocation, as the
recipient does not even know its donors.

In the case of the percentage transfer, the taxpayer needs to make a
conscious decision about (a) whether to make the designation, and, if so, (b) to
whom to make the designation. This two- step thought process is similar to the
process when people decide (a) whether to give, and, if so, (b) to whom to give.
Especially in considering the second question–the identity of the beneficiary–the
debate on the decision wi ll likely be strikingly similar in both cases.

One’s choice in the case of charitable giving is “whether to give financial
support to an organization with the conseq uence of a decrease in my own property”.
In designating a portion of one’s income tax, by contrast, the choice is “whether to
have a say over what this part of my taxes will be used for”.

Despite the fact that the percentage me chanism may be considered a form of
philanthropy, we can conclude that the tax designation itself is not a donation.

Is the Percentage Designation a Tax Benefit or a Tax Incentive?
What is the place of this mechanism in the system of tax benefits and tax
incentives? Is the opportunity provided by this law an incentive for people to make a
designation and thereby increase the fl ow of resources to the NGO sector?

Most legal systems acknowledge the cont ribution of non-profit organizations
to the public good and recognize this co ntribution by providing a range of tax
benefits related to their activities.

Traditionally, because of the loss of tax revenue, these tax benefits are
viewed as indirect government subsidies to the organizations and their donors. Tax
revenue foregone constitutes an indirect means of support from the state, and can
be contrasted with direct government support involving transfer of funds to NGOs.
The 1% law from this point of view is a special form of indirect support. Like other
tax incentives, it deprives the state of tax revenue through a foregone opportunity to
collect taxes. Funds are designated to NGOs not by the state but by taxpayers
directly. The fact that in most cases the tax authority itself actually delivers the
transfer is only a technical issue; indeed, in Poland taxpayers must transfer the tax
designation directly to NGOs.

Such indirect support is frequently s een as an incentive to encourage NGO
activity and private philanthropy. Black’s Law Dictionary defines tax incentives as “a

governmental enticement, through a tax benefit, to engage in a particular
activity” [15] . Traditionally, two main forms of tax benefits are seen as incentives for
philanthropic behavior:

tax deductions
tax credits.
Tax deductions on charitable donations mean that the donor can deduct all or
part of the money s/he contributed to an NGO from his/her taxable income, thus
diminishing the tax base upon which tax will be calculated. Tax credits for charitable
donations, by contrast, let the donor deduct part of the donated amount from his/her
tax liability (i.e., the tax to be paid). In other words, a tax credit reduces the amount
of tax owed, whereas a deduction reduces the amount of income subject to tax.
[16] In this respect, the designation is not a tax benefit, as it does not reduce the
tax base or the tax liability. The taxpayer who designates his/her one or two percent
of income tax to an NGO will still have to pay the tax calculated according to the
general tax rules. (S/he may, however, decide on how this tax will be used.)

Thus, the only question that remains is this: If not a tax benefit, can the
designation still be considered an incentive to get people to engage in philanthropic
activities in support of NGOs? Based on the limited evidence available in CEE and
internationally
[17] , percentage laws might be consider ed incentives in a broad sense,
assuming the taxpayer will indeed choose to donate his/her property or designate
his/her tax percentage to an NGO based on an awareness of the benefit of such
action to the NGO. This leads us back to the definition of philanthropy–in these
cases, taxpayers “donate” because of the in tangible benefits they derive from the
“good deed”.

The Percentage Designation as a Form of Tax Allocation
As seen above, in the strictly legal sense, the tax designation mechanism is
not a donation, a tax benefit, or a tax incentive. What is it, then?

It is essentially a special form of tax allocation. In other words, Parliament
confers a limited right on each individual taxpayer to decide how to use (where to
allocate) a certain percentage of the public budget. This right is limited, because the
options as to how to use the tax revenue are limited. Taxpayers may decide to
transfer this portion of the tax to a qualif ying organization or beneficiary as defined
by law (either a separate law or the tax law). Should they decide not to transfer the
funds to one of these beneficiaries, the funds will be channeled into the overall public
budget and used as determined by th e annual Budget Act of Parliament.

Consequently, the percentage mechanism is less a “donation” than a
“designation”, “allocation”, “assignation”, “dedication”, or “transfer.” All of these
terms embrace the intentional act of suppl ying something addressed to someone or
somewhere, but without implying that this thing belongs to the supplier.

As a special form of redistributing pu blic funds, percentage designation is
clearly a mechanism that affects de mocratic decision-making and civic
responsibilities.
[18] Its function, therefore, especially in societies where taxpayer

awareness is not so strong, is a significant one, in that it reinforces the notion of
taxpayer control over public funds.

The Importance of Percentage Legislation
We have concluded that the percentage designation is not a donation, a tax
benefit, or a tax incentive in the strict sense of these concepts, but that it may,
nevertheless, have a significant effect on philanthropic behavior in transitional
societies. We have additionally conclude d that the percentage designation in the
legal sense is a special form of tax alloca tion and therefore has an effect on the
redistribution of public funds as well as on the understanding of citizen
responsibilities.

In fact, this multifunctional nature of the percentage mechanism is what
makes it unique. It has several intended impacts, and governments and NGOs have
used a range of arguments in campaigning for its adoption. Let’s examine this idea in
light of the possible rationales that support it.

Policy Rationales for Introducing Percentage Laws
One rationale is “taxation self-determination ” [19] , i.e., letting tax-paying
citizens make autonomous deci sions on the use of a portion, however small, of their
income tax, thereby exercising direct de mocracy. Hungarian researchers examining
the impact of the law gave their paper the title “Citizens’ Votes”
[20] as a reflection of
this principle. In the context of this rati onale, the mechanism is actually a tool for
strengthening democratic values–specific ally, citizen participation and taxpayer
control of spending public f unds–in transition societies.

Another rationale is “civil society development” , i.e., strengthening civil
society by (a) providing new resources to NGOs, (b) raising public awareness about
NGOs, and (c) increasing the skills of NGOs in communication and community
outreach. In this argument, the mechanism helps educate the general public about
the role and importance of NGOs, and at the same time it motivates NGOs to
communicate with the public. These function s are crucial in societies where people
are ignorant of or hostile towards NG Os. Also, importantly, the percentage
designation provides an income source th at organizations can use with relative
freedom, such as for their core activities (as opposed to project funding, the use of
which is restricted).

A third rationale is “development of a philanthropic culture”. This focuses on
the importance of citizen support to NGO endeavors. According to those emphasizing
this rationale, transition societies lack a tradition of philanthropy (private giving);
this mechanism may be a good first step toward developing such a culture, as it
encourages individuals to think about re asons for supporting particular NGOs. In
addition, it serves as an indicator of the level of public support for NGOs.

A fourth rationale is “government outsourcing”, in that the system can
provide decentralized and depoliticized govern ment support to activities that benefit
the public. At least in Hungary, governme nt funding is generally viewed as too
centralized, politicized, and subject to favoritism. In fact, recent reports revealed
that 80% of government funding to NGOs in Hungary, in contrast to many Western
European countries, is provid ed by the central government
[21] , and 80% of this

central government funding is distributed via sole-source solicitation (i.e., without a
tender or bidding procedure). [22] Under the “government outsourcing” rationale, the
beneficiary organizations are conducting public benefit activities, so the government
is subsidizing important public tasks, but in a decentralized and depoliticized way
that constitutes a needed alternative to centralized and bureaucratic decision-
making.

Impacts of Percentage Legislation
In Hungary, seven years have passed since the introduction of the one
percent law. A number of studies have been conducted to examine and measure its
impact. In Slovakia, 2002 was the first ti me taxpayers could use the designation
option, and there has been some resear ch on the outcomes. In the other two
countries, the law has been implemented this year (2004) for the first time.
Consequently, most of the understanding of how this type of law works in practice–
specifically, its potential impacts related to the rationales described above–will be
based on the Hungarian experience and, to some extent, the Slovakian one.

As for the intended effects of the taxation self-determination rationale, we
suggest that the percentage mechanism has a very good potential to increase citizen
participation and taxpayer control over public funds. By giving taxpayers an
opportunity to designat e a percentage of their taxes, it makes them conscious of the
fact that they can actually have a say in how their taxes are used. This kind of
“taxpayer consciousness” is still generally weak in CEE countries. The law has some
limitations in this regard, especially related to the tax returns filled out by employers
for their employees and the ability of citizens to monitor the execution of their
designations by the tax authority
[23] ; nonetheless, this potential is important for
transition societies.

In terms of raising resources for the non-profit sector, based on the data from
Hungary and Slovakia we can conclude the following: while the one percent income
has not represented a major source of funding for the sector as a whole
[24] , it has
played an important developmental role in the composition of the sector. It has
increased access to unrestricted fundin g and channeled public support for
organizations that would otherwise have li ttle or no chance to gain such access.

The percentage mechanism has also helped in raising public awareness about
the civil sector , which is a critical element in the development of civil society. The
relevance and strength of voluntary or ganizations depends largely on public
recognition and support. Simply because information about this opportunity is
delivered to every taxpayer, the one perc ent provision has the potential to raise
awareness about these organizations in almost every household in the country
[25] .
This represents an unprecedented opport unity and probably one of the biggest
benefits of the law. It takes decades of education and several generations to change
culture and attitudes in a society. The pe rcentage law offers a unique chance to
accelerate such change in relation to no n-profit organizations and their importance.

In terms of its impact on the development of NGOs themselves , through the
experience in Hungary we could observe th at the 1% Law has helped increase the
responsiveness, transparency, and accountability of the NGO sector. Efforts by NGOs
to seek citizens’ support strengthened co mmunication between the non-profit sector
and society. By receiving contributions from their stakeholders, NGOs became directly

accountable to them in terms of how funds were spent. In addition, because the law
subjects NGOs to reporting requirements, it increased the transparency of NGOs and
reduced possibilities for the misuse of funds.

The mixed nature of the percentage mechanism, however, limits its potential
to develop a philanthropic culture . The main reason is that it costs the donor nothing
except the time and effort needed to make the designation. If we regard
philanthropy as private investment in the public good, involving a personal stake,
there is a clear tension between treating the designation arrangement as a tax
allocation and treating it as a form of ph ilanthropy. Taxes as such are not considered
a form of philanthropy but a civic obligation, and therefore not a voluntary choice of
the individual.

As for the government outsourcing rationale, based on the Hungarian
experience this is perhaps the weakest ju stification. While the mechanism itself
guarantees decentralized and non-politica l decision-making by the taxpayers, the
funds involved are not significant enough to alter the culture of government funding.
The portion of public funds distributed in this way is minuscule compared to the scale
of non-transparent and political subsidies.

Erzsebet Fazekas addresses the failur e of this rationale from another
perspective, writing, “The state was not fully successful in realizing its other
purpose: to ease the negative outcomes of transformation to a market economy
through a citizen-headed redistribution of wealth. (…) A major portion of the
donations went to purposes that do not respond to the most acute and pressing
social needs.”
[26] Unwanted Impacts: Curbing Traditional Incentives for Philanthropy
Unfortunately, there have been unwanted impacts as well, stemming from a
misinterpreted relationship between perc entage legislation and philanthropy. In
particular, governments view this legislat ion as satisfying the demands for both
public and private support to the sector. As a result, traditional tax incentives (tax-
deductible donations) have been abolished in Lithuania and in Slovakia, and the
same was planned in Poland following the adoption of percentage legislation.
[27] This
is both regrettable and extr emely dangerous. The multifaceted purpose of the law
has become a double-edged sword: it seems as though percentage legislation could
substitute for philanthropic support.

Whether as a direct “exchange”, as in Lithuania, or as part of a larger tax
reform, as in Slovakia, governments have been keen on curbing traditional tax
incentives based on fiscal arguments. However, NGOs lose a great deal. To illustrate
this, take the example of a fictional country where the ta x regime is progressive and
a person can deduct charitable donations up to 10% of his/her tax base. An annual
income of 1000 monetary units (let’s call them crowns) will fall into the tax bracket
of a 30% tax liability, which would requir e 300 crowns without any deductions. When
a person with an annual income of 1000 cr owns donates 10 crowns, an NGO receives
10 crowns and the tax office “loses” 3 crowns as a result of deducting the donation
from the tax base (30% of 990 crowns is 297 as opposed to 300). In contrast, when
the same person makes a tax designation of 1% of his/her tax liability, the tax office
“loses” the same 3 crowns (1 % of 300), but the NGO receives only 3 crowns, not 10.

Naturally, there is the argument that the percenta ge mechanism in post-
communist countries is likely to be exercised by more people than traditional
philanthropic giving. Initially, this may be true. However, in the long run, and
assuming that it is an important goal for the non-profit sectors in CEE to increase the
personal involvement of citizens in their communities, it is desirable to maintain
traditional tax incentives, as much from a financial point of view as from a moral
one.

* Nilda Bullain, nbullain@icnl.org.hu , is Program Director at the European
Center for Not-for-Profit Law in Bu dapest. This article is based on a
paper published as part of the Percenta ge Philanthropy Study conducted by the
Nonprofit Information and Training Centre (NIOK), Budapest. The article originally
appeared in the Summer-Autumn 2004 issue of the Social Economy and Law (SEAL)
Journal , published by the European Foundation Centre. We are grateful to SEAL for
permission to reprint it.

The author would like to extend special thanks to partners who provided
valuable information for this study: Árpád L őrincz and Jana Kadlecová (Slovakia),
Igor Goli ński (Poland), and Vaidotas Ilgius (Lithuania).