Another win for Taxpayers in the Court of Appeal

On 6 May 2020 the Court of Appeal issued its judgment in The Church of Jesus Christ of Latter-Day Saints Trust Board v CIR[2020] NZCA 143.

This is the second substantive Court of Appeal judgment to go in the taxpayers' favour in the last six months. The other was CIR v Roberts (2019) 29 NZTC 24-026. There has been a procedural decision in issued in February but that involved a litigant in person arguing about whether the Commissioner was out of time on a NOPA. There has also been a “Russel” case decided but they are in a special category.

The issue in the Latter-Day Saint's case was whether gifts to missionaries were eligible for tax credits under s LD1 (1) and (2). In the High Court, Hinton J had determined that payments made to the Trust Board by a missionary, his or her parents, guardians, or grandparents are not gifts and were not eligible for donation tax credits. But, the High Court Judge also held that payments by a missionary’s sibling, other relatives such as a cousin, aunt or uncle or members of the church were eligible.

The High Court judgment resulted in nit-picking distinctions in consanguinity to determine the eligibility for donation tax credits.

This was in a context where the donations in question were voluntary and none refundable to the donor. But the catch was that there was some level of family relationship between the donors and the missionaries. This led the Commissioner to argue that the donations were not gifts.

The Court of appeal went through a large number of the cases submitted to it but said at paragraph [53] that [w]e do not think this case actually engages the jurisprudential controversies that the parties have suggested.”

In other words, the Court thought that the answer was clear and well settled by Mills v Dowdall [1983] NZLR 154, which was also a decisive precedent in the Roberts litigation. The key judgment in Mills v Dowdall is that of Richardson J. There is a reassuring return to an analysis of the legal arrangements actually entered into in reaching tax outcomes.  

The Court rejected the Commissioners argument that when family members make a donation in this sort of context, they are receiving a material benefit. Any benefit was considered insufficient to disqualify the gifts from being charitable donations.

This is a good win for taxpayers generally and will be of assistance to all charities.

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