Inside the 2013 Charities Act

Shena Stubbs-Gibson, Contributor

This column will seek to delve deep into the bowels of the various enactments coming out of and being considered by Parliament, with a view to facilitating informed public discourse. In this first piece, we will look at the Charities Act which was recently passed in Parliament.

Purpose of the Act

The Charities Act, 2013 (the Act), which was passed in Parliament in November 2013, has as its core purpose, the bringing of charitable organisations under one regulatory umbrella.

In a landscape, where little, or none, existed before, the Act provides an institutional and legal framework for the governance of charitable organisations. This should bring more transparency and accountability to the operations of these organisations.

Target Group

To be brought under the Act, an organisation must prove that:

1. It has amongst its raison d'etre, a charitable purpose that benefits the public. The charitable purpose cannot later be changed, except with prior approval of the authorities.

This does not mean that the organisation may not have other "non-charitable" purposes but those other purposes must be "merely ancillary" to the charitable purpose. "Ancillary" is defined in the Act as being, amongst other things, "secondary", "subordinate," "incidental" and most importantly, "not an independent purpose of the organisation."

There are 13 recognised "charitable purposes" including the prevention or relief of poverty; the advancement of education; the advancement of religion and; the advancement of health or saving of lives. There is also a provision where the Minister of Finance backed by Parliament is able to specify other purposes, provided that they are similar to any of the 13 listed purposes.

2. No part of the net income or assets of the organisation personally benefits any member of the governing board of the organisation.

However, this requirement could clearly be circumvented by vesting the benefit in a connected party to a governing board member, such as a spouse. It does not appear that this was considered by the drafters.

Tax Relief

With the coming into force of the Act, only registered charitable organisations will be able to obtain tax relief previously give to charitable entities, under the following legislation:

The Customs Act,

The General Consumption Tax Act,

The Income Tax Act, the Property Tax Act,

The Stamp Duty Act and

The Transfer Tax Act.

It should be noted, that section 42 provides that organisations which immediately before the commencement date of the Act had been entitled under certain laws, including the above-mentioned legislation, to be treated as charitable organisations, shall: a) continue to be so regarded and (b) "may" apply within six months of the commencement date of the Act to be approved as registered charitable organisations.

If an application is not made within the six months period stipulated, the benefit provided under subsection (a) would expire.

Amendment of tax laws

To facilitate the new Act, several of the laws governing taxation have been amended.

For the most part, these changes are superficial or changes of phraseology to bring those Acts up to date with the new designation: "registered charitable organisation."

There are, however, a few material amendments that are worth highlighting:

The Customs Act, section 5(2), previously prohibited the payment of import duty by University of the West Indies or the Council of Legal Education on any article imported into, or taken out of bond in, Jamaica, for their use. That has been replaced, with the result being that the original scope of the prohibition has now been reduced, as 'motor vehicles' have been excluded from, "any article", while the category of beneficiaries has expanded to include registered charitable organisations.

The General Consumption Act, section 11, provides that special consumption tax shall be payable by every registered taxpayer who manufactures prescribed goods and by any person who imports prescribed goods into Jamaica. The Act provides a new section 11A which now exempts registered charitable organisations from that provision.

The General Consumption Act, Group 9, Part II of the First Schedule, paragraph 7A, previously extended a carte blanche waiver of GCT on goods and services acquired by a charitable organisation. The paragraph has now been changed so that motor vehicles have been removed from the band of articles entitled to a waiver.

The Stamp Duty Act, section 34, previously provided that certain foreign bills of exchange and promissory notes were exempt from stamp duty. That wording now forms section 34, subsection (1) and a new subsection (2) has been introduced which is quite significant, as it precludes every registered charitable organisation from paying stamp duty on any instrument executed on its behalf.

I have one nagging concern, over the years charities have largely registered under the Companies Act or Friendly Societies Act. While there are incentives to get existing organisations which operate as charities, to register under the auspices of the new Charities Act, there is nothing in the Act which repeals those provisions which previously filled the gap.

In the absence of clear and unambiguous wording that organisations with core charitable functions should register under the new Act, the uniformity of purpose sought, may not be achieved. Nevertheless, I wish the new Act well!

Shena Stubbs-Gibson is an Attorney-at-Law. She can be contacted at editorial@gleanerjm.com.