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Community and economic development
This page explains when community and economic development organisations may be considered to 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:
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:
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).
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:
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.
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:
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.
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  2 NZLR 707 at , 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."