What makes a not-for-profit

Kapi-Mana News - - OUT & ABOUT - ALAN KNOWSLEY LE­GAL MAT­TERS

Not all not-for-profit en­ti­ties are char­i­ta­ble; how­ever, there are some im­por­tant ben­e­fits to reg­is­ter­ing as a char­ity with Char­i­ties Ser­vices if your en­tity meets the ap­pli­ca­ble cri­te­ria.

To be reg­is­tered as a char­ity, an en­tity must have a char­i­ta­ble pur­pose, such as: the re­lief of poverty, the ad­vance­ment of ed­u­ca­tion, the ad­vance­ment of re­li­gion, or any­thing else that ben­e­fits the com­mu­nity.

The char­i­ta­ble pur­pose must also pro­vide a legally recog­nised ben­e­fit to the public. This ben­e­fit should be avail­able to the public gen­er­ally, or at least a suf­fi­ciently large sec­tion of the public. Some­times a not-for-profit en­tity can fall down here be­cause al­though it has a char­i­ta­ble pur­pose, the sec­tion of so­ci­ety that it ben­e­fits is too nar­row.

TAX EX­EMP­TION

Reg­is­tered char­i­ties do not have to pay tax on in­come they earn, be­cause of the ben­e­fit they pro­vide to the public.

This is what is known as ‘‘tax ex­empt sta­tus’’ and gen­er­ally oc­curs au­to­mat­i­cally when Char­i­ties Ser­vices ap­proves reg­is­tra­tion of a char­i­ta­ble en­tity.

CHAR­I­TIES REG­IS­TER

When a char­ity is reg­is­tered, its in­for­ma­tion shows on the Char­i­ties Reg­is­ter, which is public and search­able. This trans­parency helps the public to gain trust and con­fi­dence in a char­ity, and can be help­ful when ap­ply­ing for fund­ing or seek­ing do­na­tions.

Each char­ity is given a unique reg­is­tra­tion num­ber which proves its char­i­ta­ble sta­tus. Char­i­ties Ser­vices has an on­go­ing role in mon­i­tor­ing com­pli­ance of reg­is­tered char­i­ties.

A reg­is­tered char­ity will have some on­go­ing com­pli­ance re­quire­ments, in­clud­ing:

Up­dat­ing the Char­i­ties Reg­is­ter when­ever there is a change of of­fi­cers. This is some­thing that is quite of­ten ne­glected which can mean that a char­ity’s in­for­ma­tion on the reg­is­ter is out of date.

Fil­ing a new ver­sion of the gov­ern­ing doc­u­ment (such as trust deed or con­sti­tu­tion) when­ever it is amended. In this case Char­i­ties Ser­vices will re­assess the new rules to make sure that they still meet re­quire­ments, and if not fur­ther amend­ments may be needed. Fil­ing an­nual fi­nan­cial re­turns.

REMOVALASACHARITY

A char­i­ta­ble or­gan­i­sa­tion can ask to be re­moved from the Char­i­ties Reg­is­ter. Com­monly, Char­i­ties Ser­vices will re­move or dereg­is­ter a char­ity for one of sev­eral rea­sons:

If it has changed its pur­poses and ac­tiv­i­ties, and no longer

Each char­ity is given a unique reg­is­tra­tion num­ber.

qual­i­fies for char­i­ta­ble sta­tus be­cause these are out­side of the Char­i­ties Act 2005.

If it has per­sis­tently or sig­nif­i­cantly failed to meet its obli­ga­tions un­der the Char­i­ties Act 2005 (for ex­am­ple by not fil­ing an­nual re­turns) or any other leg­is­la­tion.

If it en­gages in ‘‘se­ri­ous wrong­do­ing’’. Once de-reg­is­tered, the en­tity will be­come sub­ject to in­come tax be­cause its tax ex­emp­tion sta­tus will cease. Some­times this can be back­dated to when the en­tity be­came non-com­pli­ant, rather than the date of de-reg­is­tra­tion, which can have se­ri­ous im­pli­ca­tions in terms of any over­due tax. It is very im­por­tant to get the right ad­vice if this sit­u­a­tion ap­plies.

If you are won­der­ing whether your not-for-profit en­tity could reg­is­ter as a char­ity, or if you need some ad­vice about an ex­ist­ing char­ity, talk to your le­gal ad­vi­sor about your par­tic­u­lar sit­u­a­tion.

Col­umn cour­tesy of RAINEY COLLINS LAWYERS, 0800 733 484, rain­ey­collins.co.nz.

If you have a le­gal in­quiry you would like dis­cussed con­tact aknowsley@rain­ey­collins.co.nz.

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