## Facts

- Federal income-tax law permitted deductions for expenditures serving “state-political purposes,” understood to include donations to political parties.
- The Government of the Land Hesse initiated an abstract review challenging the deduction regime and related implementing rules.
- Hesse argued the deduction functioned as indirect public support that skewed political competition because wealthy individuals and companies were more able to give deductible donations.
- The dispute arose against the constitutional role of parties in democratic will-formation and an emerging constitutional requirement of equal opportunity among political parties.

## Issues

1. Whether tax deductions for donations to political parties constitute constitutionally relevant state support that must comply with the principle of equal opportunity among political parties.
2. Whether a deduction scheme that predictably benefits parties with access to high-income donors substantially impairs party equality and is therefore unconstitutional.
3. Whether indirect party support through tax law is categorically impermissible, or permissible if structured in a constitutionally neutral manner.

## Decision

- The court treated the deduction as an act of public authority that can influence political competition and thus triggers constitutional review under party-equality requirements.
- Indirect support for parties through tax benefits was not held categorically forbidden.
- The concrete configuration of the challenged tax privileges was held incompatible with the constitution to the extent it produced a systematic skew favoring parties supported by larger donors.
- The legislature was required to revise the scheme to remove constitutionally impermissible distortive effects.

## Legal Principles

- Political parties’ constitutional role implies a constitutional requirement of equal opportunity in party competition, extending beyond elections and media access to competition for donations when shaped by state action.
- Tax privileges for party donations constitute indirect public funding (via foregone revenue) and must satisfy state neutrality in party competition.
- Inequalities arising from private fundraising are not, by themselves, unconstitutional; the constitution bars inequalities created or materially intensified by state measures.
- State measures with election-relevant effects that substantially impair party equality are impermissible; any permissible support must be structured in an evenhanded, party-neutral way.

## Conclusion

The court held that tax deductions for party donations are a form of indirect public funding subject to strict party-equality and neutrality requirements, and it invalidated the challenged scheme insofar as it substantially distorted equal opportunity among political parties by favoring parties with access to wealthy donors.


Party Finance II Case, 8 BVerfGE 51 (BVerfG 1958)