By a 3:2 majority decision (Re Greenpeace), the Supreme Court has held that there is no longer a blanket rule preventing entities with independent “political” purposes from obtaining “charitable entity” status under the Charities Act 2005. However, entities with political purposes must still satisfy the law’s well-established “public benefit” test. Illegal or unlawful purposes or activities may disqualify an entity from obtaining “charitable entity” status.
The Court’s decision has immediate impacts for Greenpeace’s and other entities’ ability to obtain the benefits of “charitable entity” status. But the decision isn’t a watershed one that effectively redefines all political advocacy as a “charitable purpose” under section 5 of the Charities Act 2005. Rather, the Court has confirmed that a “charitable purpose” generally involves “tangible public utility”. Consequently, the continued need for public benefit means that it will be difficult for an organisation to show that the standalone promotion of an idea or cause is a “charitable purpose” that supports granting it registration as a “charitable entity”.
What is a “charitable entity” and why does such status matter?
Charities do important (and necessary) work in New Zealand. Consequently, the law makes certain legal and tax benefits available to recognise and support their work.
To qualify for such benefits, however, an entity must secure “charitable entity”1 status under the Charities Act 2005. Currently, the Charities Board at the Department of Internal Affairs (DIA) is responsible for deciding whether to accept an entity’s application for registration as a “charitable entity” and for deregistering entities. Between 2005 and 2012, the Charities Commission made all such decisions.
Two key advantages for entities with “charitable entity” status are that individuals and companies can receive tax rebates for donations and such charities are exempt from income tax. But perhaps most importantly, “charitable entity” status makes access to funding much easier for an entity. That is because many funders now only support registered entities.
“Charitable entity” status is not available to all not-for-profit or voluntary organisations. To achieve “charitable entity” status, an entity must:
- be for a purpose that the law considers to be “charitable” (i.e. the relief of poverty, the advancement of education or religion, and other purposes beneficial to the community);2
- satisfy the law’s “public benefit” test (i.e. the benefit of an entity’s activities generally must be available to the public or a substantial proportion of it, rather than simply to particular individuals or organisations with common characteristics);
- be beneficial, not detrimental; and
- be established and maintained exclusively for charitable purposes (subject to some limited statutory exceptions, e.g. a non-charitable purpose is merely ancillary to an entity’s charitable purpose).3
The law’s “charitable purpose” definition and the recognised exceptions to the need for exclusivity of such purposes therefore function as a gateway to entities being able to obtain the valuable legal and fiscal benefits given to a “charitable entity”.
Political purpose traditionally not charitable
Traditionally, the law has refused to recognise entities with political purposes as “charitable”. In this context, “political purposes” includes:
- support for, or furthering the interests of, any political party;
- promoting the maintenance or alteration of domestic or foreign law, government policies or particular decisions of government authorities; and
- attempting to influence public opinion through advocacy of a particular viewpoint.
Section 5(3) of the Charities Act 2005 refers to “advocacy” that is “merely ancillary to a charitable purpose”. This wording saw the Charities Commission take the position in a number of cases that “charitable entity” status was not available to entities that had a political purpose that was more than ancillary/secondary to the entity’s charitable purpose/s. Consequently, some entities that had previously enjoyed long-standing charitable status before introduction of the Charities Act 2005 were denied registration. Some others recorded being fearful that advocating for their causes would risk jeopardising their ongoing “charitable entity” status.
Background to the Greenpeace case
The Greenpeace case involved an appeal by Greenpeace against the Charities Commission’s 2010 decision refusing it “charitable entity” status. The main reasons why the Commission refused Greenpeace’s application were that:
- two of Greenpeace’s objects were not “charitable” and instead “political”. Those two objects were the promotion of:
- disarmament and peace; and
- legislation, policies, rules, regulations and plans which further Greenpeace’s other objects;
- the two political objects were “independent” (i.e. more than ancillary) to Greenpeace’s charitable purposes; and
- action “central” to Greenpeace’s activities could involve illegal activity, which was not in the public interest and charitable.
The High Court considered itself bound by earlier New Zealand authorities that applied a blanket exclusion against political purposes being charitable. It also questioned whether there was sufficient evidence to show that Greenpeace was deliberately involved in illegal activities.
The Court of Appeal set aside the Commission’s decision refusing Greenpeace’s registration as a “charitable entity” and referred the case to DIA for reconsideration. In its reasoning, the Court confirmed the political purposes exclusion but held that amendments to Greenpeace’s objects meant that Greenpeace avoided the political purpose exclusion. In particular, the Court of Appeal considered that the uncontroversial amended object to “promote nuclear disarmament and the elimination of weapons of mass destruction” was charitable and for the public benefit. The Court, however, recorded that Greenpeace’s actual political advocacy might be more than ancillary to its charitable purposes and therefore mean Greenpeace would remain ineligible for “charitable entity” status. DIA was also directed to consider whether any unlawful activity by Greenpeace was inconsistent with “charitable entity” status.
In its appeal to the Supreme Court, Greenpeace contended that:
- the political purposes exclusion should no longer apply in New Zealand;
- its political advocacy is of public benefit and a “charitable purpose”; and
- ancillary illegal purposes or activities (as opposed to serious wrongdoing) do not exclude an organisation from obtaining “charitable entity” status.
The Supreme Court’s decision
Ultimately, the Supreme Court remitted Greenpeace’s “charitable entity” application to DIA for reconsideration. But the Supreme Court differed from the Court of Appeal in its reasons for doing so. Key conclusions reached by the Supreme Court include:
- section 5 of the Charities Act 2005 is not an exclusive list of purposes that are charitable. Parliament did not intend for section 5 to widen or narrow the scope of a “charitable purpose”, or to change the law in this area. Rather, its clear decision was to retain the concept of “charity” that has been developed in case law over the last 400 years;
- the concept of charity requires both public benefit and charitable object. The two concepts, however, do not coincide completely (i.e. beyond relief of poverty and the advancement of education and religion, a charitable object might be found to be lacking the public benefit needed to secure “charitable entity” status. Similarly, something of benefit to the community may not be charitable as understood in the case law);
- when determining whether any particular purpose of an entity is “charitable”, the relevant purpose must be assessed on its own merits and on a case-by-case basis. A comprehensive and fixed definition of “charitable purpose” is impossible and undesirable. The law relating to charities should continue to develop as new social needs arise or old ones become obsolete or satisfied;
- political advocacy (e.g. contributing to public debate on issues) can be a “charitable purpose”. In that context, the correct approach is to examine the advocated end, the means promoted to achieve that end, and the manner in which the cause is promoted in order to determine whether the purpose is of public benefit within the sense that the law recognises as charitable. If public benefit is not self-evident, it must be proved by evidence. Lack of controversy alone about an idea or abstraction (e.g. the goal of nuclear disarmament) is insufficient for a conclusion that an entity’s promotion of an idea/abstraction is a “charitable purpose”;
- entities that can show tangible good in the work that they do (e.g. housing or feeding those in need) can establish “charitable purpose” more easily than those who only promote ideas they consider to be of public benefit;
- illegal purposes (whether stated objects or inferred from an entity’s activities) are not “charitable purposes” and therefore prevent an entity from obtaining “charitable entity” status. It is a “matter of fact and degree” whether any illegal or unlawful activity (including isolated breaches of the law and other unlawful activities not deliberately undertaken or coordinated) disqualifies an entity from obtaining registration in any particular case; and
- the issue of whether Greenpeace’s purposes were each a “charitable purpose” was not considered correctly by decision-makers below. The Supreme Court did not have enough information to decide whether Greenpeace’s amended objects and activities meant it should have “charitable entity” status. Referral of the case to the Charities Board for reconsideration was therefore most appropriate.
Implications and take away messages
The key take away messages from the Supreme Court’s Greenpeace decision are:
Legal test for “charitable entity” status
- removal of the blanket rule against political purposes as charitable has made New Zealand law on the issue consistent with that in Australia;
- “political purpose” and “charitable purpose” are not mutually exclusive. Standalone (i.e. more than ancillary) political advocacy objects can be a “charitable purpose”;
- the continued need for entities to satisfy the law’s well-established “public benefit” test means that scope for entities to secure “charitable entity” status is likely to be limited if the relevant entity only promotes ideas, causes or abstractions and can’t show tangible good;
- for entities with political advocacy as a standalone (or only) object:
- to be a charitable object, the ends of the idea/abstraction being promoted (e.g. peace) still need to be within the scope of cases that have developed the meaning of what is charitable; and
- both the methods of promotion used by the entity and the entity’s suggestions about how the ends of the idea/abstraction it is promoting should be achieved are important in determining if public benefit exists;
- political advocacy that is not charitable but only ancillary/secondary to an entity’s main “charitable purpose” is still possible and not a bar to securing “charitable entity” status;
- illegal activity (of all degrees of seriousness) may disqualify an entity from obtaining “charitable entity” status depending on the circumstances; and
- contrary to the suggestions of some in the media, the Greenpeace decision does not represent a sea change in this area. The decision confirms that notions of “charitable purpose” must move with the times. But the Supreme Court has not opened the door for all political lobby groups and other non-profit organisations to become registered as charitable entities and to enjoy the benefits that follow from that status;
Future Charities Board decision-making
because of the Court’s decision, DIA is now reviewing the approach the Charities Board will take when assessing future applications for “charitable entity” status. In due course, DIA will issue new guidelines for entities wishing to apply for such registration. The guidelines will be published online once available; and
the Court’s decision does not invalidate any earlier decision made by the Charities Commission or Charities Board. Entities previously declined registration or deregistered by the Commission or Board because of political advocacy that was their only object or more than ancillary to a “charitable purpose”, can now make a new application for registration. But (as noted above) to secure “charitable entity” status, entities making a fresh application for registration must show public benefit and meet all other requirements of the Charities Act 2005.