Wednesday, January 16, 2008

British Charity Commission Defines Public Benefit; May Hurt Private Schools

The Charity Commission for England and Wales has issued much anticipated guidance on the legal requirement that charities be established for "the public benefit."  The guidance comes in the wake of a 2006 statutory change that removed the presumption that relief of the poor, advancement of education, and advancement of religion were for the public benefit.  The public benefit requirement is in addition to the requirement that charities have "charitable purposes," a term which is defined in the Charities Act of 2006 in a manner similar to how the term "charitable" is defined by U.S. federal tax law.

The guidance states that for a charity to be established for the public benefit it must meet two requirements.  First, there must be an identifiable benefit or benefits that is clear and related to the organization's charitable purposes.  The benefit or benefits must also be balanced against any detriment or harm.  Second, the benefit or benefits must be to the public or a section of the public, with the beneficiaries appropriate to the entity's charitable purposes and with the opportunity to benefit neither denied to those in poverty nor unreasonably restricted by geography, ability to pay, or other restrictions.  Any private benefit must also be incidental.

Early press reports indicate that fee-charging private schools may be at greatest risk of not meeting the newly defined public benefit standard.  A report by the Guardian quotes the Commission's chair as saying "If you are an education charity, you have to show that it's possible for people on low incomes to benefit from education."  She insisted, however, that charitable status would be removed in only the rarest of circumstances.  The article also states that the Commission is planning to issue specific guidance for schools later this year.  Other coverage of the guidance's possible effects on private schools can be found in the Independent and the Mirror.  More general coverage of the guidance is available in an article by the Guardian.

LHM

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