Actualités / Taxation (english)
Communiqué of March 6, 2002
On February 28, 2002 the Appellate Court of Versailles rendered a judgement that we were keenly awaiting.
The court made its ruling in the litigation opposing Association of
"Jehovah's Witnesses" and the Hauts-de-Seine Internal Revenue Department.
The Internal Revenue Department undertook a colossal tax adjustment to
impose a 60% tax on donations made by our faithful brothers during a
four-year period.
The Appellate Court of Versailles confirmed the position of the tax
authorities who, in the case in point, used the new article in the General Tax Code adopted by the financial law on December 30, 1991, which became Article 757-2 of the CGI. In the terms of this article, the disclosure to the tax authorities of a manual gift leads to the collection of a 60% tax as registration fee. According to the Court of Versailles, this taxation would apply "to all persons, both physical and juristic (...), including associations". This interpretation appears contrary to the will of the legislator, who obviously had not conceived this new arrangement as a means
to levy taxes on manual gifts to associations. In this matter, the
parliamentary deliberations are revealing. In its decision, the Court of Versailles goes as far as to recognize "that manual gifts are not (...) taxable, that there is no obligation to declare manual gifts" (p. 11 of the judgement). In fact, the law of July 23, 1987 confirms the possibility of all registered associations to freely receive manual gifts (Article 6 of the law of July 1, 1901).
Bringing the deliberations back to the simple interpretation of Article 757-2 of the CGI, the Court brought out that "the only question that can be asked is that of determining if the taxpayer disclosed the donations, in the sense of Article 757, paragraph 2, when the accounts were presented to the requesting authorities" (p. 11 of the judgement).
In short, the deliberations were purely technical, with the Court making its decision based on the point that "the presentation by the association, in harmony with legal obligation, of its accounts records, (...) is equivalent to revealing in the sense of Article 757, paragraph 2".
The Association of "Jehovah's Witnesses" has, therefore, been taxed for voluntary donations from its members during a four-year period, not because of their being taxable, but because they were carefully recorded by the association. For the Court, "what motivated the taxation is, therefore, not the gift itself but rather the disclosure of it by the donator." (p. 11 of the judgement).
This interpretation with have serious repercussions for associations as a whole who receive manual gifts and who record them. Perfectly aware of the consequences of its decision, the Appellate Court of Versailles, as is excusing itself, affirms: "it is not the prerogative of the judge to reform or modify the law, no matter how inadequate it may be." (p. 13 of the judgement).
In this way, on February 8, 2002, a new tax was consecrated. From now on manual gifts, or using the terminology of the Appellate Court of Versailles, the "resources of the generosity of members who are benefactors" are taxable at the rate of 60% if they are recorded in the accounts records of an association.
However, the motivation of the taxation will depend on the attitude of the Internal Revenue Department who could decide to audit this or that association. In the future, those who have the misfortune of being audited and who have recorded the donations from their "members who are benefactors" will not be able to escape this tax.
No doubt about it, such an interpretation, constituting a legal precedent, should be judged as "inadequate".
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See also : Excerpts from the decision rendered by the appelate court of Versailles on February 28, 2002
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