HR 12 Non-exempt charities: treatment of tax-exempt accumulations
Who this section applies to

(1)

This section applies to—

(a)

a person (person A) who—

(i)

is registered on the register of charitable entities under the Charities Act 2005 for a period; and

(ii)

derives exempt income under section CW 41 or CW 42 (which relate to charities) in the same period; and

(iii)

is deregistered as a charitable entity on the end date:

(b)

a person (person B) who derives exempt income under section CW 42 for a period that comes to an end on the end date.

When this section does not apply

(2)

This section does not apply if—

(a)

for person A, they are re-registered on the register of charitable entities within 1 year of the end date:

(b)

for person B, they meet the requirements of section CW 42(1) within 1 year of the end date.

Treatment of income

(3)

Person A or person B, as applicable, has an amount of income derived on the day that is 1 year after the end date that is equal to the value of assets that the person held on the end date less the liabilities of the person on that date, but ignoring—

(a)

assets that are disposed of or transferred within 1 year of the end date, together with any rights and obligations, to another person—

(i)

for charitable purposes:

(ii)

in accordance with the person’s rules described in subsection (4):

(b)

assets received from the Crown—

(i)

to settle a Treaty of Waitangi claim:

(ii)

in accordance with the Maori Fisheries Act 2004:

(c)

assets other than money gifted or left to the person when they met the requirements to derive exempt income under section CW 41 or CW 42.

Person’s rules

(4)

In subsection (3)(a)(ii), the person’s rules are, as appropriate—

(a)

for person A, the person’s rules set out in the register of charitable entities immediately before the person’s removal from the register:

(b)

for person B, the governing instrument that applies immediately before the end date.

Negative amounts

(5)

For the purposes of the calculation in subsection (3), if the amount is negative, it is treated as zero.

References to assets and liabilities

(6)

In this section, references to assets and liabilities, as applicable,—

(a)

mean the assets and liabilities owned, controlled, or held, wholly or in part, immediately before the end date; and

(b)

include—

(i)

all assets of any kind; and

(ii)

all liabilities, including debts, charges, duties, contracts, or other obligations, whether present, future, actual, contingent, payable, or to be observed or performed in New Zealand or elsewhere.

Meaning of end date

(7)

In this section, end date means—

(a)

for person A, the day of final decision:

(b)

for person B, the day on which the requirements of section CW 42(1) are no longer met.

Defined in this Act: amount, asset, charitable purpose, day of final decision, end date, exempt income, income, liabilities, New Zealand, real property, share, year

Section HR 12: replaced, on 29 March 2018 (with effect on 6 April 2016), by section 137 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).