A recent decision of the High Court of Australia considered whether an organization established for the purpose of promoting the effectiveness of international aid – in part by challenging established government policy – was charitable. A majority of the Court (five out of seven judges) held that it was. The case provides a useful discussion of the limits on political purposes and activities to which charities are subject, and suggests a broadening view of what constitutes allowable political purposes.
In Aid/Watch Incorporated v. Commissioner of Taxation, the High Court considered whether an organization, Aid/Watch, qualified for tax exempt status as a charity. Aid/Watch had formerly been endorsed as a charitable institution under the Australian Income Tax Assessment Act, but had later had its endorsement as a charity revoked. Aid/Watch’s purpose was to conduct and disseminate research on how governments and non-governmental organizations could reduce negative environmental impact when conducting various types of foreign aid. Part of Aid/Watch’s activities involved efforts to promote what it viewed as positive changes in governmental activity and policy in the area of international aid. The court below had denied charitable status on the basis that the organization was formed in part for political purposes, which it viewed as prohibited for charities.
In overturning the decision below, the majority of the High Court referred a line of cases which have held that organizations established for the purpose of advocating for changes in the law or government policy are not charitable. The Court analyzed the reasoning in these cases, and summarized the principles established in the cases as follows:
- A purpose contrary to the established policy of the law cannot be charitable;
- Even if (a) does not apply, the purpose in question must have the real or imputed intention of contributing to the public welfare;
- When the main purpose of the [charity] is “agitation” for legislative or policy changes, with respect to religion, poor relief, or education, it is “difficult” to find that (b) is satisfied; and
- The source of the difficulty referred to in (c) is the apparent paradox in a “coherent system of law” of treating as for the public welfare “objects which are inconsistent with [the law’s] own provisions”.
The majority went on to state, however, that under the Constitution of Australia, which mandates a system of representative and responsible government, communication between electors, legislators and the officers of the executive (as well as among electors themselves) on matters of government and politics is an “indispensable incident” of that constitutional system. Thus, the majority held that the “agitation” for legislative and political changes referred to in the older cases are a part of the operation of the constitutional processes which contributes to the public welfare.
Accordingly, the majority of the court held that Aid/Watch, by generating public debate as to the best methods for the relief of poverty by the provision of foreign aid, had two characteristics indicative of its charitable status. The first is that its activities were apt to contribute to the public welfare, being for a purpose beneficial to the community (the relief of poverty). Secondly, its “political” activities generated public debate concerning the efficiency of foreign aid directed to the relief of poverty. For the reasons set out above, the Court held that this “political” component did not disqualify the charity from charitable status. The Court thus held that organization could qualify as a charity under Australian law.
The implications of this decision remain to be seen, but on its face the decision suggests a broadening of the understanding of the types of “political” purposes that are consistent with the notion of charity at common law (at least in Australia). If organizations with a purpose of pressing for legislative or policy changes to promote one of the recognized heads of charity can be charitable, this could significantly expand the number of organizations which may qualify as charitable. The Court’s reasoning with respect to a system of government constitutionally premised on communication between electors, legislators and government officials would seem to apply to Canada’s political system as much as it does to Australia’s.
To be sure, in Canada the CRA continues to take the position that organizations with a political purpose – which would include advocating for changes in law or government policy – cannot be registered as charities. CRA’s views on political purposes and activities are set in Policy Statement CPS-022 (http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-022-eng.html), and Canadian charities should continue to comply with this Policy Statement with regard to any political activities. However, it will be interesting to watch whether the Australian approach has any influence on courts or the Charities Directorate in Canada in how they evaluate organizations with “political” purposes.