Computer Society's charitable status appeal dismissed

High Court upholds Charities Commission's decision to remove NZCS from charities register

The NZ Computer Society has lost its appeal to the High Court to keep its charitable status for tax purposes. CEO Paul Matthews says he is puzzled by the decision and wonders how the law defines education if the society’s activities do not qualify.

The basic argument by the Charities Commission when it revoked charitable status for NZCS last year is that the Society’s seminars and conferences mainly benefit the specific class of ICT professionals and not the general public; therefore they are not a qualifying educational function for the purposes of the Charities Act. The High Court in Wellington last week upheld that decision.

The Society may now look at forming a separate charitable trust to accommodate those activities which unambiguously qualify for charitable status. This might allow it to more easily continue with such activities as its extensive KiwiSkills digital literacy programme.

The net effect of the decision is to penalise with a higher tax rate any activity the society undertakes which is aimed at a public audience rather than the membership, Matthews says.

NZCS’s activity for the benefit of its own members, which was a cause of the change of status, will, ironically, remain tax-exempt.

“As a non-charity but an incorporated society, the ‘Principle of Mutuality’ applies,” Matthews writes in an issue of the NZCS’s newsletter. “This means that as we’re an incorporated society we basically are our members. Since you can’t gain profit from trading with yourself, any ‘surplus’ from activity with our members is not taxed.

“What [the judgement] essentially means in our current structure is that we are now penalised for any work we do for the general public, such as putting on free or cheap educational presentations aimed at [them].”

“However I can confirm we are absolutely committed to this programme [KiwiSkills] and others,” says Matthews. “The projects and initiatives we undertake are conducted for the benefit of New Zealand and the benefit of the ICT sector and profession, and this hasn't changed because of this ruling.

“For the moment, it’s business as usual - albeit with a potential reduction in some activities. Every dollar we spend on a restructure or tax is a dollar we can't spend on these public benefit programmes.”

Advocacy also does not qualify as a charitable purpose in New Zealand, “unlike Australia and most of the rest of the civilised world”, says Matthews. “As an example, [our] publicly lobbying for the improvement of educational resources and standards in schools is potentially running foul of New Zealand's Act. Really!

“We'll keep our members informed of progress and of any significant changes as a consequence of this decision,” he concludes.

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