You may have noticed that the charity regulator, Internal Affairs Charities, seems to be taking a closer look at registered charitable entities that have become more highly visible as their views become more public via various media reports. This has resulted in challenges to several trust-based organisations, asking them to justify their entitlement to registration and in several cases this has resulted in deregistration. While this will not affect the position of incorporated trusts to function within the provisions of their trust deed and constitution, it has the same consequences in terms of their tax exempt status.
It cannot be denied that many common-purpose organisations can effectively operate as incorporated societies. However, the advantage of being granted donee status as a ‘registered charity’ is the obvious financial benefit, with qualifying donations being an income source. In essence it gives registered charities a competitive advantage over entities operating in the same sector relying entirely on membership subscriptions and service delivery for their income. However, it also deprives the Government of revenue from tax.
While there runs a thin red line between what is advocacy or lobbying, it cannot be denied that the political process is influenced by the media and can carry weight in the decision making process of government. The traditional definition of a charity is to meet a certain public benefit and be mindful of its overall charitable purpose. Therefore if a charity chooses to take part in enabling a highly vocal, and arguably minority view, with an aim to change public policy it needs to have at its heart its *charitable purpose. Therefore Charities serving a two-fold purpose of providing actual relief and benefits that are truly charitable, and also lending a strong voice in support of a particular cause (that is not representative of a majority view, regardless of its merits), are therefore advised to divide these into separate activity centres of incorporation. As reported recently in the NZ Herald ‘Advocacy is not charity’.
We would also like to point out that there are remaining uncertainties in the distinction between advocacy and lobbying that have been resolved in Australia. The definition of a charity that meets their public benefit test is: advocacy backed by publicity, intended to bring about change that results in positive action that is in the public interest and benefits the majority of citizens. It can be foreseen that New Zealand will eventually follow this example. While the matter remains open for discussion we advise Charities that also serve a representative role to government and have doubts about the effect on its entitlement to charitable registration to consider their position. NZARC would welcome enquiries for further clarification in this regard.
*The test for a charitable purpose as defined in the Charities Act is: ‘relieving poverty, advancing education or religion or other purpose beneficial to the community..’