Computer Society loses charity status

Will fight decision in the High Court

The New Zealand Computer Society has lost its charity status and with it the right to considerable tax exemptions for both the organisation and its donors.

But the NZCS chief executive Paul Matthews says the Society is appealing the decision made by the Charities Commission in March and has lodged an application for appeal with the High Court.

According to a decision by the Commission, NZCS’s charity status was revoked earlier this year. It followed nine months of detailed submissions and counter submissions as the Society fought to keep its charity status. However, the Commission was unmoved and delisted the Society as a charity on 18 March.

NZCS is one New Zealand’s oldest ICT organisations, and was first registered on 6 October 1960 (it plans to celebrate its 50^th anniversary later this year). However under the Charities Act 2005 it was required to apply for status as a registered charity, which it achieved in January 2009.

On 29 June 2009 the Commission received a complaint about the society and three days later sent its first notice of intention to remove it from the register.

The Commission’s case

In order to become a registered charity, an organisation must prove that its primary purpose is to serve the public good. The NZCS view is that it provides educational opportunities that are beneficial to the New Zealand public. But the Commission contends that the NZCS exists for the advancement of the ICT profession.

“The Commission considers that, read as a whole; the purposes are directed towards the promotion and protection of the Society, the IT profession and the IT industry through the development of professional standards, educational standards, professional development and networking.”

Marriage of poor maids

In the detailed 12-page decision to deregister NZCS, the Commission sites a range of case and constitutional law dating as far back as the Elizabethan era. It quotes the Preamble to the Charitable Uses Act 1601 (the Statute of Elizabeth), and provides a list of purposes considered to be beneficial to the community. These include “relief of aged, impotent, and poor people” and the “marriage of poor maids”.

The most relevant New Zealand case law concerns cases between professional bodies and the Commissioner of Inland Revenue. The Medical Council achieved charitable tax status as it was considered to perform a public good - the registration of medical professionals directly benefits the community because it protects the public by upholding the quality of medical and surgical practices. On the other hand, The Institution of Professional Engineers New Zealand failed to gain charitable tax status, because although the advancement of the science of engineering is beneficial to the general public, a significant part of its function is to act as a professional organisation for the benefit of engineers.

The Society’s case

NZCS chief executive Paul Matthews says that as the NZCS’s case is before the High Court he can’t comment directly, however he did provide some preliminary views in an email to Computerworld. “In short, we exist to advance education and professionalism, which is why we successfully gained charitable status when the new Act came in.”

These activities include the Kiwiskills programme on digital literacy, 120 educational events nationwide every year, and the Society’s upcoming Degree Accreditation Programme, Matthews says.

What’s at stake

Matthews says the loss of charitable status will have a detrimental effect on its education programmes. “If the High Court does uphold the (Commission’s) decision it will potentially impact on several of our activities which are based on the fact that we’re charitable.”

“We had announced we were making a significant number of educational licenses (with a retail value of around $300,000) available for digital literacy programmes such as ICDL and e-Citizen at no cost to a range of other charities. This is now in jeopardy. We run a Standards Fund to advance the work of Standards NZ which people can donate to, with over $30,000 donated thus far and pegged to assist with establishing standards around cloud computing and other items of interest to greater New Zealand, and the ongoing operation of this is potentially in threat.”

The loss of charitable status could mean that donations to the Society won’t receive tax credits, although the organisation can apply to the IRD for donations to be tax deductible. The society will itself lose its tax exempt status.

“Whilst we generally don’t make a significant surplus, any additional tax liability will come completely off our education-based work,” Matthews says.

The legal battle

“Our lawyers Duncan Cotterill are looking after us at a substantially discounted rate, of which we are very grateful, the cost of going through this process is still significant and again is inevitably borne in the reduction of education-based activities,” says Matthews.

“The reasons given for the deregistration were detailed. We do not agree with the Commission's findings or reasoning, hence our appeal to the High Court. It will be interesting to see how the High Court Appeal goes.”

The NZCS is not the only delisted organisation to fight the Commission in court. Several organisations have also filed High Court action, including Team New Zealand and Greenpeace.

A spokesperson for the Commission told Computerworld that five appeals have already been heard in the High Court and in each case the Commission’s decision to deregister has been upheld.