On 6 August 2014 after 4 years of legal battles New Zealand’s Supreme Court has ruled in favour of Greenpeace being potentially able to register as a charity, and that a political purpose is not an automatic barrier to being considered a charitable purpose. Our country’s highest court has overruled the previous Court of Appeal decision and now confirms that campaigning organisations can potentially register as charities. We look at the background of this case and what it means for Greenpeace and New Zealand charities law.
In legal terms this is huge. Greenpeace have scored a landmark win with this ruling and have progressed the law. In effect this decision is a recognition that the legal definition of what is considered charitable in New Zealand needs to, and can be, updated to reflect the society in which we live in 2014.
The definition of what constitutes a charity in NZ law has been determined by a 1601 Act of Elizabeth and case law since then. The legal definition involves what are known as the 4 heads of charity:
- The relief of poverty;
- The advancement of education;
- The advancement of religion; and
- “and any other purposes beneficial to the community”.
The first 3 came directly from the 400 year old English legislation. Even though our world has changed dramatically in the last 400 years most people can still see the logic in those pursuits being classified as charitable. It is the last one though that has been more problematic. It has essentially evolved via case law since that time and is a lot more subjective.
Being officially recognised as a charity is important for a number of reasons including brand perception, but for most it is primarily important in relation to an exemption from income taxation.
(Click here to see earlier article for a more detailed consideration of this).
However it is possible to have donee status and not income tax exemption status. The former allows the donor to claim a tax credit but does not impact the tax situation of the organisation the donation was made to. Whereas income tax exemption, which is granted to registered charities, means that the organisation does not have to pay tax on any business income they generate or on other forms of income such as interest. Depending upon the type of organisation the practical impact of this exemption can vary considerably.
The Background & Timeline
Greenpeace since establishing itself in New Zealand as an incorporated society has understood they were charitable. They are an organisation that exists primarily for the protection of the planet. Their members are individuals who support them financially to further this cause. They refuse money from governments or corporations so they can remain staunchly independent and non-party political in their promotion of good environmental outcomes.
Prior to the Charities Act 2005, which established the now defunct Charities Commission (replaced by a Charities Board in 2012 when the Charities Commission was disestablished), if you wanted to be considered charitable you dealt with the Inland Revenue Department. However the process was not as clear cut as we now have, nor was there any regular checking after an entity was initially considered charitable. This has now been appropriately replaced with a much more rigorous system including a formal registration system, a public register, and ongoing reporting obligations for registered charities. These tasks are all administered by DIA Charities Services which now administers the requirements of the Charities Act 2005.
The Charities Act 2005 required all entities who thought they were charitable to apply to the then Charities Commission to have their charitable status assessed. Confirmation of this was them being deemed charitable, given a charities registration number, and various information about them posted on the public register www.charities.co.nz.
In June 2008 Greenpeace applied to the Charities Commission for registration as a “charitable entity” under Part 2 of the Charities Act 2005.
However in April 2010 the Charities Commission declined Greenpeace’s registration. The Commission said that, although the bulk of Greenpeace’s purposes and activities, such as the promotion and protection and preservation of nature and the environment were charitable, the promotion of disarmament and peace would not be charitable.
Societies or institutions qualify for registration under s 13 of the Act only if they are “established and maintained exclusively for charitable purposes”.
Greenpeace appealed to the High Court in December 2010. In May 2011 the High Court found that Greenpeace should not be able to register as a charity because the organisation’s nuclear disarmament purposes were independent political purposes and therefore non-charitable.
Political advocacy has been established by case law in the past to be not charitable. This was a significant feature of the declining of Greenpeace’s original application. Click here to see the Charitable Purpose Forum article for an explanation and discussion regarding the issue of advocacy.
September 2012 saw Greenpeace take this to the Court of Appeal. In November 2012 the Court of Appeal agrees with Greenpeace, and says that the organisation’s peace and disarmament purposes were broadly charitable and the DIA Charities Services should consider the application again. The Court agreed that political advocacy did not disqualify an organisation from being a charity, as long as it was not a ‘primary purpose’. The Court also said that any activities carried out by a charity that were illegal would preclude that organisation from being a charity.
On 14 May 2013 Greenpeace applied to the Supreme Court to challenge two of the Court of Appeal’s findings, arguing that restrictions should not be put on political advocacy, as it is not consistent with New Zealand’s participatory democracy for there to be a general probation on participation. The organisation also questioned whether the Court was able to judge where public benefit lies around political advocacy.
On 6 August 2014 the Supreme Court handed down its judgement. The Supreme Court by majority (comprising Elias CJ, McGrath and Glazebrook JJ) allowed the appeal against the Court of Appeal’s determination that a political purpose cannot be a charitable purpose. The majority held that a political purpose exclusion should no longer be applied in New Zealand. They concluded that a blanket exclusion of political purposes is unnecessary and distracts from the underlying inquiry whether a purpose is of public benefit within the sense the law recognises as charitable.
The Supreme Court however unanimously dismissed the appeal against the Court of Appeal’s determination that purposes or activities that are illegal or unlawful preclude charitable status. The Court held that an illegal purpose is disqualifying and that illegal activity may disqualify an entity from registration when it indicates a purpose which is not charitable even though such activity would not justify removal from the register of charities under the statute.
So what does all this mean?
- Political purpose and charitable purpose are no longer mutually exclusive and the blanket exclusion from charitable status due to political purpose is no longer valid. This means engaging in political advocacy, as long as it is for a public good, should not disqualify a group from being a charity.
- Other entities may, including some previously refused charities registration or deregistered, may now be able to successfully reapply for charitable status.
- The Court’s decision does not invalidate the Charities Registration Board’s previous decisions to decline to register any applicant, or to deregister any previously registered charity, on the basis of political advocacy. Those decisions were made applying the law as the courts interpreted it to be at the time.
- Applicants will still have to demonstrate that their purposes and all their activities provide benefits to the public or a sufficient section of the public, not just to an individual, organisation or closed group, as well as being charitable. Applicants must also demonstrate that they meet all of the other requirements of the Charities Act 2005.
- DIA Charities Services will now need to review their approach to assessing applications and apply the law as it has been clarified by the Supreme Court.
- A welcomed reduction in fear from existing charities concerned about speaking out publically on matters lest this be deemed to be political advocacy and result in them losing their charitable status.
And lastly a bouquet…
A bouquet to Greenpeace; they have fought a long, complex, difficult, and expensive battle to move the law forward in New Zealand. Most others would have given up.
Arguably they didn’t need to take this action as this was not a matter of financial life and death matter for their organisation. The benefits of income tax exemption to their organisation, given their make-up and supporter base, are nowhere near as significant compared to many other organisations.
However they took a stand based on a principled belief that the existing law in New Zealand was out of date with our current society. That it needed to be debated and moved forward. And they have won.
Thanks to their efforts our charities law in New Zealand has moved forward positively.
Disclosure Note: Greenpeace New Zealand Incorporated have had no input into this article. The comments and opinions in this article are the author’s own.