Community and economic development

This page explains when community and economic development organisations may be considered to be charitable.

Can community and economic development organisations be charitable?

In all cases, whether an organisation has a legally recognised charitable purpose will depend on its rules and the activities it undertakes.  Not all community and economic development organisations will qualify for registration.

Community and economic development organisations are most likely to be considered in terms of the following categories of charitable purpose:

• relief of poverty (for example, if they provide assistance for those in need), or
• advancement of education (for example, if they provide training or skills development for the public), or
• other purposes beneficial to the community (for example, if they provide public works and services or public amenities and recreational facilities).  Please note that not all purposes which benefit the community are charitable in law. Purposes must benefit the community in a way recognised in law (further information below).

Community development purposes

Not all community development purposes are considered charitable purposes at law.  However, many will be charitable.  Examples of community development purposes which can be charitable include:

• providing essential services for disadvantaged communities
• promoting public health (such as providing education, counselling, and rehabilitation services)
• providing public works and services, such as building roads and maintaining a water supply
• providing public amenities and recreational facilities, such as public halls, libraries, museums, statues, fountains, playing fields, gymnasiums, swimming pools, parks and botanical gardens
  
• protecting the environment, such as re-vegetation and afforestation
• promoting the permanent preservation of places of historic interest for the nation.
  

In order to be considered charitable, community development purposes must provide benefits for the general public or a sufficient section of the public.  You should be prepared to provide information to show these benefits.

When writing your community development purposes it helps to be as specific as possible.  We need to be able to clearly identify the organisation’s purposes and public benefit from these purposes.  The Courts have held that broadly worded community development purposes can sometimes have an ambit that is too wide to include only purposes which the law regards as charitable (for example, referring to “moral, social and physical well-being of the community” and “raising the standard of life of the community” is considered too wide).

Residents’ associations

Some community organisations, such as residents’ and ratepayers’ associations, have a focus on keeping the community informed and encourage community participation in decisions affecting the local community. These purposes may be charitable as they promote good citizenship by encouraging public participation in democracy and democratic processes.

Examples of activities that an organisation might carry out to engage with the community in a way that promotes good citizenship include:

• keeping the local community informed about, and encouraging community participation in, decisions affecting the community, such as planning and development processes
• holding public meetings
• liaising with council and/or other local agencies and decision makers on behalf of the community;
• representing the community on community liaison groups
• helping the local community to develop an independent plan for a locality or community, guided or informed by residents and stakeholders.

If your organisation is a residents’ or ratepayers’ association, you should be prepared to provide specific information about the activities you carry out, and how those activities keep the community informed, encourage participation, and involve the local community in discussions and decisions that affect it.

Some local residents’ associations are also involved in helping residents to oppose or change a particular issue that affects their community. In these cases Charities Services must also consider whether the organisation’s purposes involve advocacy for a cause. You can find more information about this on the Advocacy for causes page.

Economic development purposes

Many organisations have purposes to benefit the general economy of a particular region or community.  A general economic development purpose for a community will only be charitable if:

• the economic development is focused on an area or community that is disadvantaged
• any benefits to individuals and businesses are incidental to the economic development benefit to the public.

If your organisation has a purpose to benefit the economy of a particular region or community, you should provide information about the area or community to show that it is disadvantaged compared to the rest of the nation.  You should also be prepared to provide information about the activities you plan to carry out so that we can ensure that any benefits to individuals and businesses are incidental to the public benefit.

If your economic development purposes are focused on assisting people in poverty (for example assisting unemployed people to find employment) we recommend that you state this in your purpose clauses.

Private benefits and profit making activities

For both community and economic development purposes to be charitable, they must provide benefits to the public, rather than private benefits. 

Any private benefits arising from the organisation's purposes and activities must only be a means of achieving an ultimate public benefit and therefore be ancillary or incidental to it. Private benefits which are an end unto themselves will not be acceptable. 

For example, in the recent New Zealand case of Canterbury Development Corporation [2010] 2 NZLR 707 at [67], Young J stated:

Any public benefit therefore from CDC’s purpose and operations is in my view too remote to establish CDC as a charity. Public benefit is not the primary purpose of CDC’s objects or operation. Its primary purpose is the assistance of individual businesses […] the public benefit is hoped for but ancillary. In the same way the general economic lift for the Canterbury region from CDC’s work is the hoped for result of helping individual businesses. It is remote from the purpose and operation of CDC. Public benefit is not at the core of CDC’s operation.

You should be prepared to provide information to show the public benefit from your organisation’s purposes and to show that any private benefits are incidental.

A charity can still carry out profit making activities and can pay people for the purchase of goods and services as long as all of its activities are to further its charitable purposes and not to further the private financial interests of individuals. Payments must therefore be reasonable and based on "arms- length commercial rates."