You may recall we had an article in last month’s newsletter regarding ‘Membership Restrictions in Charities. We had a number of enquiries around this topic and received the following response from the Charities Commission:
Only entities that have charitable objectives (purposes) are eligible for registration with the Commission.
Charitable purposes include the advancement of education or religion, or the relief of poverty, or any other matter beneficial to the community. (There is considerable case law about what constitutes a “charitable purpose”, but the Commission has published a number of “plain language” information sheets about charitable purpose, and sample wording for trust deeds and constitutions that your members may find helpful).
Charities must also provide a “public benefit”. This means that the benefit they provide must be available to an appreciable section of the public, and not just an individual, or a small group of people (there is more about this in our information sheet - "Public benefit" test: Guidance for charities).
The Commission has registered a number of charities that have a paid membership. Paid membership on its own doesn’t disqualify a charity from being registered with the Commission – it is only if the organisation’s membership criteria unreasonably exclude such a large part of the public that its benefits (in effect) become unavailable to “the public” (and therefore they don’t provide a “public benefit”).
Regarding the tax status of donations and corporate sponsorships, you may wish to contact Inland Revenue for clarification. However, registered charities that have donee status are eligible for income tax exemption. You may like to read the two Inland Revenue brochures I have attached, which explain registered charities’ tax status.”
If you have any further queries, we are happy to respond to them – you can email rosemary@associations.org.nz
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