( Disponible en anglais seulement )
On August 6, 2014, the Supreme Court of New Zealand allowed an appeal by Greenpeace of New Zealand Inc. (“Greenpeace”), finding generally that an organization cannot be prevented from registering as a charity, or be removed from the register of charities, on the basis that it has a political purpose. Prior to this decision, the law of New Zealand had been interpreted such that an organization could be prevented from registering, or removed from the register, if it was considered to have political purposes that were not merely ancillary to its charitable purposes. The law was being interpreted in this way since the wording of the legislation seemed to contemplate a blanket prohibition on “non-ancillary” political purposes. Despite the wording of the legislation, the Supreme Court of New Zealand in this case ultimately held that any political purpose (which may or may not include advocacy) can also be a charitable purpose. In the Court’s view, the assessment of whether a political purpose is also a charitable purpose depends on whether that particular political purpose can be said to have a “public benefit” as determined by the courts.
The background to this appeal was that Greenpeace had been denied registration in New Zealand on the basis that its political purposes were “not merely ancillary” to its charitable purposes (i.e., secondary, subordinate, or incidental) but were rather “independent purposes” of the organization. Its stated objects and purposes at that time included: “the promotion of legislation, policies, rules, regulations and plans which further [Greenpeace’s objectives] and support their enforcement or implementation through political or judicial processes as necessary.”
When the issue reached the Supreme Court, the case turned on whether New Zealand should continue to follow the status quo or whether the political purposes of Greenpeace could somehow also be charitable (i.e., whether or not political purposes and charitable purposes would continue to be mutually exclusive). Greenpeace argued that it should be possible for its political activities to be characterized as charitable in itself, provided that a public benefit could be established. The Supreme Court agreed. In its view, “an absolute rule that promotion of legislation is never charitable is hard to justify.” The Court further stated, “the law of charities changes in response to change in social conditions… [and, therefore] advocacy for a change in law is charitable.”
A practical concern arising from this decision is that previously, New Zealand courts were only required to distinguish a political purpose from a charitable purpose. Going forward, the courts will be required to undertake the potentially difficult task of determining when a political purpose has a “public benefit”. In the case of Greenpeace, the Supreme Court declined to give a ruling on the basis that this was a question of fact, which in the normal course is decided by a trial court. In other words, it will not be possible to know the outcome of this case until the “public benefit” issue is re-heard by the appropriate deciding body.
Viewed from a Canadian perspective, this is a novel decision since the Canadian courts have not recognized political purposes as charitable. Under the Income Tax Act (Canada), charities may engage in non-partisan political activities, such as the promotion of new legislation, to a very limited extent. To date, where CRA is of the view that the amount of a charity’s political activities is above the 10% limit, it has argued that the excessive activities are indicative of a collateral political purpose which is not charitable. Although foreign case law such as this decision from New Zealand is not binding on Canadian courts, it can be persuasive. This case may be helpful when dealing with the CRA on political activities audits. It is also worth noting similar new developments in other jurisdictions, especially when those developments contrast to the direction we are seeing in the current domestic approach, which has seemingly been to tighten the rules, as evidenced by the CRA’s recent political activities audits of certain Canadian charities.