Defining a charity
March 23rd, 2011 at 7:00 am by David FarrarThere’s been an interesting court case as to what constitutes a charity. Paul Matthews of the NZ Computer Society blogs:
As many of you will know we’ve been embroiled in a debate with the Charities Commission over the last year or so as to the educational nature of our activities. Earlier this week the High Court released their ruling, dismissing our appeal.
Without going into huge detail, in short we are of the view that we exist for the advancement of education, in various forms and in various contexts. When you break our activiites and purposes down we think it’s very hard to draw any other conclusion.
After all, in its purest form professionalism is simply education and the application of that (ie. experience) plus ethics.
If we exist for the advancement of education then by definition we are “charitable”. In practice this means two things. People can donate to our programmes (such as KiwiSkills, a programme focused on increasing the country’s digital literacy levels), and we don’t pay income tax on activities (although we still pay GST, PAYE, FBT, ACC etc).
So what did the High Court decide?
The Charities Commission granted us charitable status when we first applied. They reviewed our application in detail then agreed with us that we clearly existed for the advancement of education.
Some time after this decision the Commission began re-looking at charities they thought were in “grey areas” with a view to establishing precedents and after their investigation they concluded that we weren’t charitable after all. While we see our purpose as advancing education and our mandate wider than just our membership, they disagreed.
We appealed this decision to the High Court, and had our day in court. I must say, regardless of outcome our lawyers represented our position well and we got our day in court.
The High Court ruled on the appeal earlier this week, refusing to overturn the Commission’s decision.
What are the implications of this?
We’re still looking at this in detail, however the interpretation appears to suggest that if the result of having particular knowledge or skills imparted is that professionals or “the industry and profession” become more educated or skilled, this is not regarded as Educational under the Charities Act.
One of the primary reasons we appealed the Charities Commission ruling is because we were deeply, deeply concerned about this precedent, which is likely to have a significant impact on other education-focused organisations.
So NZCS conclude:
Frankly, we think this definition is daft and a law change is most likely necessary to clarify this. While we’re most likely not going to appeal the decision, we will be writing to the Minister responsible for this area expressing our very serious concerns.
Another organisation caught up in being deemed non-charitable is the National Council of Women. That one is less controversial as they are fairly overtly political – they submit on almost every single bill that goes through Parliament.
Related posts:
- Is Greenpeace a charity?
- Greenpeace not a charity
- The 2010 Kiwiblog Charity is the Fred Hollows Foundation
- Voting time – Kiwiblog Charity of 2010
March 23rd, 2011 at 7:38 am
This seems to reflect some of the concerns of churches when the commission was created.
Vote:March 23rd, 2011 at 8:17 am
@Scrubone: Why were the churches concerned?
Vote:March 23rd, 2011 at 8:18 am
What were the legal principles laid down by the court? Does this include defining what is ‘education’? It appears that some forms of education are charitable while others are not. Some more information would be helpful here.
The debate has parallels with the ‘food’ debate and GST exemptions in Australia (warm pie, cold pie etc). Whenever the state starts to micro-manage and hair split then it’s laywer heaven.
Vote:March 23rd, 2011 at 8:22 am
As far as I remember IRD ceased regarding The Institution of Professional Engineers as a charity some years back as many of its functions were not deemed charitable (it carries out a whole range of services including membership services, education, advocacy, some statutory functions delegated/ontracted by Government, etc). NZCS would be of a similar nature but seems to have been ‘under the radar’ until now.
A way round it for NZCS is to create a related charity for educational purposes and concede that it advocacy and membership functions are not.
In general a sports or recreational club cannot be a charity although it could set up a related charity for educational purposes.
Interestingly, provision of infrastructure (eg water sewage etc) is a charitable objective. This was over-ridden by legislation in recent times with respect to NZ infrastructure, but provision of such infrastructure in third world countries remains a charitable objective in NZ.
In UK, which has a similar Charities Commission, Eton’s and Harrow’s charitable status was questioned (AFAIK they survived). Nearly all private schools operate as charities and AFAIK the non-operational side of integrated schools would operate as charities. Even some state schools have associated charities (generally called ‘foundations’) whose main function is to shake money out of former pupils to support the schools.
I have grave doubts whether the Charities Commission is a cost effective way of ‘regulating’ charities. I view it as a bit of a ‘job creation’ scheme for Labour oriented people. NZ did for many years without it, and I do not think it has been effective against dubious charities (eg those with big internal operations budgets). It is far to easy to make a charity ‘look good’ on paper and thus hoodwink the Commission. There must be a better way.
Vote:March 23rd, 2011 at 8:25 am
Operational separation a solution?
Vote:March 23rd, 2011 at 9:49 am
There are several overtly political organisations who manage to slither under the radar. One in particular comes to mind that is a lobby group for the industry (commercial providers), but they have managed to convince the Commission that they comply because the service they supply comes within one of the limbs of ‘charitable purpose’. They successfully argued that their political lobbying was only ancillary to the primary purpose. To me its ridiculous and makes a mockery of the regulator.
Vote:March 23rd, 2011 at 10:02 am
The real problem charities are those which exist largely on tax-payers’ money and are in effect simply extensions of the state. It is typically these institutions which do the endless lobbying for new bans and restrictions on our freedoms and provide the distorted “facts” and hyperbolic quotations to the conniving mainstream media.
A charity which relies on tax-payer funding isn’t a charity.
In the UK these corrupt self-serving groups are charted at the Fake Charities site:
http://fakecharities.org/database/fake
Vote:March 23rd, 2011 at 10:02 am
So, is Greenpeace a charity? Or that Sea Shepard organisation?
Vote:March 23rd, 2011 at 12:49 pm
Linda: not sure about Greenpeace, but suspect in Sea Shepard’s situation it doesn’t matter as they’re overseas based and have no branch here AFAIK. You don’t get charitable rebates for overseas giving generally speaking.
JiveKitty: Because it put the government in the position to say what is and is not a charity, and what you can and can’t say while you have charitable status. It’s the whole church/state thing I guess.
Vote:March 23rd, 2011 at 4:17 pm
These decisions are all cause for concern, and from where I sit the Draco decision is a real worry. Education is narrowly defined and it seems that Internet learning is a no-no. Go to:
http://www.charities.govt.nz/LinkClick.aspx?fileticket=Yk%2fx7rh5AWg%3d&tabid=266
Then the Canterbury Economic Development Trusts all assert that the Government does not accept that economic growth and development reduces poverty but only serves to make a few individuals rich – unless of course they are Maori Trusts.
Weird.
Googles search for Charities Commission– Update Newsletter. And go to:
Court judgments from Appeals
Name of entity Date of decision
Vote:New Zealand Computer Society Incorporated 28 February 2011
Draco Foundation New Zealand Charitable Trust 15 February 2011
The Grand Lodge of Antient Free and Accepted Masons in NZ 23 September 2010
Education New Zealand Trust 29 June 2010
Canterbury Economic Development Fund 11 March 2010
Canterbury Development Corporation 11 March 2010
Canterbury Development Corporation Trust 11 March 2010
Travis Trust 3 December 08
March 23rd, 2011 at 4:22 pm
The Environmental Defence Society is registered and last time I looked received hundreds of thousands of dollars a year from the MfE.
And is a blatant and self declared advocate. Go to:
http://www.eds.org.nz/
It says:
The Environmental Defence Society is a not-for-profit environmental advocacy organisation comprised of resource management professionals who are committed to improving environmental outcomes within New Zealand.
Yet other groups only need to mention “policy” and they are declared to be “political” and their papers “propaganda” rather than research.
Vote:March 23rd, 2011 at 4:28 pm
@Owen McShane – Maori Trusts pay the Maori Authority tax rate (assuming they are trusts under Te Ture Whenua or recipients of Treaty settlement assets), Charitable trusts that happen to be primarily Maori focussed on the other hand are charitable trusts like any other organisation and are subject to the same rules as everyone else. Prior to legislative enactment organisations where the beneficiaries were blood relatives could not be a charity; that common law exclusion was removed but (importantly) the remaining requirements still apply, i.e. the public benefit test must be complied with. In any event it is difficult to relate the last part of your second sentence to the first part…
Vote:March 24th, 2011 at 12:06 pm
spk18
Vote:In the decision by the Commission rejecting the application by the Centre for Local Government Studies they set out the argument that Economic Development did not reduce poverty and hence did not fit but then went on to explain that this did not apply to Maori Trusts.
We are not talking about taxation issues here but the deductibility of donations etc.
Anyhow, their words not mine.