1. Legal bases
Following the fundamental ruling by the Federal Constitutional Court on the public financing of political parties in accordance with Article 21, Para. 1 of the Basic Law (Decisions of the Federal Constitutional Court (BVerfGE) 85, 264), the relevant provisions in the Law on Political Parties (PartG) were thoroughly amended with effect from 1 January 1994 (cf. the Law on Political Parties, amended version of 31 January 1994, Federal Law Gazette I, p. 149).
Since then, under Article 18, Para. 1 of the Law on Political Parties, the State has granted the parties funds to partly finance the performance of the tasks assigned to them by the Basic Law and specified in the Law on Political Parties. The yardstick for the distribution of public funds is the extent to which the parties are established within society. This is measured, on the one hand, by the parties' performance in the most recent European, Bundestag and Landtag (state parliament) elections, and, on the other, the total membership subscriptions and donations ("contributions") from natural persons.
2. Preconditions for claiming public funds
Pursuant to Article 18, Para. 4 of the Law on Political Parties, parties which according to the final result of the most recent European or Bundestag election polled at least 0.5% or, in a Landtag election, 1% of the valid votes cast for the party lists are entitled to partial public funding. If a party was not permitted to present a list, pursuant to Article 18, Para. 4 of the Law on Political Parties it has a right to public funds if it obtained 10% of the valid votes cast in a constituency.
Further preconditions for claiming public funds are the submission of the last due statement of account, which must comply with legal regulations (Article 23, Para. 4 of the Law on Political Parties), and a written application for the public fund entitlement to be established and disbursed (Article 19, Para. 1 of the Law on Political Parties).
3. Extent of entitlement to public funds
Pursuant to Article 18, Para. 3 of the Law on Political Parties, for each valid vote obtained in the aforementioned elections, each party entitled to public funds receives DM 1.30 per vote up to five million votes, and DM 1.00 for every additional vote thereafter (so-called "degression").
Furthermore, pursuant to Article 18, Para. 3 (3) of the Law on Political Parties, each party is entitled to the sum of DM 0.50 for each DM received in contributions from natural persons up to a limit of DM 6,000 per person per year. In accordance with Article 24, Para. 5 of the Law on Political Parties, each party must include the total amount of contributions it has received in its statement of account.
4. Upper limits
Pursuant to Article 18, Para. 2 of the Law on Political Parties, the maximum annual amount of public funding which may be granted to all parties together may not exceed an "absolute limit". From 1994 to 1997, in line with the aforementioned decision of the Federal Constitutional Court and the findings of the Independent Commission on Party Financing appointed by the Federal President in accordance with Article 18, Para. 6 of the Law on Political Parties, this was set at DM 230 million (cf. Bundestag Printed Paper 12/4425, p. 74). With the 7th Law Amending the Law on Political Parties of 17 February 1999 (Federal Law Gazette I, p. 146), this absolute limit was increased by DM 15 million to DM 245 million with retroactive effect to 1 January 1998.
The calculations of the extent of entitlement to public funds described in Section 3 above regularly result in a total which exceeds the absolute limit. The amounts paid by the State to all the parties entitled to public funds are thus reduced proportionally (Article 19, Para. 6, second sentence of the Law on Political Parties). As a result, the parties do not in fact receive the amounts per vote and per DM received in contributions as stated in Article 18, Para. 3 of the Law on Political Parties; instead, they only receive correspondingly reduced amounts.
In view of the constitutional ban on the political parties being "predominantly" financed by the state, Article 18, Para. 5 of the Law on Political Parties states that the amount of public funds may not exceed the party's own annual income ("relative limit"). If the latter is lower, the public funds allocated to the party in question are limited to the party's own total annual income.
5. Establishing and disbursing the public funds
Pursuant to Article 19, Para. 2 of the Law on Political Parties, the President of the German Bundestag, within the framework of his responsibilities as the authority administering the funds pursuant to the Law on Political Parties, determines, on 1 December of each year, the amount of public funds for each party for the current year. If the statements of account for the previous year which form the basis of this calculation and which are required by law to be presented have not been submitted by all parties in sufficiently good time to allow them to be taken into account in the assessment carried out on 1 December, this assessment is carried out on a provisional basis for the other parties in accordance with Article 19 Para. 4 first sentence of the Law on Political Parties. In this case the contributions of the "defaulting" parties are taken from the last statements of account submitted and used as an approximate value to perform the calculation for the other parties. The final and definitive assessment is carried out after the statement of account has been submitted for the previous year. If this has not been submitted by 31 December of the current year, the final and definitive assessment is carried out without taking into account the contributions of the "defaulting" party. Any differences arising between the provisional and the final assessment are redressed in the next advance payment (cf. Article 19 Para. 4 second sentence et seq., Law on Political Parties).
The funds calculated are disbursed to the party associations at Land (state) and federal level. The Land associations receive a share of the amount due to the party as a whole, corresponding in DM to the total number of votes cast for the party in the most recent Landtag elections (Article 19, Para. 8 of the Law on Political Parties). They thus receive DM 1.00 per vote, irrespective of any reduction of the absolute limit, on the one hand, and the setting of DM 1.30 for the first 5 million votes, on the other hand, both of which only apply at federal level. The President of the German Bundestag informs the Presidents of the regional parliaments, as the authorities responsible for granting public funds at Land level, of the maximum amounts to be disbursed to the party organizations at Land level from the Land budgets (Article 21, Para. 1, second sentence, Law on Political Parties). This notification is binding. The remaining public funds are disbursed to the parties' federal associations (or, if the party is only represented at Land level, to the Land association) by the Federal Government from the federal budget (Article 21 Para. 1 of the Law on Political Parties).
6. Advance payments
Pursuant to Article 20 Para. 1 of the Law on Political Parties, the parties may, upon written application, be granted advance payments on 15 February, 15 May and 15 August which may each not exceed 25% of the total amount allocated to the party concerned for the preceding year. These payments are then deducted from the amount of funding established on 1 December (Article 19, Para. 7, Law on Political Parties).
7. The parties' statutory obligation to publish accounts
Pursuant to Article 21, Para. 1, fourth sentence of the Basic Law and Article 23 ff. of the Law on Political Parties, parties must publicly account for their assets and for the sources and use of their funds. To ensure that the statements of account are as clear as possible, and therefore transparent for everyone, Article 24, Paras. 2 to 4 of the Law on Political Parties determines the structure and elements of the statement of account. Once it has been scrutinized by an independent auditor, the statement of account, together with the audit certificates, must be submitted to the President of the German Bundestag and be circulated by him as a Bundestag printed paper (Article 23, Para. 2, Law on Political Parties).
The President of the German Bundestag examines whether the statement of account complies with the provisions of Section Five of the Law on Political Parties (Article 23 Para. 3 first sentence). If a party has failed to submit such a statement of account, the President of the Bundestag is not permitted to allocate any public funding to that party (Article 23 Para. 1 sentence 1, Law on Political Parties). The result of the examination is included in the President's report on the development of party finances and on the statements of account of the parties, which is then circulated as a Bundestag printed paper (Article 23 Para. 3 and Para. 5, Law on Political Parties).
(From the 13th electoral period onwards, the full text of the aforementioned Bundestag printed papers together with the statements of account of the parties and the reports of the President of the German Bundestag will be published on the internet (www.bundestag.de); cf. List of Source References Annex 1)
8. Legal consequences of Article 23 a of the Law on Political Parties
If a party has obtained donations illegally or has failed to disclose them in the statement of account as required (Article 25 Para. 2, Law on Political Parties), then in accordance with Article 23 a Para. 1 first sentence of the Law on Political Parties, it loses its claim to public funding in the amount of double the illegally obtained or undisclosed donation.
If a donation has been obtained illegally, Article 23 a Para. 2 second sentence of the Law on Political Parties requires that it be transferred to the President of the German Bundestag. The President passes on all such monies received during the course of a year to an institution whose objects are charitable, ecclesiastical, religious or academic by the beginning of the next year (Article 23 a Para. 3, Law on Political Parties).
9. Treatment of donations for tax purposes (indirect funding of parties)
Alongside the direct public financing of political parties, indirect funding also takes place through the exemption of the parties from, inter alia, inheritance and gift tax (Article 13, Para. 1 (18) of the Inheritance Tax Law) and the opportunity for natural persons to claim tax deductions for contributions to the parties. The latter option, however, applies only to donations up to an amount of DM 6,000 per annum (Article 10 b, Para. 2, Article 34 g, second sentence of the Income Tax Law). Donations exceeding DM 6,000 are permissible but any amount above the DM 6,000 threshold is not under any circumstances tax-deductible. Donations by legal persons are also permissible but are never tax-deductible.
