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Italy: Code to Regulate Nongovernmental Organizations

(Oct. 4, 2017) On August 3, 2017, the new Code of the Third Sector entered into effect in Italy.  The new Code is part of a broader reform of the “third sector” that includes The “third sector” comprises organizations — such as associations, volunteer organizations, and philanthropic foundations – formed to pursue the common good, in order to reach the goals of full human development and employment opportunities for all Italians. (Legislative Decree No. 117 of July 3, 2017, Code of the Third Sector, Issued in Accordance with Article 1, ¶ 2(b), of Law No. 106 of June 6, 2016 (L.D. No. 117), GAZZETTA UFFICIALE (G.U.) (Aug. 2, 2017), (in Italian); Law No. 106 of 2016, Delegation to the Government of Reform of the Third Sector, of Social Companies, and of the Universal Civil Service Sector, G.U. (June 18, 2016) (in Italian).)  The new Code consolidates and simplifies the law governing the third sector.

The third sector includes entities working in different walks of life that promote Italian community solidarity and pluralism, in a context of autonomy and cooperation with governmental authorities. (L.D. No. 117,  arts. 2(1) & 4(1).)  Other Third Sector entities (enti del Terzo settore, or ETSs) are organizations promoting the culture of legality; peace among peoples; nonviolence and unarmed defense; human, civil, social, and political rights; and the rights of consumers.  (Id. art. 5(1)(v) & (w).)  Governmental agencies; political associations; unions; and professional, entrepreurial, commercial, or industrial associations are not considered part ofthe third sector.  (Id. art. 4(1).)  Under certain circumstances, religious entities are also subject to third sector regulations.  (Id. art. 4(3).)  Third sector organizations must engage exclusively in not-for-profit activities.  (Id. art. 5(1).)

Creation and Registration

L.D. No. 117 creates a mandatory National Single Registry (NSR) for ETSs, as well as a Council of the Third Sector. (Id. arts. 11(1) & 58(1).)  Both are administered by the Ministry of Labor and Social Policies and an office of the Registry established in each region of the country.  (Id. art. 45(1).) Registration in the Registry must be requested by the legal representative of each third sector organization.  (Id. art. 47(1).)  ETS employees are entitled to the same benefits as other, equivalent private sector employees who are subject to collective bargaining agreements.  (Id. art. 16(1).)  Each ETS must mention their nonprofit nature in their founding documents.  The law sets a minimum amount for the incorporation of associations at €15,000 (about US$18,000) and for foundations at €30,000 (about US$36,000).  (Id. art. 21(4).)

Internal Operation of Third Sector Entities

The new legislation provides for detailed regulation of international organizations and domestic ETSs, covering such matters as admission of new members, administrative structures, conflicts of interest, liability of board members and various officers, and legal auditing of accounts. (Id. arts. 23-29 & 31.)

Fundraising Activities

ETSs may organize fundraising activities, to include solicitations to the public and receipt of legacies. (Id. art. 7(1) & (2).)  The distribution of funds, income or other assets to members of third sector organizations is prohibited.  (Id. art. 8(2).)  If the organization is dissolved or otherwise ceases to exist, the assets are transferred to Fondazione Italia Sociale, a private entity created by Law No. 106 of 2016 to support the activities of ETSs. (Id. art. 9(1); Fondazione Italia Sociale, Approvato lo Statuto, VITA (Mar. 13, 2017) (in Italian).)

Volunteer Organizations (ODVs)

ODVs (in Italian) are a special type of ETS regulated by L.D. No. 117. ODVs may use occasional volunteers for the furtherance of their activities, and the volunteers must register in a special registry. (L.D. No. 117, art. 17(1).)  To be constituted, ODVs require a minimum of seven individuals or three other volunteering organizations. (Id. art. 32(1).)  Associations for Social Promotion are a particular category of ODVs regulated by the new legislation. (Id. art. 35(1).)

Volunteers may not serve simultaneously as employees of the respective ODV. (Id. art. 17(5).)  Volunteers may only be reimbursed for their expenses, excluding non-refundable expenses in the case of, for example, blood and organ donors.  (Id. art. 17(2) & (4).)  ETSs must contract insurance against accidents and illnesses affecting their volunteers and civil liability vis-à-vis third parties. (Id. art. 18(1).)   Governmental entities must promote a culture of volunteering in the country, particularly among young people. (Id. art. 19(1).)   Universities may recognize academic credits for volunteering activities carried out at ETSs.  (Id. art. 19(3).)

Other Third Sector Entities

In addition to ODVs, the Code regulates several other ETSs s, including:

  • philantropic entities, whose purpose is to provide support to disadvantaged persons or to “activities of general interest” (id. art. 37(1));
  • social enterprises (which were created under Law No. 106 of June 6, 2016 on delegating power to the government for third sector reform) (id. art. 40(1); Law No. 106 of 2016, art. 6);
  • associative networks (L.D. No. 117, art. 41(1)); and
  • mutual associations (id. art. 42(1)).

Oversight Organs

The Ministry of Labor and Social Policies has the ultimate power and responsibility to monitor, oversee, and control ETSs. (Id. art. 92(1).)  In addition, two other types of government oversight agencies for ETSs are created: the National Control Organization and territorial control bodies.  (Id. arts. 64(1) & 65(1).)

Use of Public Infrastructure and Buildings

Government agencies at the national, regional, and provincial levels are mandated to provide ETSs with access to their facilities, as feasible and appropriate. (Id. art. 70(1).)

Funding, Tax Regime and Exemptions

Duly registered ETSs may access the Fund created for them by Law No. 106 of 2016. (Id. art. 72(1).)  Credit institutions authorized to operate in Italy may issue “solidarity bonds” (titoli di solidarietá) to finance the activities of ETSs.  L.D. No. 117 exempts the issuing organizations from the payment of placement fees.  (Id. art. 77(1).) General activities carried out by ETSs pursuant to their mission through cooperative actions with government agencies are considered non-commercial activities.  Hence, such activities are exempted from income tax liability. (Id. art. 79(1).)  L.D. No. 117 creates a special tax credit equivalent to 65% of the cash donations made to ETSs by individuals and 50% by legal entities.  (Id. art. 81(1).)  Additionally, 30% of the expenses incurred by taxpayers for in-kind contributions made to ETSs for non-commercial activities are regarded as deductible for purposes of gross income tax.  (Id. art. 83(1).)  Managers of online portals that carry out social lending activities are subject to a different, more favorable tax regime for contributions received via their portals. (Id. art. 78(1).)