In France, corporate philanthropy has become an essential means of funding projects in the public interest. It enables charities, foundations and endowment funds to raise several billion euros each year, whilst offering corporate sponsors substantial tax relief. However, this generosity is not without conditions: tax legislation is strict, and audits are becoming increasingly frequent.

In this context, the patronage ruling has emerged as an essential tool for providing certainty. By enabling organisations to ask the tax authorities whether their donations qualify for tax relief, it offers donors a valuable guarantee and strengthens the credibility of the beneficiary organisations. Long overlooked, it is now being used more and more frequently, as the DGFiP steps up its checks and donors demand assurances.

What is a patronage ruling?

The charitable donation ruling is a legal procedure provided for under Article L.80 B of the Book of Tax Procedures. It enables an organisation to make a written enquiry to the tax authorities to ascertain whether the donations it receives entitle its donors to the tax relief provided for under Articles 200 (individuals) and 238 bis (companies) of the General Tax Code.

In other words, this is a prior and legally binding decision: if the authorities confirm the beneficiary’s eligibility, they will not be able to subsequently call into question the tax relief granted to the sponsors, unless there is a change in circumstances or fraud.

Why the tax ruling has become essential

The use of tax rulings on charitable donations has become widespread over the past ten years or so. According to the Court of Auditors, several hundred applications are submitted each year, a figure that is rising steadily. This trend is due to two main factors:

1. The rise in audits: the tax authorities are increasingly targeting the not-for-profit sector. In 2022, several dozen charities had their tax receipts called into question following in-depth audits. Endowment funds, in particular, have come under scrutiny.

2. Pressure from sponsors: companies, keen to avoid any reassessment, are increasingly demanding that beneficiary organisations have obtained a favourable ruling before entering into a partnership. For a director, funding a project that could subsequently be reclassified poses a reputational and financial risk that they are unwilling to take.

Who can apply for a charitable donation ruling?

An application for a ruling may be submitted by:

• Non-profit organisations recognised as being in the public interest;

• foundations and endowment funds;

• More generally, any organisation wishing to receive donations entitling the donor to a tax relief.

However, donating organisations cannot apply directly to the authorities: they must go through the recipient organisation. This follows a simple principle: it is the recipient’s eligibility that is assessed, not the donor’s circumstances.

The procedure and its time limits

The application for a ruling must be sent to the departmental public finance directorate at the organisation’s head office, accompanied by a complete set of documents:

• Articles of Association,

• Balance sheet and profit and loss account,

• Overview of activities,

• Justification of the public interest nature.

The authorities have six months to respond. In practice, most applications are dealt with within this timeframe. However, failure by the authorities to respond is deemed to constitute an implied refusal, which means it is advisable to resubmit the application or clarify the details.

The legal scope of the ruling

A favourable ruling is a genuine tax assurance. Provided the organisation complies with the conditions set out in the application, the tax authorities will not be able to challenge the tax relief granted to donors.

Conversely, an unfavourable ruling is not a final decision. It calls on the organisation to review its articles of association, and to amend its corporate purpose or operating procedures. Many organisations take this opportunity to bring themselves into compliance and resubmit their application.

Finally, the absence of an advance ruling does not prevent an organisation from receiving donations, but it does expose it to a risk in the event of an audit: if the tax authorities consider that the organisation was not eligible, the donors’ tax relief will be called into question.

Recent guidance documents: teaching practices

The latest publications from the tax authorities demonstrate a clear intention to tighten the scope of corporate philanthropy:

• Endowment funds that redistribute funds to ineligible foreign organisations have been refused recognition;

• Certain hybrid organisations, such as cooperative societies of collective interest (SCICs), are not automatically regarded as being in the public interest;

• In the cultural sector, the eligibility of some performing arts practitioners has been called into question, particularly where commercial activities form the bulk of their work.

These examples show that the authorities apply a strict interpretation of the legislation: the benefit of patronage must remain the exception, not the rule.

Advantages and limitations of the advance ruling

The main benefit of a charitable giving ruling is legal certainty. For a charity or an endowment fund, this is a compelling argument for donors: the tax relief is guaranteed.

But it also has its limitations:

• The procedure is cumbersome and requires a thoroughly documented file.

• Response times can be long, which holds up some projects.

• The scope is limited to the situation described: a change in business activity may render the ruling invalid.

How can you optimise a request for a review?

Experience shows that the strongest applications share several characteristics:

• clear articles of association that unambiguously state the organisation’s public-interest purpose,

• A proven track record of selfless management (no excessive remuneration, transparent governance),

• The traceability of donations is ensured by a rigorous accounting system,

• An emphasis on the collective benefit of the activity.

For large organisations, it is recommended that they prepare their application with the assistance of a tax adviser in order to maximise their chances of receiving a favourable decision.

Conclusion

The patronage ruling is much more than an administrative formality: it is a strategic tool. In an environment where corporate philanthropy is subject to increasing scrutiny, it provides assurance for patrons and a mark of credibility for beneficiaries.

Failing to make use of it means accepting a significant tax and reputational risk. Conversely, a philanthropic strategy structured around the advance ruling can become a decisive asset when seeking funding.

At Qualifisc, we help charities, foundations and endowment funds to ensure their sponsorship schemes are sound and to prepare their applications for tax rulings, thereby safeguarding donors’ confidence and ensuring their projects run smoothly.