December 1, 2010
Australia: High Court Overrules Revocation of Exemption Based on "Political" Activity
In a major decision, Australia's highest court has ruled a nonprofit organization that sought to promote the effectiveness of international aid qualified as a tax-exempt "charitable institution" even given the "political" nature of its goals and activities. In Aid/Watch Incorporated v. Commission of Taxation, the High Court of Australia reversed a lower court's decision upholding the revocation of tax exempt status for Aid/Watch. According to the opinion, Aid/Watch "is an organization concerned with promoting the effectiveness of Australian and multi national aid provided in foreign countries by means which include investment programs, projects and policies." After carefully considering both the meaning of the term "charitable institution" as used in the applicable tax statutes and whether a "political" purpose or activity of changing government policy through public education disqualified an organization from being classified as such an institution under Australian law, the Court concluded that "the generation by lawful means of public debate . . . concerning the efficiency of foreign aid directed to the relief of poverty, itself is a purpose beneficial to the community within the fourth head of [Commissioners for Special Purposes of Income Tax v.] Pemsel [1891 AC 531]." The Court further concluded that "in Australia there is no general doctrine which excludes from charitable purposes 'political objects' . . . ." The opinion is of particular interest not only because of its ramifications for nonprofit organizations in Australia but also for its consideration of the laws governing political activity by charities not only in that country but also in the UK, Canada, and the United States.
(Hat tip: Harvey Dale)