Friday, August 8, 2014
My life as a military brat, particularly in Germany, taught me that the world does not begin and end on the shores of North America. So if you clicked on this post expecting to hear that the U.S. Supreme Court did us all a favor by eliminating the restrictions on political activities by charities, well . . . sorry about that. But in a throughly written, wonderfully informative and well-reasoned opinion regarding the meaning of "charity," and making references to the very same Statute of Charitable Uses, Pemsel, and ALI Restatment of Trust generally relied upon as the source of U.S. law on the topic, the New Zealand Supreme Court recently held that political activity, in and of itself, can be "charitable" and therefore is not presumptively precluded from the purposes for which tax exemption may be granted. Prior to Wednesday's decision, New Zealand law allowed for charitable tax exemption status only when an organization's political activity was "ancillary" or "subordinate" to a charitable purpose, implying that political activity itself is not charitable.
In Greenpeace of New Zealand Incorporated, (Aug. 6, 2014) the New England Supreme Court discussed the matter of political action -- including campaign intervention, I think (the Court is not entirely clear and the facts of the case relate to lobbying) -- stating:
We do not think the development of a standalone doctrine of exclusion of political purposes, a development comparatively recent and based on surprisingly little authority, has been necessary or beneficial . . . Even in the case of promotion of specific law reform, an absolute rule that promotion of legislation is never charitable is hard to justify. . . . A conclusion that a purpose is "political" or "advocacy" obscures proper focus on whether a purpose is charitable within the sense used by law. It is difficult to construct any adequate or principled theory to support blanket exclusion. . . . As well, a strict exclusion risks rigidity in an area of law which should be responsive to the way society works. it is likely to hinder the responsiveness of this area of law to the changing circumstances of society.
The High Court's press release can be found here and includes a history of the litigation and a discussion of the relatively brief dissenting opinion:
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.
They rejected the conclusion of the Court of Appeal that s 5(3) of the Charities Act enacts a political purpose exclusion with an exemption if political activities are no more than “ancillary”. Rather, s 5(3) provides an exemption for noncharitable activities if ancillary.
The minority (William Young and Arnold JJ) concluded that s 5(3) codifies the position that advocacy in support of a charitable purpose is non-charitable unless it is merely ancillary to that charitable purpose. They further took the view that the rule that political advocacy is not charitable is defensible not only on the basis of the authorities but also as a matter of policy and practicality and that there is accordingly no requirement to depart from the ordinary language approach to s 5(3).
The Court 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.