Sports and charity: Rules of the game

Posted on 25 July 2018

After the recent excitement of the football World Cup, we thought this is a good opportunity to explain how sporting organisations can be charitable.

We get a lot of queries about whether “sport” is charitable, and hear of some inaccuracies in how we treat sport by some commentators. The following blog explains:

-          When sporting organisations can be charitable

-          The numbers of sporting organisations on the charities register

-          When sporting organisations are declined or deregistered

When sport can be charitable

Although promoting “sport” itself isn’t a charitable purpose, most sporting organisations can qualify as charities. This is because they promote participation in healthy activity. Promoting health is a charitable purpose in New Zealand.

A lot of groups also qualify because they advance education – not teaching people about how to play a sport – but having a close link with an educational institution (e.g. a school or university). This is because previous cases have held that sports are an important part of education, so sports are seen as a part of an educational process. Sports for very young children will also usually be educational in teaching children motor skills and socialisation.

Sports can also advance other charitable purposes, like relieving the social needs associated with a group (for example: people with disabilities or older people). Because of this Paralympics and Masters Games type events are usually charitable.

Publicly available “recreational facilities” are also charitable in most cases: this includes most sporting stadiums and sporting fields.

Numbers of sports that are charities

The charities register has approximately 6,000 charities that report being involved in the sporting and recreational sector, and almost 1,900 charities report sports and recreation as their main sector (this is about 7% of the register). 

Not all sporting groups that would qualify have applied to be charities. We don’t know why this is but we expect that for a lot of sporting groups the obligations of being a registered charity outweigh the benefits. Most also get a separate tax exemption and can still incorporate as societies, so don’t see much benefit to being charitable. Inland Revenue estimates this is about 23,000 organisations.

When sporting groups don’t qualify

Some sporting groups don’t qualify. The Charities Registration Board that makes all decisions on the registration and deregistration of charities (and its predecessor the Charities Commission) have declined and deregistered some sporting groups. This has included Rowing New Zealand, Swimming New Zealand and Team New Zealand.

The main reason that sporting groups don’t qualify is because they have an independent purpose to benefit a closed group of elite sportspeople. Although it might sometimes feel that way, the All Whites do not have a charitable purpose. Charities have to be for the benefit of the public, if they just benefit a small group of elite sportspeople, they aren’t charitable.

This doesn’t just include purposes focussed on Cristiano Ronaldo. When an organisation focuses on success through tournaments for elite players, even if they are not professional, this can disqualify them from registration as a charity. That doesn’t mean sporting organisations can’t be competitive, it is just that improving participation in healthy sport must be their purpose, not lifting their own version of the World Cup.

The key is that the activities are available to the public. For example if a group’s purpose was flying-in international elite players to complete with domestic elite players in a special tournament for the purpose, it would be unlikely to qualify. An event that included elite players where the wider public also compete, like a marathon, would not be disqualified just because elite athletes are involved.

A charity can also have an “ancillary” purpose to benefit elite sports people if this is a small part of their overall activities – this is a case by case assessment – but usually would have to be less than 10% of their expenditure or activities. 

Other reasons sporting organisations have been declined include:

-          There is no evidence the sporting activity promotes health (e.g. gun clubs).

-          The organisation doesn’t actually promote participation, it just promotes the sport (e.g. where a group advertises its sport at the exclusion of others).

-          Very high costs associated with the sport meaning it is only available to a small group (e.g. you need to own a yacht or a horse).

Another issue that we often see is that sporting organisations do not have an appropriate “winding up” clause in their rules. This can slow down the registration process. If you want to register, you need to ensure that your rules document states that on winding up the surplus funds will go to charitable purposes: just putting another sporting purpose (or a national sporting body – if it’s not charitable) won’t be enough.

If you have any questions about your group, or don’t know if you qualify, don’t hesitate to contact us at CCRegistrationinfo@dia.govt.nz.

There is also a page on our website if you want to read more about sporting and recreational purposes, as well as some of the key decisions:

 

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