ISSUES REPORT – Escalations and Advising
7 November 2019
TO:
Megan Jamieson, Senior Tax Counsel, Public Rulings
FROM:
Gloria Yee, Senior Tax Counsel, Escalations & Advising
SUBJECT: Meaning of “benevolent, philanthropic or cultural” in s LD 3 Income Tax Act
2007 - ADV00064
TYPE:
Advising Report
All legislative references are to the Income Tax Act 2007 (the Act) unless otherwise
stated. The relevant legislative provisions are set out in full in Appendix 1.
1
SUMMARY
1.1
A person who makes a “charitable or other public benefit gift” and who meets the
requirements of s 41A of the Tax Administration Act 1994 has a tax credit: s LD 1
Income Tax Act 2007. A monetary gift of more than $5 is a “charitable or other
public benefit gift” if it is made to a society, institution, association, organisation,
trust or fund (an entity) that is described in s LD 3(3): s LD 3(1). To be an entity
described in s LD 3(2)(a), (b), (c) or (d), the purposes of the entity must be
“charitable, benevolent, philanthropic or cultural”.
1.2
From 1 April 2020 for a gift to an entity described in s LD 3(2)(a), (b), (c) or (d)
to be a “charitable or other public benefit gift”, the entity must be on a list
published by the Commissioner: s LD 3(1)(a).
Issues
1.3
1. The meaning of benevolent, philanthropic or cultural for the purposes of Part
LD, which relates to the donations tax credit.
2. What matters are relevant in determining whether an entity that is carried on,
established or maintained for benevolent, philanthropic or cultural purposes is
a donee organisation for the purpose of the donations tax credit.
Conclusion
1.4
There is a considerable overlap between the meaning of “charitable” (as defined in
s YA 1) and the meaning of “benevolent”, “philanthropic” or “cultural” but a
benevolent, philanthropic or cultural purpose is not necessarily a charitable
purpose. A benevolent, philanthropic or cultural purpose would not be charitable
even if it is beneficial to the community (has a public benefit) unless it is
analogous to a purpose that has already been found to be a charitable purpose.
Benevolent or cultural purposes are likely to be charitable purposes but
philanthropic purposes could encompass purposes that are not analogous to
purposes that are charitable. However, to be an entity for benevolent,
philanthropic or cultural purposes, the carrying out of the entity’s purposes must
ISSUES REPORT – Escalations and Advising
result in a public benefit (a benefit to New Zealand society as a whole). A
summary of the reasons for this conclusion is set out below.
Role of the Charities Registration Board and the Commissioner
1.5
Currently there is no legislative requirement for entities to obtain the approval of
the Commissioner to be treated as a donee organisation for the purposes of the
donations tax credit regime. However, with effect from 1 April 2020:
• for a gift to an entity described in s LD 3(2)(a), (b), (c) or (d) to be a
“charitable or other public benefit gift”, the entity must be on a list published
by the Commissioner: s LD 3(1)(a). The entity cannot be published on the
list if the entity is not an entity described in s LD 3(2)(a), (ab), (b), (c) or (d).
• a gift to an entity described in s LD 3(a), (b), (c) or (d) is not a charitable or
other public benefit gift” if, in the opinion of the Commissioner, the entity is
eligible to be registered as a charitable entity under Charities Act 2005 and the
entity is not registered as a charitable entity under that Act: s LD 3(3). An
entity is eligible to be registered as a charitable entity under the C
harities Act
if its purposes are charitable purposes: s 13 Charities Act.
1.6
The Charities Registration Board, which replaced the Charities Commission, is
responsible for determining whether an entity’s purposes are charitable purposes
for income tax purposes: see s CW 41(5), definition of “tax charity” in s YA 1 and
s LD 3(2)(ab). “Charitable purposes” for the purpose of the Charities Act has a
similar meaning to the Income Tax Act definition. The Charities Commission and
the Commissioner had entered into a relationship protocol agreement that sets
out the expectation that Inland Revenue and the Charities Commission will always
work together when considering an organisation’s charitable purposes and that a
Crown Law opinion may be requested if they reach different interpretations: Tax
Working Group’s Background paper on
Charities and the not-for-profit sector:
background paper for session 13 of the Tax Working Group (6 July 2018) p. 11.
1.7
Therefore, from 1 April 2020, in determining whether an entity is entitled to be
treated as a donee organisation for the purpose of the donations tax credit, the
Commissioner must consider:
• whether an entity is entitled to be registered as a charitable entity under the
Charities Act; and
• if it is determined that an entity’s purposes are not charitable (so that the
entity is not eligible to be registered as a charitable entity under the Charities
Act), whether the entity’s purposes are benevolent, philanthropic or cultural
purposes.
Meaning of “benevolent
1.8
The word “benevolent” has a similar meaning to the ordinary meaning of
“charitable”, which relates to the provision of relief to people in need:
Chichester
Diocesan Fund v Simpson [1944] 2 All ER 60.
1.9
A benevolent purpose relates to the provision of aid to people who need help and
who are unable to help themselves:
Australian Council of Social Service Inc v
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ISSUES REPORT – Escalations and Advising
Commissioner of Pay-roll Tax 85 ATC 4235;
Mines Rescue Board of New South
Wales v FCT (2000) ATC 4191;
Trustees of the Indigenous Barristers’ Trust (2002)
ATC 5,055;
Commissioner of Pay-Roll Tax v Cairnmillar Institute 92 ATC 4307;
Northern Land Council v Commissioner of taxes (NT) (2002) ATC 5117.
1.10 The promotion of a sport is not a benevolent purpose within that meaning:
Northern NSW Football Ltd v Chief Commissioner of State Revenue [2011] NSWCA
51. The relief of suffering by animals is also not a benevolent purpose as the
concept of “benevolence” relates to the relief of need of human beings:
FCT v
Royal Society for the Prevention of Cruelty to Animals Queensland Inc 92 ATC
4441.
1.11 Benevolence is not limited to the provision of money, housing, food, medicine or
other basic essentials. The provision of services to relieve distress may be
benevolent:
Commissioner of Pay-Roll Tax v Cairnmillar Institute 92 ATC 4307;
Northern Land Council v Commissioner of taxes (NT) (2002) ATC 5117.
1.12 An entity that has a purpose of making a profit for its owners would not be carried
on for benevolent purposes. However, the fact that a charge is made for the
provision of assistance does not mean that an organisation would not be carried
on for benevolent purposes. Benevolence is directed at the relief of need or
distress, rather than the relief of poverty. See
Commissioner of Pay-Roll Tax v
Cairnmillar Institute 92 ATC 4307;
Northern Land Council v Commissioner of taxes
(NT)
Meaning of “philanthropic”
1.13 A philanthropic purpose relates to the promotion of the welfare of other human
beings in general:
Re MacDuff [1895-99] All ER Rep 154;
Residence “Joie de
Vivre” Inc v Niagara Falls (City) [1994] OJ No 749;
Rotary International v
Commissioners of Customs & Excise [1991] VATTR 177;
Hallé Concerts Society v
Revenue and Customs Commissioners [2016] UKFTT 294;
Wilson v Flowers 58 NJ
250 (1971).
1.14 A philanthropic purpose is not limited to the provision of basic necessities.
Schools, libraries, public art galleries and museums or the provision of free or
subsidised concerts could be a philanthropic purpose:
Hallé Concerts Society v
Revenue and Customs Commissioners [2016] UKFTT 294. The term
“philanthropic” does not include organisations directed at the care and welfare of
animals, rather than human beings:
Kitchener-Waterloo and North Waterloo
Humane Society v City of Kitchener [1973] 1 OR 490.
Meaning of “cultural”
1.15 A cultural purpose relates to the arts and intellectual pursuits. “Cultural” means:
• “relating to the arts and to intellectual achievements”: Concise Oxford
Dictionary (12th ed);
• “relating to the training, development and refinement of mind, tastes and
manners”:
Molloy v CIR (1981) 5 NZTC 61,070);
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ISSUES REPORT – Escalations and Advising
• “of or relating to the artistic and intellectual aspects or content of human
activity”:
Pooh-Bah Enterprises v Cook County 905 N.E.2d 781 (2009).
1.16 The purpose of opposing a change in the law relating to abortion could not
properly be described as cultural:
Molloy v CIR. The activities that take place at
an adult entertainment cabaret are not cultural activities:
Pooh-Bah Enterprises v
Cook County.
Charitable purposes
1.17 For income tax purposes, “charitable purposes” are “the relief of poverty, the
advancement of education or religion or any other matter beneficial to the
community”: definition of “charitable purpose” in s YA 1. This definition is based
on the classification in
Pemsel’s case [1891] AC 53, which in turn is based on the
preamble to the Statute of Elizabeth (the Statute of Charitable Uses 1601).
1.18 To be a charitable purpose, being “any other matter beneficial to the community”,
the purpose must be analogous to purposes already held to be charitable, being
purposes that are within the “spirit and intendment” of the preamble
to the
Statute of Elizabeth:
Re Greenpeace of New Zealand Incorporated (2014) 26
NZTC ¶21-088 paragraph 18.
1.19 The scope of the purposes that are regarded as analogous to purposes that are
within the spirit and intendment of the preamble to the Statute of Elizabeth has
evolved and continues to evolve:
DV Bryant Trust Board v Hamilton City Council
[1997] 3 NZLR 342;
Travis Trust v Charities Commission (2009) 24 NZTC 23,273;
Re Greenpeace;
Vancouver Society of Immigrant and Visible Minority Women v
MNR 99 DTC 5034.
1.20 To be a charitable purpose, a purpose must also be for a public benefit:
Re
Greenpeace of New Zealand Incorporated (2014) 26 NZTC ¶21-088 paragraph 29.
Whether a trust is for a public benefit requires consideration of whether the
purposes of the trust are such as to confer a benefit on the public or a section of
the public and whether the class of persons eligible to benefit constitute the public
or a sufficient section of it:
NZ Society of Accountants v CIR (1986) 8 NZTC
5,205, p 5,212.
1.21 In the most recent cases in which the court has held that an entity is not entitled
to be registered as a charity under the Charities Act, the court considered that,
although the entity’s purpose is analogous to purposes that had been held to be
charitable , its purpose was to provide a private benefit and any benefit to the
public was remote, was not sufficient or was indirect:
Canterbury Development
Corporation v Charities Commission (2010) 24 NZTC 24,143;
Re the Grand Lodge
of Ancient Free and Accepted Masons in New Zealand (2010) 24 NZTC 24,590;
Re
Education New Zealand Trust (2010) 24 NZTC 24,354;
Re Queenstown Lakes
Community Housing Trust (2011) 25 NZTC ¶20-059;
Re Family First New Zealand
(2018) 28 NZTC ¶23-072.
1.22 Therefore, two issues arise in determining whether an entity is a charitable entity
under the Charities Act: whether its purpose is charitable in nature (being
analogous to purposes that are within the spirit and intendment of the preamble
to the Statute of Elizabeth) and whether the benefit is public in nature:
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ISSUES REPORT – Escalations and Advising
Canterbury Development Corporation v Charities Commission (2010) 24 NZTC
24,143.
Benevolent, philanthropic or cultural purposes are not necessarily charitable purposes
1.23 Benevolent, philanthropic or cultural purposes are not necessarily charitable
purposes:
Pemsel’s case;
Molloy;
Attorney-General for New Zealand v Brown
[1917] AC 393;
Chichester Diocesan Fund v Simpson;
Loggie Estate v McCauley
[1954] SCR 645.
1.24 It is possible that a purpose could be both a charitable purpose and a benevolent,
philanthropic or cultural purpose. The relief of suffering, distress or misfortune is
a benevolent purpose:
Australian Council of Social Service Inc v Commissioner of
Pay-roll Tax;
Commissioner of Pay-roll Tax v Cairnmillar Institute;
Northern Land
Council v Commissioner of Taxes. The relief of human suffering or distress may
be a charitable purpose, being a purpose beneficial to the community:
McGovern
v Attorney-General [1981] 3 All ER 493;
DV Bryant v Hamilton City Council [1997]
3 NZLR 341. A philanthropic purpose could be a charitable purpose on the basis
that it is a purpose that is for the benefit of the community. A cultural purpose
may also be a charitable purpose (the advancement of education):
Royal Choral
Society v Inland Revenue Commissioners [1943] All ER 101’
Re Municipal
Orchestra Endowment Fund [1999] QSC 200.
1.25 To distinguish between a purpose that is both beneficial to the community (or
benevolent) and charitable and a purpose that is beneficial to the community but
is not charitable, it is necessary to consider whether the purpose is analogous to
purposes that are within the spirit and intendment of the Statute of Elizabeth:
Travis Trust v Charities Commission (2009) 24 NZTC 23,273 paragraph 19-20.
1.26 Therefore, there is a considerable overlap between the meaning of “charitable” (as
defined in s YA 1) and the meaning of “benevolent”, “philanthropic” or “cultural”
but a benevolent, philanthropic or cultural purpose is not necessarily a charitable
purpose. A benevolent, philanthropic or cultural purpose would not be charitable
even if it is beneficial to the community (has a public benefit) unless it is
analogous to a purpose that has already been found to be a charitable purpose.
Entity’s activities must result in a benefit to New Zealand society
1.27 The meaning of a provision is to be ascertained from the text and in the light of its
purposes: s 5(1) Interpretation Act. In determining purpose, the immediate and
general legislative context must be considered:
Commerce Commission v
Fonterra Co-operative Group Ltd [207] 3 NZLR 767.
1.28 Section 5(2) of the Interpretation Act 1999 also permits any “indications provided
in the enactment” to be considered in ascertaining the meaning of legislation. The
examples of such indications include the headings to Parts and sections and the
organisation and format of the enactment: s 5(3). The heading to s LD 1 is “tax
credits for charitable
or other public benefit gift”. This suggests that whether or
not an entity’s purposes are charitable purposes, the purposes must be for a
public benefit.
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ISSUES REPORT – Escalations and Advising
1.29 To be an entity in paragraph (a) or (c) of s LD 3(2), the entity must not be carried
on for the private pecuniary benefit of any individual. An entity that is carried on
for the private pecuniary benefit of any individual would not be carried on for a
public benefit:
Presbyterian Church of New Zealand Beneficiary Fund v CIR
(1994) 16 NZTC 11,183.
1.30 To be an entity described in paragraph (b) of s LD 3(2), the entity must be a
public institution. An institution is public if its purpose is to benefit an appreciable
section of the community. See
Maughan v FCT (1942) 66 CLR 388, 397-398.
1.31 To be an entity described in s LD 3(2)(a), (b), (c) or (d), the entity’s purpose
must be for a public benefit. This view is consistent with the purpose of the
donations tax credit regime, which was intended to encourage giving to charities
or other non-profit organisations whose activities result in a benefit to New
Zealand society, whether directly by providing assistance to people who are in
need of assistance or by contribution to the improvement of society generally:
Discussion Document on
Tax incentives for giving to charities and other non-profit
organisations (2006).
1.32 In the
Queenstown Lakes case Mackenzie J held that a trust established to
promote or provide housing through a shared ownership scheme was not a trust
for charitable purposes because the means by which the claimed public benefit
was achieved involved the provision of a private benefit to those who were
assisted. The fact that people selected to participate in the scheme were selected
because they contributed to the social, cultural, economic environmental wellbeing
of those living within the Queenstown area did not confer on the community a
sufficiently tangible and clearly defined benefit to be a public benefit.
1.33 Subsequently LD 3(2)(ac) was enacted to help promote home ownership to New
Zealanders who would not otherwise be able to afford to buy a house and because
it was not certain that entities involved in providing home ownership products to
low-income households would have charitable status: Commentary on the
Taxation (Annual Rates, Employee Allowances, and Remedial Matters) 2014.
Therefore, the Government made a policy decision that the promotion of home
ownership provided a public benefit that outweighs the provision of the private
benefit to those to whom assistance is provided and that should be encouraged by
providing a tax credit for gifts to fund the activities of community housing entities.
1.34 It is possible that some purposes that are not analogous to purposes already held
to be charitable purposes could be benevolent, philanthropic or cultural purposes.
A benevolent purpose (which relates to the relief of poverty or distress) or cultural
purpose (being a purpose of advancing education) is likely to also be a charitable
purpose but the word “philanthropic” could encompass a variety of ways of
promoting the wellbeing of others that may not meet the test of charitable
purpose. However, in my view, to be an entity for benevolent, philanthropic or
cultural purposes, the carrying out of the entity’s purposes must result in a public
benefit (a benefit to New Zealand society as a whole).
Relevance of political purpose, illegal purpose or discrimination
1.35 The presence of political purpose may mean that the entity’s purpose does not
result in a public benefit, which the donations tax credit is intended to support.
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ISSUES REPORT – Escalations and Advising
An entity whose purpose is to support a particular political party would not be
entitled to approved as a donee organisation:
Re Collier [1998] 1 NZLR 81.
However, in some circumstances, a political purpose in the sense of advocating for
a cause would not disentitle an entity from approval:
Greenpeace.
1.36 It would not be possible to stablish that an illegal purpose or a purpose that
involves discrimination on prohibited grounds has a public benefit:
Re Family First
New Zealand (2018) 28 NZTC ¶23-072. The prohibited grounds of discrimination
are sex, marital status, religious belief, ethical belief, colour, race, ethnic or
national origins, disability, age, political opinion, employment status, family status
and sexual orientation: s 19 New Zealand Bill of Rights Act 1990; s 21 Human
Rights Act 1993.
Recommendation
1.37 That Technical Standards be provided with a copy of this this report for
consideration in conjunction with the finalisation of their operational statement.
2.
BACKGROUND
2.1
A person who makes a “charitable or other public benefit gift” and who meets the
requirements of s 41A of the Tax Administration Act 1994 has a tax credit: s LD 1
Income Tax Act 2007. A monetary gift of more than $5 is a “charitable or other
public benefit gift” if it is made to a society, institution, association, organisation,
trust or fund (an entity) that is described in s LD 3(2): s LD 3(1). The entities
described in s LD 3(2) are:
(a)
a society, institution, association, organisation, or trust that is not carried on for the
private pecuniary profit of an individual, and whose funds are applied whol y or
mainly to charitable, benevolent, philanthropic, or cultural purposes within New
Zealand:
(ab)
an entity that, but for this paragraph, no longer meets the requirements of this
subsection, but only for the period starting on the day it fails to meet those
requirements and ending on the later of—
(i)
the day the entity is removed from the register of charitable entities under
the Charities Act 2005:
(ii)
the day on which al reasonably contemplated administrative appeals and
Court proceedings, including appeal rights, are finalised or exhausted in
relation to the person’s charitable status.
(ac)
a community housing entity, if the gift is made at a time the entity is eligible to
derive exempt income under section CW 42B (Community housing trusts and
companies):
(b)
a public institution maintained exclusively for any 1 or more of the purposes within
New Zealand set out in paragraph (a):
(bb)
a Board of Trustees that is constituted under Part 9 of the Education Act 1989 and is
not carried on for the private pecuniary profit of any individual:
(bc)
a tertiary education institution:
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ISSUES REPORT – Escalations and Advising
(c)
a fund established and maintained exclusively for the purpose of providing money for
any 1 or more of the purposes within New Zealand set out in paragraph (a), by a
society, institution, association, organisation, or trust that is not carried on for the
private pecuniary profit of an individual:
(d)
a public fund established and maintained exclusively for the purpose of providing
money for any 1 or more of the purposes within New Zealand set out in paragraph
(a).
2.2 Technical Standards is in the process of completing an Operational Statement
relating to the meaning of “charitable or other public benefit gift” and has asked
us to consider the meaning of “benevolent, philanthropic or cultural” in the
context paragraphs (a), (b), (c) or (d) of the definition of “charitable or other
public benefit gift” in s LD 3(2).
3. ANALYSIS
Roles of the Charities Registration Board and the Commissioner
3.1
Currently there is no legislative requirement for entities to obtain the approval of
the Commissioner to be treated as a donee organisation for the purposes of the
donations tax credit. However, with effect from 1 April 2020:
• for a gift to an entity described in s LD 3(2)(a), (b), (c) or (d) to be a
“charitable or other public benefit gift”, the entity must be on a list published
by the Commissioner: s LD 3(1)(a). The entity cannot be published on the
list if the entity is not an entity described in s LD 3(2)(a), (ab), (b), (c) or (d).
• a gift to an entity described in s LD 3(a), (b), (c) or (d) is not a charitable or
other public benefit gift” if, in the opinion of the Commissioner, the entity is
eligible to be registered as a charitable entity under Charities Act and the
entity is not registered as a charitable entity under that Act: s LD 3(3). An
entity is eligible to be registered as a charitable entity under the Charities Act
if its purposes are charitable purposes: s 13 Charities Act.
This requirement is intended to ensure that all charitable organisations that
can issue donation receipts for tax credit or deductions purposes are subject to
the same reporting and regulatory requirements: Commentary to the
Taxation (Annual Rates for 2018-19, Modernising Tax Administration and
Remedial Matters) Bill 2018. Entities with charitable purposes that are
currently on Inland Revenue’s approved donee list but that are not currently
registered under the Charites Act must register under the Charities Act by 1
April 2020 if they wish to retain their donee status.
3.2
The Charities Registration Board, which replaced the Charities Commission, is
responsible for determining whether an entity’s purposes are charitable purposes
for income tax purposes: see s CW 41(5), definition of “tax charity” in s YA 1 and
s LD 3(2)(ab). “Charitable purposes” for the purpose of the Charities Act 2005
has a similar definition to the Income Tax Act definition. Under s 5 of the
Charities Act, “charitable purpose” includes every charitable purpose, whether it
relates to the relief of poverty, the advancement of education or religion, or any
other matter beneficial to the community.
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3.3
The Tax Working Group’s Background paper on
Charities and the not-for-profit
sector: background paper for session 13 of the Tax Working Group (6 July 2018)
states that the Charities Commission and the Commissioner had entered into a
relationship protocol agreement that sets out the expectation that Inland Revenue
and the Charities Commission will always work together when considering an
organisation’s charitable purposes and that a Crown Law opinion may be
requested if they reach different interpretations: p. 11.
3.4 Therefore, from 1 April 2020, in determining whether an entity is entitled to be
treated as a donee organisation for the purpose of the donations tax credit, the
Commissioner must consider:
• whether an entity is entitled to be registered as a charitable entity under the
Charities Act; and
• if it is determined that an entity’s purposes are not charitable (so that the
entity is not eligible to be registered as a charitable entity under the Charities
Act), whether the entity’s purposes are benevolent, philanthropic or cultural
purposes.
3.5
As the words “benevolent”, “philanthropic” and “cultural” are not defined in the
Act, these words have their ordinary meaning.
Meaning of “benevolent”
3.6
The Concise Oxford Dictionary definition of “benevolent” reads as follows:
1. Wel meaning and kindly
2 (of an organisation) serving a charitable rather than a profit-
making purpose)
3.7
In
Pemsel’s case Lord Bramwell interpreted “benevolent” as meaning wishing good
to others.
3.8
In
Chichester Diocesan Fund v Simpson [1944- 2 All ER 60 Lord Wright said that
the word “benevolent” was almost interchangeable with the ordinary meaning of
“charitable”:
“Benevolent,” which is the other material term here, is also a word of wide connotation,
and almost interchangeable with charitable. That the two words overlap to a very great
extent is clear. Lord Herschel in
Pemsel's case is careful to equate charity and
benevolence even as the words are popularly used. He sums up, at p 572, that:
… the popular conception of a charitable purpose covers the relief of any form of
necessity, destitution, or helplessness which excites the compassion or sympathy of
men, and so appeals to their benevolence for relief. (p. 67)
The ordinary meaning of “charitable” relates to “affording relief to persons in
necessitous or helpless circumstances, and in most instances, at all events, if
required, gratuitously”: Swinburne v FCT (1920) 27 CLR 377, 384. The ordinary
meaning is not the same as the income tax meaning of “charitable”, which is
discussed below.
3.9
Under the Australian Income Tax Assessment Act 1997 a deduction is allowed for
a gift to a “public benevolent institution”. The expression “public benevolent
institution” is regarded as a composite expression:
Perpetual Trustee Company
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Ltd v Commissioner of Taxation (1931) 45 CLR 224. This means that the
interpretation of “public benevolent institution” is not determined by considering
the meanings of the separate words forming the composite phrase:
Metropolitan
Fire Brigades Board v FCT 91 ATC 4052;
FCT v Launceston Legacy 87 4635.
However, in some Australian tax cases there is discussion of the meaning of
“benevolent” in isolation or the concept of “benevolence”.
3.10 In
Australian Council of Social Service Inc v Commissioner of Pay-roll Tax 85 ATC
4235 Priestley J considered that the word “benevolent” carried with it the idea of
benevolence exercised towards persons in need, rather than benevolence
exercised for the benefit of the community as a whole:
To me, the word “benevolent” in the composite phrase “public benevolent institution'' carries
with it the idea of benevolence exercised towards persons in need of benevolence, however
manifested. Benevolence in this sense seems to me to be quite a different concept from
benevolence exercised at large and for the benefit of the community as a whole even if such
benevolence results in relief of or reduction in poverty and distress. Thus it seems to me that
“public benevolent institution”' includes an institution which in a public way conducts itself
benevolently towards those who are recognisably in need of benevolence but excludes an
institution, which although concerned, in an abstract sense, with the relief of poverty and
distress, manifests that concern by promotion of social welfare in the community general y.
(p. 4242)
3.11 In
Mines Rescue Board of New South Wales v FCT (2000) ATC 4191 (which was
upheld by the Full Federal Court [(2000) ATC 4580]) Hely J considered that the
concept of “benevolence” involved an act of kindness, particularly the rendering of
assistance voluntarily to those who are in need of help and who cannot help
themselves:
30.
…the authorities import an underlying conception of “charity” or “gratuity”' as the
fundamental foundation for their understanding of “benevolence”' in this context, a
notion of benevolence which involves an act of
kindness, or perhaps most
particularly, the rendering of assistance
voluntarily to those who, for one reason or
another are in need of help and who cannot help themselves. [court’s emphasis]
3.12 In
Northern NSW Football Ltd v Chief Commissioner of State Revenue [2011]
NSWCA 51 Gzell J (with whom the other members of the court agreed) considered
that the word “benevolent” connotes the provision of aid to those in need of that
aid: paragraph 56. The court considered that the promotion of the game of
football is not a benevolent purpose.
3.13 In
Trustees of the Indigenous Barristers’ Trust (2002) ATC 5,055 the Federal
Court considered that a public benevolent institution must relieve disadvantage or
misfortune, rather than benefit a worthy community objective: paragraph 19.
The court held that a trust established primarily to provide assistance for
indigenous persons seeking to undertake a legal career was benevolent. The
court noted that most indigenous persons in Australia could be described as
disadvantaged generally, in particular in relation to education and the ability to
take a place in the business and professional world and that the benefits provided
by the trust were calculated to relieve that disadvantage: paragraph 22.
3.14 In
Commissioner of Pay-Roll Tax v Cairnmillar Institute 92 ATC 4307 the Supreme
Court of Victoria considered that an institution whose predominant purpose to
make a profit for its owner would not have the character of benevolence because
it was not “desiring to do good for others”. However, the court considered that, to
qualify as a benevolent institution, it was not necessary to show that services
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ISSUES REPORT – Escalations and Advising
were provided only to those in financial need or without charge or for a small
charge, as benevolence related to the relief of distress, rather than the relief of
poverty:
The findings of the learned primary judge were that the service was predominantly the
treatment of mental conditions or disability by psychotherapy and that these conditions were
such as to arouse community compassion and so engender the provision of relief. Those
findings were sufficient in my opinion to bring the respondent within the concept of public
benevolent institution as described in the
Perpetual Trustee Case and so demonstrate the
element of benevolence.
It might wel be said that the mere provision of a service for a fee to those requiring medical
treatment would not, without more, be benevolent even though it involved relief of suffering.
The hypothetical case was raised in argument of a medical clinic which charged fees for
medical treatment which found their way to the doctors who owned the clinic, seeking to
come within the exemption because they were relieving the suffering of their patients. Such a
claimed exemption would however probably fail at the threshold because the clinic would have
great difficulty in proving it was a public institution. Assuming however, that this could be
overcome, it could not be said that such a service was a benevolent one for the predominant
purpose of the institution was not to relieve distress but to make a profit for its owners.
Moreover the institution could not have the necessary character of benevolence because it
was not “desiring to do good for others”'. Rather its predominant aim was to make a profit or
enrich those who directly or indirectly control ed it…..
It is no less benevolent to assist an AIDS sufferer because that person can afford to pay, for
the issue here is not the relief of poverty but the relief of distress. The question of payment
for services should not be approached on the basis that the making of a charge is prima facie
inconsistent with benevolence. To do this is to make poverty in the nature of destitution an
essential characteristic of benevolence. The authorities show no support for such an
assumption. (p. 4311)
The court considered that this was consistent with cases that recognised that the
fact that a charity charged for its service did not preclude a conclusion that it was
a charity.
3.15 In
Northern Land Council v Commissioner of Taxes (NT) (2002) ATC 5117 Mildren
J in the Court of Appeal of the Northern Territory said that benevolence is not
limited to the provision of money, housing, food, medicine or other basic
essentials and that the provision of services to relieve distress may be benevolent,
even if the services are not provided only to those in financial need or are not
free: paragraph 23. In
Cairnmillar it was held that the provision of
psychotherapy to treat psychological disorders and abnormalities was benevolent.
3.16 In
FCT v Royal Society for the Prevention of Cruelty to Animals Queensland Inc 92
ATC 4441 the Supreme Court of Queensland held that the RSPCA was not a public
benevolent institution as its purposes concerned the relief of suffering animals,
rather than the relief of needy human beings. The court accepted that the
promotion of the RSPCA’s object of the prevention of cruelty to animals ultimately
benefitted human beings indirectly. Pincus J commented that the notion that
people may not be harmed by carrying out or witnessing cruelty towards animals
was “an eccentric one”. However, the RSPCA’s purpose was not the relief of the
needy or underprivileged and was not directed towards relief of the human
conditions that traditionally call for aid: p. 4449-4450.
3.17 The cases outlined above indicate that:
• a benevolent purpose relates to the provision of aid to people who need help
and who are unable to help themselves, rather than benevolence exercised for
the benefit of the community as a whole. The promotion of a sport is not a
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ISSUES REPORT – Escalations and Advising
benevolent purpose within that meaning. The relief of suffering by animals is
also not a benevolent purpose as the concept of “benevolence” relates to the
relief of the distress of human beings.
• benevolence is not limited to the provision of money, housing, food, medicine
or other basic essentials. The provision of services to relieve distress is also
benevolent.
• an entity that has a purpose of making a profit for its owners would not be
carried on for benevolent purposes. However, as benevolence is directed at
the relief of need or distress, rather than the relief of poverty, the fact that a
charge is made for the provision of assistance does not mean that an
organisation would not be carried on for benevolent purposes.
M
eaning of “philanthropic”
3.18 The Concise Oxford Dictionary defines “philanthropy” as meaning “the desire to
promote the welfare of others, especially through the donation of money to good
causes”.
3.19 In
Re MacDuff [1895-99] All ER Rep 154 Lindley LJ said that a philanthropic
purpose must be a purpose that “indicates goodwill to mankind in general” (p.
157). Rigby J considered that the promotion of happiness of human beings is a
philanthropic purpose:
The promotion of the happiness of mankind would no doubt be a philanthropic purpose and…
the happiness of mankind is nearer in its meaning to that of the word philanthropic than any
other. (p. 162)
3.20 In
Kitchener-Waterloo and North Waterloo Humane Society v City of Kitchener
[1973] 1 OR 490 the Ontario Court of Appeal considered that the word
“philanthropic” meant a person who practices philanthropy (one who loves their
fellow human beings and who exerts themselves for their wellbeing) and that the
term “philanthropic” did not include organisations directed at the care and welfare
of animals, rather than human life:
In our opinion, the primary question here is whether or not this was an incorporated
institution conducted on philanthropic principles. The dictionary definition of philanthropy
makes it clear that the term is confined to one who loves his fel owmen and exerts himself for
their wel -being -- that he was a friend or lover of mankind. The word philanthropic is confined
to a person who practises philanthropy.
In view of the Legislature's use of this term, it is our opinion that it has restricted the section
in its application in such a fashion as to exclude organizations such as the applicant which
devotes its attention to the care and the welfare of animals rather than human life.
3.21
Residence ‘Joie de Vivre’ Inc v Niagara Falls (City) [1994] OJ No 749 concerned an
organization whose purpose was to provide housing for older or disabled people.
Most of its tenants were poor and the organisation aimed to select the neediest
people for future occupancy. The Ontario Court of Justice considered that for an
institution to be conducted on philanthropic principles, there must be a disposition
to the well-being of fellow human beings. As the organisation catered for
disadvantaged people and sought to serve those who were most disadvantaged,
the court considered that the organisation operated on philanthropic principles:
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ISSUES REPORT – Escalations and Advising
was not limited to helping poor people, “philanthropic” had a wider meaning than
“charitable”:
118.
The law report of
re MacDuff includes reference to an exchange between Lindley LJ
and counsel for the respondent where counsel was asked to suggest a purpose which
would be philanthropic without being charitable. Counsel gave numerous examples,
including a trust established for the purpose of supplying music as a source of
recreation. He described philanthropic as “a very wide word and includes many things
which are only for the pleasure of the world, and cannot be cal ed charitable”. In his
judgment, Lindley LJ went on to suggest purposes which might be philanthropic and
not charitable: “purposes indicating goodwil to rich men to the exclusion of poor
men. Such purposes would be philanthropic in the ordinary acceptation of the word –
that is to say in the wide, loose sense of indicating goodwil towards mankind or a
great portion of them; but I do not think they would be charitable”. Lopes LJ and
Rigby LJ both gave il ustrations of philanthropic gifts for the benefit of the rich or
“moderately well-to-do” which would not be charitable.
119.
It is notable that the current online edition of the Oxford English Dictionary also defines
philanthropy as “
love of mankind; the disposition or active effort to promote the
happiness and wel -being of others; practical benevolence, now esp. as expressed by
the generous donation of money to good causes” (emphasis added). It seems to us
that the term has come to have an even wider meaning than perhaps it once did. A
charitable donation or act might now be described as philanthropic, a
lthough not every
philanthropic act wil be charitable. In that sense philanthropy has a much wider
meaning than the legal term charity, which was clearly recognised in re
MacDuff.
….
123.
Both counsel cautioned us against attempting any general definition of the word
“philanthropic”. It is clear from the authorities quoted above that philanthropy includes
“goodwil towards mankind in general”.
3.27 The Tribunal considered that the word “philanthropic” was not limited to the
provision of basic necessities. The Tribunal held that the Society’s purpose of
promoting the study, practice and knowledge of the art of music through concerts,
educational programmes and community initiatives was philanthropic. Although
the Society charged for admission to its concerts, the tickets were subsidised and
were free in some cases and the Society did not seek to make a profit from
concerts:
127.
….We do not consider that it is necessary to give the word philanthropic a restrictive
meaning such that it only applies to what Mr Chapman described as “practical
benevolence” involving the provision of basic necessities such as food or shelter.
128.
The great philanthropists of the 19th Century focussed on private initiatives for public
good, and in particular improving the quality of life of people in towns and cities. It
seems to us that their philanthropy did not stop at building decent housing and
sanitation for workers. It extended to schools, universities, parks and gardens,
libraries, public art gal eries and museums. It is difficult to see why art and literature
should be distinguished from music in this context. If a wealthy benefactor wished to
build or subsidise a library or a concert hal for the benefit of a town or city we would
regard that as philanthropic. Likewise the setting up and funding of an orchestra to
put on free or subsidised public concerts would also amount to philanthropy.
129.
The Society does charge for admission to its concerts but as we have found the
tickets are subsidised to a greater or lesser extent and in some cases are free. In
1974 total expenditure, principal y orchestra costs, was approximately £525,000.
Concert income was approximately £290,000. There were similar subsidies in
subsequent years. No commercial operator could put on concerts with the same
repertoire in the same way as the Society.
3.28 In
Wilson v Flowers 58 NJ 250 (1971)
the Supreme Court of New Jersey
said that:
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ISSUES REPORT – Escalations and Advising
…the word “philanthropic” in its liberal sense, includes al acts of friendliness to mankind,
whether conducive to the improvement of society or merely to enrichment and enjoyment:
(p. 256)
3.29 Therefore, a philanthropic purpose relates to the promotion of the welfare of other
human beings in general. Philanthropy is not limited to the provision of basic
necessities. It could include schools, libraries, public art galleries and museums or
the provision of free subsidised concerts. The term “philanthropic” does not
include organisations directed at the care and welfare of animals, rather than
human beings. A purpose of benefitting the members of an organisation as an
aim in itself is not a philanthropic purpose. A philanthropic activity is motivated
by altruism, rather than self-interest.
Meaning of “cultural”
3.
30 The Concise Oxford Dictionary defines “cultural” as meaning “relating to the arts
and to intellectual achievements”.
3.31 In
Molloy v CIR (1981) 5 NZTC 61,070 the Court of Appeal said that “cultural” in
the context of “s 84B of the Income Tax Act 1976 [now s LD 3(2)] had its ordinary
dictionary meaning as relating to the training, development and refinement of
mind, tastes and manners”: p. 61,072. The Court of Appeal considered that the
purpose of opposing a change in the law relating to abortion could not properly be
described as cultural: p. 61,078.
3.32 In
Pooh-Bah Enterprises v Cook County 905 N.E.2d 781 (2009)
the Supreme
Court of Illinois interpreted “cultural” as meaning “as meaning “of or relating to
the artistic and intellectual aspects or content of human activity”. The court
considered that the activities that take place at an adult entertainment cabaret
were not within that definition.
3.33 Therefore, a cultural purpose relates to the arts and intellectual pursuits.
Charitable purposes
3.34 For income tax purposes, “charitable purposes” are “the relief of poverty, the
advancement of education or religion or any other matter beneficial to the
community”: definition of “charitable purpose in s YA 1. This definition is based
on the classification in
Pemsel’s case (which in turn is based on the preamble to
the Statute of Elizabeth (the Statute of Charitable Uses 1601). (For the purpose
of this report it is not necessary to consider paragraphs (a) and (b) of the
definition of “charitable purposes”, which brings certain Maori organisations within
the scope of charitable purposes.)
3.35 To be a charitable purpose, being “any other matter beneficial to the community”,
the purpose must be analogous to purposes already held to be charitable, being
purchases that are within the “spirit and intendment” of the preamble to the
Statute of Elizabeth. In
Re Greenpeace of New Zealand Incorporated (2014) 26
NZTC ¶21-088 the majority in the Supreme Court said:
[18]
At common law, charitable status is recognised on a case by case basis, by analogy
with previous common law authorities fal ing general y within the “spirit and
intendment” of the preamble to the Statute of Charitable Uses 1601 (UK) 43 Eliz I c
4.31 Objects have been accepted to be charitable if they advance the public benefit in
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ISSUES REPORT – Escalations and Advising
a way that is analogous to the cases which have built on the preamble to the 1601
Act.32
31
The expression, picked up by the subsequent cases, is that used by Sir Wil iam Grant
MR in
Morice v Bishop of Durham [1804] 9 Ves 399, (1804) 32 ER 659 (MR) (aff’d
(1805) 10 Ves 522, 32 ER 947 (Ch)): “Those purposes are considered charitable,
which that Statute enumerates, or which by analogies are deemed within its spirit
and intendment …”
32
D’Aguilar v Guyana Commissioner of Inland Revenue [1970] TR 31 (PC) at 33 per
Lord Wilberforce;
Vancouver Society of Immigrant and Visible Minority Women v
Minister of National Revenue [1999] 1 SCR 10 at [44] per Gonthier J (dissenting).
3.
36 The scope of the purposes that are regarded as analogous to purposes that are
within the spirit and intendment of the preamble to the Statute of Elizabeth has
evolved and continues to evolve. In
DV Bryant Trust Board v Hamilton City
Council [1997] 3 NZLR 342 Hammond J commented that charities law must take
into account changing institutions and societal values and that there may be
changes in what is considered to be charitable: p. 348. In
Travis Trust v
Charities Commission (2009) 24 NZTC 23,273 Joseph Williams J commented that
the class of charitable purpose evolves over time and the courts have shown a
willingness to develop or extend established ones: paragraph 52. In
Re
Greenpeace the majority in the Supreme Court also recognised the need for
charities law to respond to the changing circumstances of society: paragraph 70.
In
Vancouver Society of Immigrant and Visible Minority Women v MNR 99 DTC
Gonthier J in the Supreme Court of Canada commented that:
The
Pemsel classification provides a framework within which the courts may adapt the law as
those social needs change. [paragraph 36]
3.37 To be a charitable purpose, a purpose of relief of poverty, advancement of
education or religion or other purpose beneficial to the community, the purpose
must be for the benefit of the public:
Re Greenpeace of New Zealand Inc (2014)
26 NZTC ¶21-088. In
NZ Society of Accountants v CIR (1986) 8 NZTC 5,205
Richardson J said that for a trust to be for a public benefit, the purposes of the
trust must be such as to confer a benefit on the public or a section of the public
and whether the class of persons eligible to benefit constitute the public or a
sufficient section of it: p 5,212.
3.38 In
South Australian Employers’ Chamber of Commerce & Industry Inc v
Commissioner of State Taxation Blue J commented that the requirement that
there must be a purpose to provide a public benefit, rather than to advance one’s
own interests, means that a charitable purpose is altruistic (benevolent or
philanthropic):
128.
As observed above the fact that a person’s motive is not altruistic does not entail that
his or her purpose is not charitable. In the middle ages, as observed above, the
motive for many charitable acts was to benefit the benefactor’s eternal soul but this
did not prevent the purpose being charitable. For this reason it is often said that
altruism does not form part of the legal concept of charity. However, when one turns
to purpose, the requirement that the purpose be to provide public benefit as opposed
to advancing one’s own interests necessarily connotes that the purpose is altruistic.
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ISSUES REPORT – Escalations and Advising
129.
Thus in
In re Cranston, Webb v Oldfield,[1898] IR 431Fitz Gibbon LJ said:
The essential attributes of a legal charity are, in my opinion, that it shal be
unselfish – i.e., for the benefit of other persons than the donor – that it shal
be public, i.e., that those to be benefited shal form a class worthy, in
numbers or importance, of consideration as a public object of generosity,
and that it shal be philanthropic or benevolent – i.e., dictated by a desire to
do good. (p. 315)
130.
The reference to a charity being philanthropic or benevolent should be understood as
a reference to the purpose of the charitable institution as opposed to the motives of
those involved with the institution.
3.39 Two issues arise in determining whether an entity is a charitable entity under the
Charities Act: whether its purpose is charitable in nature (being analogous to
purposes that are within the spirit and intendment of the preamble to the Statute
of Elizabeth) and whether the benefit is public in nature. In
Canterbury
Development Corporation v Charities Commission (2010) 24 NZTC 24,143 Ronald
Young J said:
[40]
It is common ground that the appel ant must pass two tests before the
y can be
registered under this head as a charity. I agree with the respondent’s identification of
the two stage test as:
Consisting firstly of fal ing within the spirit and intendment of the Statute of
Elizabeth (often cal ed the analogy test) and secondly meeting the public
benefit requirement.
3.40 In
Travis Trust v Charities Commission the High Court held that a trust for the
purpose of providing the prize money for a horse race or supporting the
Cambridge Jockey Club’s race meetings failed to satisfy both tests. The court
considered that the promotion of sports, leisure or entertainment could be a
charitable purpose only if its deeper purpose was the pursuit of another charitable
objective (such as the promotion of health or education or animal welfare). The
court also considered that as the purpose of the trust was to fund a race for the
benefit of a private club (which was not the community or an appreciable section
of the community, the public benefit requirement was not met.
3.41 However, in the most recent cases in which the court has held that an entity was
not entitled to be registered as a charity under the Charities Act the court
considered that, although an entity’s purpose was analogous to purposes that had
been held to be charitable, its purpose was to provide a private benefit and any
benefit to the public was remote, was not sufficient or was indirect:
Canterbury
Development Corporation v Charities Commission (2010) 24 NZTC 24,143;
Re the
Grand Lodge of Ancient Free and Accepted Masons in New Zealand (2010) 24
NZTC 24,590;
Re Education New Zealand Trust (2010) 24 NZTC 24,354;
Re
Queenstown Lakes Community Housing Trust (2011) 25 NZTC ¶20-059;
Re Family
First New Zealand (2018) 28 NZTC ¶23-072.
3.42 Therefore, charitable purposes are the relief of poverty, the advancement of
education or religion and other purposes beneficial to the community. A purpose
must analogous to purposes already held to be charitable (purposes that are
within the spirit and intendment of the Statute of Elizabeth on which the definition
of “charitable purpose” is based) to be a charitable purpose on the basis that it is
17
ISSUES REPORT – Escalations and Advising
beneficial to the community. To be a charitable purpose, the carrying out of the
purpose must result in a public benefit.
Benevolent, philanthropic or cultural purposes are not necessarily charitable
purposes
3.43 Benevolent, philanthropic or cultural purposes are not necessarily charitable
purposes:
Pemsel’s case 1891] AC 53;
Molloy;
Attorney-General for New Zealand
v Brown [1917] AC 393;
Chichester Diocesan Fund v Simpson;
Loggie Estate v
McCauley [1954] SCR 645.
3.44 It is possible that a purpose could be both a charitable purpose and a benevolent,
philanthropic or cultural purpose. The relief of suffering, distress or misfortune is
a benevolent purpose:
Australian Council of Social Service Inc v Commissioner of
Pay-roll Tax;
Commissioner of Pay-roll Tax v Cairnmillar Institute;
Northern Land
Council v Commissioner of Taxes. The relief of human suffering or distress may
be a charitable purpose, being a purpose beneficial to the community:
McGovern
v Attorney-General [1981] 3 All ER 493;
DV Bryant v Hamilton City Council [1997]
3 NZLR 34
l.
3.45 In
MacDuff Rigby LJ considered that a purpose of advancing the happiness and the
position in life of those who are not poor would not be charitable but would be a
philanthropic intention, being “a very wide desire to improve the position of a
large class of persons” (p. 161). In
DV Bryant Trust Board v Hamilton City
Council Hammond J noted that the fourth category in
Pemsel had encompassed
the promotion of industry, of a geographical area, of moral welfare or the
preservation of the environment but the public benefit must also be clearly
demonstrated:
The fourth head of
Pemsel is (necessarily) more diverse in the institutions or gifts which have
been held charitable. It has encompassed things like the promotion of industry; or a
geographical area; or moral welfare; and the preservation of the environment. The element of
public benefit must be clearly demonstrated. (p. 350)
In my view, a gift for the purposes mentioned by Hammond J could be a gift for
philanthropic purposes, being a gift for the purpose of promoting the welfare of
the community in general.
3.46 A cultural purpose may also be a charitable purpose (the advancement of
education). In
Royal Choral Society v Inland Revenue Commissioners [1943] All
ER 101 it was held that the purpose of raising the artistic taste of the country is
an educational purpose and was, therefore, charitable. In
Re Municipal Orchestra
Endowment Fund [1999] QSC 200 the Queensland Supreme Court held that a
fund established for a public orchestra and a musical library was a charitable
purpose (the advancement of education by raising the artistic taste and musical
appreciation of the citizens of Brisbane or the advancement of musical education).
David Brown (Senior Lecturer, Faculty of Law, Victoria University) considered that
a broad view of education would cover most cultural purposes:
The Charities Act
2005 and the definition of Charitable Purposes (2005) 21 New Zealand
Universities Law Review 598, 624.
3.47 In
Travis Trust v Charities Commission Joseph Williams J considered that to
distinguish between a purpose that is both beneficial to the community (or
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ISSUES REPORT – Escalations and Advising
benevolent) and charitable and a purpose that is beneficial to the community but
is not charitable, it is necessary to consider whether the purpose is analogous to
purposes that are within the spirit and intendment of the Statute of Elizabeth:
[19]
As Lord Macnaughten said in the
Pemsel case:
“The object of that statute was merely to provide new machinery for the
reaffirmation of abuses in regard to charities. But by a singular construction
it was held to authorise certain gifts to charity which otherwise would have
been void. And it contained in the preamble a list of charities so varied and
comprehensive that it became the practice of the Courts to refer to it as a
sort of index or chart.”
[20]
From this his Lordship extracted the four heads of charity now codified in s 5(1) with
the last and most problematic of them being “other purposes beneficial to the
community, not fal ing under any of the preceding heads”.9 But, as Lord Bramwel
said in the same case “certainly every benevolent purpose is not charitable”.10 So
in a deft circumlocution of legal logic, we are required in considering what is
beneficial to the community under the last of the
Pemsel heads to look back to the
“spirit and intendment” of the preamble to the Statute of Elizabeth to assist in
dividing between those purposes that are both beneficial and charitable, and those
that are beneficial but not charitable. To make the division, regard must be had to
the particular words of the preamble and, it has now long been held, any cases in
which purposes have been found to be within the spirit and intendment of the
preamble by analogy. The 117 years since
Pemsel have seen a steady encrustation of
new analogous charitable categories by this means. These developments have been
evolutionary rather than revolutionary.
3.48 Therefore, there is a considerable overlap between the meaning of “charitable” (as
defined in s YA 1) and the meaning of “benevolent”, “philanthropic” or “cultural”
but a benevolent, philanthropic or cultural is not necessarily a charitable purpose.
A benevolent purpose (which relates to the relief of poverty or distress) is likely to
also be a charitable purpose. A cultural purpose may be a charitable purpose on
the basis that it is for the advancement of education. However, the word
“philanthropic” could encompass a variety of ways of promoting the wellbeing of
others that may not meet the test of charitable purpose. A benevolent,
philanthropic or cultural purpose would not be charitable even if it is beneficial to
the community (has a public benefit) unless it is analogous to a purpose that has
already found to be a charitable purpose.
Entity’s activities must result in a public benefit (a benefit to New Zealand
society)
3.49 The meaning of a provision is to be ascertained from the text and in the light of its
purposes: s 5(1) Interpretation Act. In determining purpose, the immediate and
general legislative context must be considered:
Commerce Commission v
Fonterra Co-operative Group Ltd [207] 3 NZLR 767.
3.50 Section 5(2) of the Interpretation Act 1999 also permits any “indications provided
in the enactment” to be considered in ascertaining the meaning of legislation. The
examples of such indications include the headings to Parts and sections and the
organisation and format of the enactment: s 5(3) The heading to s LD 1 is “tax
credits for a “charitable
or other public benefit gift”. This suggests that whether
or not an entity’s purposes are charitable purposes, the purposes must be for a
public benefit.
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3.51 To be an entity in paragraph (a) or (c) of s LD 3(2), the entity must not be carried
on for the private pecuniary benefit of any individual. An entity that is carried on
for the private pecuniary benefit of any individual would not be carried on for a
public benefit. In
Presbyterian Church of New Zealand Beneficiary Fund v CIR
(1994) 16 NZTC 11,183 Heron J considered that “private” in the context of the
phrase “not carried on for the private pecuniary profit of any individual” “connotes
personal, without any overriding characteristic which is public”: p. 11,196.
3.52 To be an entity described in paragraph (b) of s LD 3(2), the entity must be a
public institution. An institution is public if its purpose is to benefit an appreciable
section of the community. See
Maughan v FCT (1942) 66 CLR 388, 397-398.
3.53 In my view, to be an entity described in s LD 3(2)(a), (b), (c) or (d), the entity’s
purpose must be for a public benefit. This view is consistent with the purpose of
the donations tax credit regime.
3.54 The Discussion Document on
Tax incentives for giving to charities and other non-
profit organisations (2006) explains that the donations tax credit is intended to
encourage giving to charities and other non-profit organisations who make a
significant contribution to New Zealand society in almost every sphere of activity:
1.1
Charities and other non-profit organisations make a significant contribution to New
Zealand society in almost every sphere of activity, from sports, recreation, arts,
culture, and heritage to emergency and social services, health, education,
conservation and the environment. There are an estimated 90,000 charities and
other non-profit organisations operating in New Zealand; they vary in size, and many
depend on the voluntary commitment of time and money of ordinary New Zealanders
and businesses, as well as government funding.
1.2.
Giving to charities and other non-profit organisations by individuals and businesses
takes several forms — whether it is a matter of donating money, goods and services
or time. While the overal magnitude of this giving is unknown, cash donations to
charities and other non-profit organisations by individuals each year, as reported on
tax returns, is estimated at $356 mil ion, which represents about one-sixth of the
expenditure of the non-profit sector.
1.3
In New Zealand, charitable giving is encouraged by the availability of a tax rebate for
individuals and by tax deductions for companies and Māori authorities, for cash
donations they make to donee organisations.
3.55 The Discussion Document states that the reasons for promoting donations to
charities or other non-profit organisations are that these organisations help the
government to further its social objectives (such as increasing support to the
disadvantaged members of society and fostering a more caring and cohesive
society), their activities provide benefits to society, may be more responsive to
social needs and may provide social assistance in a more efficient way than
government programmes. The Discussion Document states:
1.13 Among the reasons that governments seek to promote charitable giving are:
•
Charities and other non-profit organisations help governments to further their
social objectives, such as increasing support to the disadvantaged members of
society and fostering a more caring and cohesive society.
•
Many of the activities of charities and other non-profit organisations provide
wider benefits to society over and above the value of the benefits received by
the recipient or supplier of the activity.
•
The activities of charities and other non-profit organisations may be more
responsive to the needs of society than government programmes, since donors
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ISSUES REPORT – Escalations and Advising
and charities can often respond more quickly to changing social needs. Also, the
donations people make to such organisations provide an effective indicator of
the extra goods and services people feel are needed.
•
Because charitable activities use donated goods and volunteer labour they may
be a more efficient way of providing social assistance than government
3.56 The donations tax credit has a significant cost in tax forgone. The Discussion
Document notes that it was estimated (based on tax returns) that donations to
charities and other non-profit organisations amounted to $356 million: paragraph
1.2.
3.
57 In the
Queenstown Lakes case Mackenzie J held that a trust established to
promote or provide housing through a shared ownership scheme was not a trust
for charitable purposes. McKenzie J accepted that that purpose was a purpose
that was beneficial to the community (the fourth category in
Pemsel) because it
was directed to the composition and social cohesion of a particular community.
However, McKenzie J held that the trust’s purpose was not charitable because the
means by which the claimed public benefit was achieved involved the provision of
a private benefit to those who were assisted. McKenzie J considered
that the fact
that people selected to participate in the scheme were selected because they
contributed to the social, cultural, economic or environmental wellbeing of those
living within the Queenstown area did not confer on the community a sufficiently
tangible and clearly defined benefit to be a public benefit.
3.58 Subsequently LD 3(2)(ac) was enacted. Under s LD 3(2)(ac) community housing
entities whose activities involve the provision of housing or housing assistance and
that meet the requirements in s CW 42B would be an entity that qualifies for
donee status: s LD 3(2)(ac). Section LD 3(2)(ac) was intended to help promote
home ownership to New Zealanders who would not otherwise be able to afford to
buy a house and because it was not certain that entities involved in providing
home ownership products to low-income households would have charitable status:
Commentary on the Taxation (Annual Rates, Employee Allowances, and Remedial
Matters) 2014.
3.59 Therefore, the Government made a policy decision that the promotion of home
ownership provided a public benefit that outweighs the provision of the private
benefit to those to whom assistance is provided and that should be encouraged by
providing a tax credit for gifts to fund the activities of community housing entities.
3.60 Therefore, in my view, for a gift to be a “charitable or other public benefit gift” on
the basis that the gift is made to an entity whose purposes are benevolent,
philanthropic or cultural, the carrying out of the entity’s purposes must result in a
public benefit (a benefit to New Zealand society as a whole). The donations tax
credit is intended to support the activities of charities or other non-profit
organisations that result in a benefit to New Zealand society, whether directly by
providing assistance to people who are in need of such assistance or by
contributing to the improvement of society generally.
Relevance of political purpose, illegal purpose and discrimination
3.61 We have been asked to consider whether a political or illegal purpose or a purpose
that involves discrimination on prohibited grounds would be relevant in
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considering whether an entity should be approved as a donee organisation for tax
credit purposes. The prohibited grounds of discrimination are sex, marital status,
religious belief, ethical belief, colour, race, ethnic or national origins, disability,
age, political opinion, employment status, family status and sexual orientation: s
19 New Zealand Bill of Rights Act 1990; s 21 Human Rights Act 1993.
3.62 These issues have been considered in the context of determining whether the
public benefit requirement was met in relation to charitable purposes. In my
view, it would be appropriate to apply a similar approach when considering
whether purposes that are benevolent, philanthropic or cultural but that are not
charitable result in a public benefit.
3.63 In the
Greenpeace case the majority in the Supreme Court noted that the label
“political” has been used in a number of different senses including party political,
controversial, law changing, opinion-moulding.
3.64 In
Re Collier [1998] 1 NZLR 81 Hammond J said that a trust to support a political
party is not a charitable trust because for public policy reasons it is thought
undesirable for the advantages of charity to be conferred on trust which overtly
secure a certain line of political administration and policy. Hammond J
commented that this appeared to be the agreed position throughout the common
law world. See p. 90.
3.65 In the
Greenpeace case the majority in the Supreme Court considered that a
political purpose (in the sense of advocacy for a cause) and a charitable purpose
are not necessarily mutually exclusive and that an object that entails advocacy for
a change in the law is “simply one facet of whether a purpose advances the public
benefit in a way that is within the spirit and intendment of the statute of Elizabeth
I”: paragraph 72. However, the court considered that the promotion of causes
will often not be charitable because it is not possible to say whether the views
promoted are of benefit to the public in a way that the law recognises as
charitable: paragraph 73. Whether the views advocated for are generally
accepted or highly controversial is not determinative: paragraph 75.
3.66
Re Family First New Zealand (2018) 28 NZTC ¶23-072 supports the view that an
illegal purpose or a purpose that involves discrimination on prohibited grounds
would not be in the public benefit. Simon France J considered that that Family
First’s purposes of promoting the traditional family unit (including advocating for
law changes to make divorce more difficult) and advocating for changes to
legislation relating to smacking, abortion, censorship and prostitution were not in
the public benefit. Simon France J considered that a purpose of favouring the
traditional family unit over other types of families would be contrary to human
rights law and there would be both fiscal and social costs if divorce was made
more difficult and costly.
3.67 In my view, the presence of a political purpose may mean that the entity’s
purpose does not result in a public benefit, which the donations tax credit is
intended to support. An entity whose purpose is to support a particular political
party would not be entitled to be approved as a donee organisation. However, in
some circumstances, a political purpose in the sense of advocating for a particular
point of view would not disentitle an entity from approval. It would not be
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7.
APPENDIX 1 – LEGISLATION
The legislative provisions relevant to this project are as follows.
Income Tax Act 2007
7.1
“Community housing entity” is defined in s CW 42B(2) as meaning:
…a trustee or company (the entity) whose activities involve the provision of housing or
housing assistance (the activities), and—
(aa)
the entity is a registered community housing provider under the Housing
Restructuring and Tenancy Matters Act 1992; and
(a)
the activities are not carried on for the private pecuniary profit of any individual; and
(b)
al profit is retained by the entity, or distributed or applied to—
(i)
community housing entities that meet the requirements to derive exempt
income under this section:
(ii)
beneficiaries or clients of the entity:
(ii )
tax charities:
(iv)
persons to whom distributions would be in accordance with charitable
purposes; and
(c)
no person with some control over the activities is able to direct or divert an amount
derived from the activities to the benefit or advantage of,—
(i)
if subparagraph (ii) does not apply, a person other than the entity except for
a purpose of the entity or a charitable purpose:
(ii)
if the entity (the operating entity) is carrying on the activities for or for the
benefit of a community housing entity or charity (the control ing entity), a
person other than the operating entity or the control ing entity except for a
purpose of the operating entity or the control ing entity or for a charitable
purpose.
7.2
Section LD 1 provides:
(1)
A person who makes a charitable or other public benefit gift in a tax year and who
meets the requirements of section 41A of the Tax Administration Act 1994 has a tax
credit for the tax year equal to the amount calculated using the formula in subsection
(2).
7.3
Section LD 3 provides:
(1)
For the purposes of this subpart, a charitable or other public benefit gift—
(a) means a gift of money of $5 or more that is paid to a society, institution,
association, organisation, trust, or fund, described in subsection (2) or listed
in schedule 32 (Recipients of charitable or other public benefit gifts) (the
entity):
(b) includes a subscription of $5 or more paid to an entity only if the subscription
does not confer any rights arising from membership in that entity or any other
society, institution, association, organisation, trust, or fund:
(c)
does not include a testamentary gift.
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ISSUES REPORT – Escalations and Advising
(2)
The fol owing are the entities referred to in subsection (1)(a) and (b):
(a)
a society, institution, association, organisation, or trust that is not carried on
for the private pecuniary profit of an individual, and whose funds are applied
whol y or mainly to charitable, benevolent, philanthropic, or cultural
purposes within New Zealand:
(ab)
an entity that, but for this paragraph, no longer meets the requirements of
this subsection, but only for the period starting on the day it fails to meet
those requirements and ending on the later of—
(i)
the day the entity is removed from the register of charitable entities
under the Charities Act 2005:
(ii)
the day on which al reasonably contemplated administrative
appeals and Court proceedings, including appeal rights, are finalised
or exhausted in relation to the person’s charitable status.
(ac)
a community housing entity, if the gift is made at a time the entity is eligible
to derive exempt income under section CW 42B (Community housing trusts
and companies):
(b)
a public institution maintained exclusively for any 1 or more of the purposes
within New Zealand set out in paragraph (a):
(bb)
a Board of Trustees that is constituted under Part 9 of the Education Act
1989 and is not carried on for the private pecuniary profit of any individual:
(bc)
a tertiary education institution:
(c)
a fund established and maintained exclusively for the purpose of providing
money for any 1 or more of the purposes within New Zealand set out in
paragraph (a), by a society, institution, association, organisation, or trust
that is not carried on for the private pecuniary profit of an individual:
(d)
a public fund established and maintained exclusively for the purpose of
providing money for any 1 or more of the purposes within New Zealand set
out in paragraph (a).
7.4
Section LD 3(1) has been amended with effect from 1 April 2020 to read as
follows:
(1)
For the purposes of this subpart, a charitable or other public benefit gift—
(a)
means a gift of money of $5 or more that is paid to a society, institution,
association, organisation, trust, or fund (the entity), if—
(i)
the entity is described in subsection (2)(a), (ab), (b), (c), or (d),
and the name of the entity is on the list published by the
Commissioner under section 41A(14) to (16) of the Tax
Administration Act 1994:
(ii)
the entity is described in subsection (2)(ac), (bb), or (bc):
(ii )
the name of the entity is listed in schedule 32 (Recipients of
charitable or other public benefit gifts):
(b)
includes a subscription of $5 or more paid to an entity only if the
subscription does not confer any rights arising from membership in that
entity or any other society, institution, association, organisation, trust, or
fund:
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ISSUES REPORT – Escalations and Advising
(c)
does not include a testamentary gift.
7.5
Section LD 3(3), which takes effect from 1 April 2020, provides:
Despite subsection (2)(a), (b), (c), and (d), a society, institution, association, , organisation,
trust, or fund is not a relevant entity for the purposes of subsection (1) if the society,
institution, association, organisation, trust, or fund,—
(a)
is not a tax charity, because it is not registered as a charitable entity under the
Charities Act 2005; and
(b)
in the opinion of the Commissioner, is eligible to be registered as a charitable entity
under that Act.
7.6
“Charitable purposes” is defined in s YA 1 as follows:
charitable purpose includes every charitable purpose, whether it relates to the relief of
poverty, the advancement of education or religion, or any other matter beneficial to the
community, and—
(a)
the purpose of a trust, society, or institution is charitable under this Act if the
purpose would meet the public benefit requirement apart from the fact that the
beneficiaries of the trust, or the members of the society or institution, are related by
blood:
(b)
a marae has a charitable purpose if—
(i)
the physical structure of the marae is situated on land that is a Maori
reservation referred to in Te Ture Whenua Maori Act 1993 (the Maori Land
Act 1993); and
(ii)
the funds of the marae are not used for a purpose other than the
administration and maintenance of the land and of the physical structure of
the marae, or are used for a purpose that is a charitable purpose
Charities Act 2005
7.7
Section 8 of the Charities Act 2005 provides:
(1)
In this Act, unless the context otherwise requires,
charitable purpose includes
every charitable purpose, whether it relates to the relief of poverty, the advancement
of education or religion, or any other matter beneficial to the community.
(2)
However,—
(a)
the purpose of a trust, society, or institution is a charitable purpose under
this Act if the purpose would satisfy the public benefit requirement apart
from the fact that the beneficiaries of the trust, or the members of the
society or institution, are related by blood; and
(b) a marae has a charitable purpose if the physical structure of the marae is
situated on land that is a Maori reservation referred to in Te Ture Whenua
Maori Act 1993 (Maori Land Act 1993) and the funds of the marae are not used
for a purpose other than—
(i)
the administration and maintenance of the land and of the physical
structure of the marae:
(ii)
a purpose that is a charitable purpose other than under this
paragraph.
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(3)
To avoid doubt, if the purposes of a trust, society, or an institution include a non-
charitable purpose (for example, advocacy) that is merely ancil ary to a charitable
purpose of the trust, society, or institution, the presence of that non-charitable
purpose does not prevent the trustees of the trust, the society, or the institution from
qualifying for registration as a charitable entity.
(4)
For the purposes of subsection (3), a non-charitable purpose is ancil ary to a
charitable purpose of the trust, society, or institution if the non-charitable purpose
is—
(a)
ancil ary, secondary, subordinate, or incidental to a charitable purpose of the
trust, society, or institution; and
(b)
not an independent purpose of the trust, society, or institution.
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