Nonprofit organizations in Mexico can take one of several forms.  Almost all are constituted as Civil Associations [Asociación Civil (A.C.)]. In addition, many groups also have the legal definition of Private Assistance Institution [Institucion de Asistencia Privada (I.A.P.)] or Private Charity Institution [Institución de Beneficencia Privada (I.B.P.)]. Most traditional charity work, including direct services, disaster relief, health care, and distribution of food and clothing, is carried out by organizations constituted as one of the latter two legal entities. These entities are federally regulated, and have requirements to report on activities as well as donors and other sources of income. Historically, it has been much easier for these kinds of organizations to receive government approval to be both tax exempt, and to be authorized to give Mexican donors a tax deductibility receipt.

In recent years, there has been tremendous growth in the number of organizations constituted as Asociaciones Civiles, which can encompass a much broader range of activities – literally any civil association of citizens organized for the public good or for the benefit of its members.  Most of the organizations listed in this report and profiled on ICFXchange are constituted as Asociacines Civiles (A.C.). While A.C.s have federal reporting requirements similar to those required by the U.S. government for 501(c)(3) corporations, the I.A.P.s and I.B.P.s are more closely regulated at the state and federal level.  As recently as ten years ago, it was extremely difficult for many A.C. organizations to obtain tax exempt or tax-deductible status from the Mexican federal government. As a result, these organizations had to pay up to 30% of their income in taxes. Moreover, it was very difficult for them to attract donations, as they could offer no tax benefits to donors. 

Recently, the government’s definition of organizations that can receive tax-deductible donations has broadened somewhat.   In fact, in late 2005, the Mexican Congress expanded deductibility to include human rights advocacy organiztions that had previously been probibited in receiving tax deductibility.

The historic limitations on tax deductibility have meant that many A.C.s do not fully understand the law, or even try to attain tax-deductible status, which severely limits their ability to raise funds.   As the philanthropic sector in Mexico evolves, one of its most important goals will be to work with the government, to try to simplify and broaden the definition of activities that can be tax-deductible. CEMEFI is already working at the federal level toward that end.

For Baja California Sur NGOs, a key concern remains securing support for administrative expenses, especially when a group is just starting out. Tax laws and responsibilities for NGOs in Mexico are so ambiguous that different offices of Secretaría de Hacienda y Crédito Público (Mexico’s tax agency) and private accountants all have different ideas about what they are. This is a huge problem for a nonprofit organization that cannot spend a lot of time and resources trying to get accurate information, and it is especially demoralizing when a group is trying hard to stay focused on its cause or issue. Opportunities exist for leadership in providing technical assistance in accounting and fiscal affairs for area nonprofits.