Difference between revisions of "Charitable organization" - New World Encyclopedia

From New World Encyclopedia
(Copied from wikipedia)
(30 intermediate revisions by 8 users not shown)
Line 1: Line 1:
{{Claimed}}
+
{{Images OK}}{{Submitted}}{{Approved}}{{Paid}}{{Copyedited}}
 
[[Category:Politics and social sciences]]
 
[[Category:Politics and social sciences]]
 
[[Category:Social work]]
 
[[Category:Social work]]
 +
[[File:Carnegie-1903.jpg|thumb|225px|[[Andrew Carnegie]]'s [[philanthropy]] depicted as a golden shower. ''Puck'' magazine cartoon by Louis Dalrymple, 1903]]
 +
A '''charitable organization''' (also known as a '''charity''') is a trust, company, or unincorporated association established for [[Charity|charitable]] purposes only. The [[law]] favors charities because they promote goodwill and lessen the government's burdens. They are therefore ordinarily exempt from paying [[income tax|income]] or [[property tax]]es. Charities are usually [[non-profit organization]]s.
 +
{{toc}}
 +
A charitable organization is designed to benefit [[society]] or a specific group of people within that society. Its purpose may be [[education]]al, humanitarian, or [[religion|religious]]. A charity goes beyond giving relief to the [[poverty|poor]] or [[homeless]], extending to the promotion of happiness and the support of many worthy causes that are for the betterment of society as a whole. It is an example of encouraging people to live for the sake of others.
  
 +
==Definition==
  
A '''charitable organization''' (also known as a '''charity''') is a trust, company or unincorporated association established for charitable purposes only.  (Trusts or bodies established partly for charitable purposes are sometimes considered as, or treated as, charities: this is a matter of definition.)
+
A '''charitable organization''' (also known as a charity) is an organization with charitable purposes only. Trusts, [[foundation]]s, unincorporated associations and in some [[jurisdiction]]s specific types of companies, may be established for a charitable purpose or may acquire such purpose after establishment. Charities are [[non-profit organization]]s while not all non-profit organizations are charities. Organizations that are only partly dedicated to charitable purposes are sometimes considered as, or treated as, charities, depending on specific regulations at a given jurisdiction. Some charitable organizations may be established by companies as part of tax planning and strategies.
  
==Legal definitions==
+
In [[law]], the concept of "charitable" purpose has a technical meaning which is not quite the same as the way that the word is used in normal language. There is no statutory definition of a charitable organization, but case law in [[England]] and [[Wales]] has identified four principal charitable purposes,<ref name=West>''West's Encyclopedia of American Law'' (West Publishing Company, 1998, ISBN 978-0314201560).</ref> namely trust for:
 +
#the relief of [[poverty]];
 +
#the advancement of [[education]];
 +
#the advancement of [[religion]];
 +
#other purposes beneficial to the [[community]], not falling under the previous heads.
  
In law, the concept of "charitable" purpose has a technical meaning which is not quite the same as the way that the word is used in normal language.  In common law jurisdictions, the concept derives loosely from the meandering list of charitable purposes in the Charitable Uses Act (also know as the Statute of Elizabeth) 1601, interpreted and expanded in a considerable body of case law. In Commissioners for Special Purposes of Income Tax v Pemsel (1891), Lord McNaughten identified four heads of charity: (1) relief of [[poverty]], (2) the advancement of [[education]], (3) the advancement of [[religion]], and (4) other purposes considered beneficial to the community.
+
Thus, a charity as a group designed to benefit society or a specific group of people, may have educational, humanitarian, or religious purposes. A charity goes beyond giving relief to the indigent, extending to the promotion of [[happiness]] and the support of many worthy causes.<ref name=West/>
  
For a purpose to fall into the fourth category, the courts will usually refer to the preamble of the Charitable Uses Act 1601, and decide by analogy to the purposes listed there. An example of this is the case of Vancouver Regional Freenet Association v [[Minister of National Revenue (Canada)|Minister of National Revenue]] (1996), where free Internet access was likened by analogy to the repair of highways found in the preamble to the Charitable Uses Act 1601.
+
Charities are generally exempt from paying [[income tax|income]] or [[property tax]]es, since they lessen the government's burdens. To qualify for such [[tax]] exemptions, though, charities must be [[non-profit organization]]s.
  
In many common law jurisdictions, the common law definition has been replaced by a statutory definition, but without greatly changing the underlying concept.
+
== History ==
  
Charities are [[non-profit organization]]s.
+
Charitable work was a part of western civilization long before it was nationalized. [[Charity]] has been a [[virtue]] recognized and fostered by [[religion]] throughout human history, and has been an integral part of European civilization. In medieval Europe, the Church bore the responsibility for organizing and promoting [[poverty|poor]] relief and it was not until the sixteenth century that the state began to take over this responsibility.  
  
Charities are sometimes referred to as [[foundation (charity)|foundations]].
+
In [[England]], the first statutory measures to alleviate poverty were enacted in the late [[Tudor]] period. Relief, however, was directed not at the population at large but at the poor and disabled and the method employed was to place responsibility on the [[parish]]es which were helped by a poor rate. During this period, there was a surge of private charity and a resentment of state paternalism.<ref name=history> Mark Cooray, [http://www.ourcivilisation.com/cooray/btof/chap242.htm 24.2 Political History Of Charity] ''The Australian Achievement'' (1996). Retrieved October February 27, 2021.</ref>
  
==General==
+
The [[Charitable Uses Act of 1601]] listed a number of purposes to be enforced and protected by law, purposes that by virtue of precedent can be still be relevant in charity case law today.<ref>[https://www.courthouselibrary.ca/how-we-can-help/our-legal-knowledge-base/what-charitable-uses-act-1601 What is the Charitable Uses Act 1601?] ''Courthouse Libraries, BC''. Retrieved February 27, 2021.</ref> United Kingdom charity law has evolved through the courts by degrees of similarity or deviation from the spirit of the 1601 Act. As a result, where no precedent can be established by reference to other case law, the Charitable Uses Act can still act as the ultimate test of a proposed charity's purposes. However, this course of action is now highly unlikely.
  
In many countries, the charity sector is fast growing. Charities often take over services that used to be provided by the state, such as health, old age and unemployment, as the state ceases to fulfill these traditional social responsibilities.
+
The commissioners appointed by the 1601 Act were the first to oversee, investigate, and enforce charitable trusts in Britain. However, after a promising start the commissioner's potency fell away and by the end of the seventeenth century they were a defunct body.
  
==Supervision==
+
The next significant development in legislation affecting charity in Britain came in 1736 when the [[Mortmain Act]] was introduced to protect the rights of [[heir]]s and frustrate benefactors determined to [[inheritance|disinherit]] their [[family|families]]. The Mortmain Act invalidated charitable gifts of land or buildings unless they were made in the last year of the donor's life.<ref>Gareth Jones, [https://www.cambridge.org/core/books/history-of-the-law-of-charity-15321827/mortmain-act-1736/0CDA2D2A2AB64153C1C3F4AD22341671 The Mortmain Act, 1736] ''History of the Law of Charity, 1532-1827'' (Cambridge University Press, October 2011). Retrieved February 27, 2021.</ref>
Charities are normally subject to some form of supervision by the government. Most countries require registration of charities, and the charity is then required to report its activities (especially financial ones) to the government, usually on an annual basis.  
 
  
Supervision can reduce the possibilities of [[charity fraud]] and may be thought particularly justified where charities receive [[Tax exemption]]s.  However, supervision may also allow the government to influence the scope and agenda of charities.
+
The Christian ethic as interpreted by the [[Puritan]] middle class called for dedication to work, honesty, thrift, and charity. It was fundamentally opposed to the corruption and paternalism associated with the institutionalized church and state. Until the twentieth century, welfare continued to be characterized by its focus on the genuinely poor or disadvantaged, the localized system of distribution and the emphasis on private duty to help one's fellow man. These duties were expanded upon as the twentieth century progressed, and private charities were formed to benefit different causes and sympathies.<ref name=history/>
  
In the United States, because of the principle of [[separation of church and state]], [[church|churches]] and other religious organisations are often exempt from this legal requirement, although they are often overseen by a church hierarchy.
+
Today, charitable organizations exist for a broad spectrum of specific purposes, all within the overarching commitment to benefit, ameliorate, or uplift humankind mentally, morally, or physically. Organizations to prevent cruelty to [[animal]]s, to erect a monument in honor of a famous historical figure, or to beautify a designated location are examples of charitable purposes intended to foster kindness to animals, [[patriotism]], and [[community]] well-being, respectively. The relief of poverty, the improvement of government, and the advancement of religion, [[education]], and [[health]] are further examples of common reasons for the establishment of a charitable organization.
  
 
== Charities in different countries ==
 
== Charities in different countries ==
 
===Australia===
 
===Australia===
Under [[Australia]]n law, there is no centralised system of government regulation or recognition for charities. The notion of a charity touches upon several distinct areas of the law; it is up to each individual agency to decide on what is a charity with respect to the laws it is administering. If an entity disagrees with the decision of the agency, it can challenge it through the Courts. It is possible for an entity to be recognized as a charity by some agencies but not others. For example, in the early 1980s, Scientology was recognized as a religious charity by the governments of most States and Territories, but the Victorian taxation system refused recognition, until Scientology successfully challenged that decision through the courts - see [[Church of the New Faith]] for more.
+
Under [[Australia]]n law, there is no centralized system of government regulation or recognition for charities. The notion of a charity touches upon several distinct areas of the [[law]]; it is up to each individual agency to decide on what is a charity with respect to the laws it is administering. If an entity disagrees with the decision of the agency, it can challenge it through the Courts. It is possible for an entity to be recognized as a charity by some agencies but not others. For example, in the early 1980s, [[Scientology]] was recognized as a religious charity by the governments of most States and Territories, but the Victorian taxation system refused recognition, until Scientology successfully challenged that decision through the courts.
  
The most important of the laws around charities is the registration with the [[Australian Taxation Office]] as deductible gift recipients (DGR). This results in the people being able to deduct donations to the charity from their income tax. However, there are also several other areas where charity comes into play: the States regulate charitable fundraising, to ensure only bona fide charities engage in it; ASIC charges reduced fees for companies established for a charitable purpose; charities can avail themselves of exceptions to the company naming provisions under the Corporations Act; trusts for charitable purposes can escape the rule against perpetuities in trust law.
+
The most important of the laws around charities is the registration with the [[Australian Taxation Office]] as deductible gift recipients (DGR). This results in the people being able to deduct donations to the charity from their [[income tax]]. However, there are also several other areas where charity comes into play: the States regulate charitable [[fundraising]], to ensure only bona fide charities engage in it; ASIC charges reduced fees for companies established for a charitable purpose; charities can avail themselves of exceptions to the company naming provisions under the Corporations Act; trusts for charitable purposes can escape the rule against perpetuities in trust law.
  
The definition of trust in Australia is derived through English common law, originally from the [[Statute of Charitable Uses Act 1601]], and then through several centuries of case law based upon it. In 2002, the Federal Government established an inquiry into the definition of a charity. That inquiry proposed that the government should legislate a definition of a charity, based on the principles developed through case law. This resulted in the Charities Bill 2003. The Bill incorporated a number of provisions, such as limitations on charities being involved in political campaigning, which many charities saw as an unwelcome departure from the case law. The government then appointed a Board of the Taxation inquiry to consult with charities on the Bill. As a result of widespread criticism from charities, the Government decided to abandon the Bill.
+
The definition of trust in Australia is derived through English [[common law]], originally from the [[Statute of Charitable Uses Act 1601]], and then through several centuries of case law based upon it. In 2002, the Federal Government established an inquiry into the definition of a charity. That inquiry proposed that the government should legislate a definition of a charity, based on the principles developed through case law. This resulted in the Charities Bill 2003. The Bill incorporated a number of provisions, such as limitations on charities being involved in political campaigning, which many charities saw as an unwelcome departure from the case law. The government then appointed a Board of the Taxation inquiry to consult with charities on the Bill. As a result of widespread criticism from charities, the Government decided to abandon the Bill.
  
As a result, the government then introduced what became the [[Extension of Charitable Purpose Act 2004]]. This Bill did not attempt to codify the definition of a charitable purpose; it merely sought to clarify that certain purposes were indeed charitable, whose charitable status had been subject to legal doubts. These purposes were: childcare; self-help groups; closed/contemplative religious orders.
+
As a result, the government then introduced what became the [[Extension of Charitable Purpose Act 2004]]. This Bill did not attempt to codify the definition of a charitable purpose; it merely sought to clarify that certain purposes were indeed charitable, whose charitable status had been subject to legal doubts. These purposes were: [[childcare]]; self-help groups; and closed/contemplative religious orders.<ref> [https://www.aph.gov.au/binaries/library/pubs/bd/2003-04/04bd164.pdf Extension of Charitable Purpose Bill 2004] Information and Research Services, Parliamentary Library. Retrieved February 27, 2021. </ref>
 
 
<ref>Reference: http://www.aph.gov.au/library/pubs/bd/2003-04/04bd164.pdf</ref>
 
 
 
===Hong Kong===
 
The city's tax department, the [[Inland Revenue Department (Hong Kong)|Inland Revenue Department]], grants tax exemption status to charitable institutions or trusts of a public character.  Organisations may apply to the Department for recognition as approved charitable institutions or trusts of a public character.  The Department stresses that it is not responsible for the registration of charities. 
 
 
 
Currently there are about 4,400 charitable institutions and trusts registered with the Department.  Any group engaged in poverty relief, education and religious advancement, and other beneficial activities can apply for charitable status.
 
 
 
===United Kingdom===
 
 
 
There were over 200,000 registered charities in the [[United Kingdom|UK]] at the start of [[2005]].
 
 
 
* The 190,000+ charities in [[England]] and [[Wales]] are generally registered with the [[Charity Commission]] for England and Wales. The Charity Commission has an online register listing them all. Many charities take the form of limited liability companies and these are also registered with [[Companies House]]. (The main reason for using a company is to obtain limited liability for the [[Trustee]]s).  Major changes to English charity law are contained in the [[Charities Act 2006]].
 
 
 
* The 20,000 or so charities in [[Scotland]] are registered with the [[Office of the Scottish Charity Regulator]] (OSCR), who also publish a Register of charities online.
 
 
 
* The 5,000 or so charities in [[Northern Ireland]] are registered with the [[Inland Revenue]]. There is no central register or regulatory body for these charities, but this situation is currently under discussion.
 
 
 
==Tax treatment of charities and gifts to charity==
 
In common law jurisdictions, charities generally enjoy tax exemption for their income, and donors generally enjoy tax reliefs for gifts to charity. Details vary, of course, from country to country.
 
  
 
=== United States ===
 
=== United States ===
 
In the United States, there are complex tax law differences between private and public charities.  
 
In the United States, there are complex tax law differences between private and public charities.  
  
Donations to charities in the United States are deductible for [[income tax]] purposes if the organization has exempt status from the [[Internal Revenue Service]], usually under [[non-profit organization]] sec. [[501(c)(3)]] of the tax code. Such organizations file a tax return by using [[IRS Form 990]], which is monitored by watchdog groups like [[Charity Navigator]] to analyze their business practices. Any organization meeting the rules of section 501(c)(3) can be classified a charity in the US, including trusts, foundations and corporations.
+
Donations to charities in the United States are deductible for [[income tax]] purposes if the organization has exempt status from the [[Internal Revenue Service]], usually under [[non-profit organization]] sec. [[501(c)(3)]] of the tax code. Such organizations file a tax return by using [[IRS Form 990]], which is monitored by watchdog groups like [[Charity Navigator]] to analyze their business practices. Any organization meeting the rules of section 501(c)(3) can be classified a charity in the U.S., including trusts, [[foundation]]s, and [[corporation]]s.<ref>Peter Frumkin, ''Strategic Giving: The Art and Science of Philanthropy'' (University of Chicago Press, 2006, ISBN 9780226266268). </ref>
  
US [[tax law]] also allows [[trust (property)|trusts]] that do not qualify as exempt under 501(c)(3) to get significant tax advantages if they are set up with specific provisions.([http://www.irs.gov/irm/part4/ch52s05.html]). These are called Charitable Remainder Trusts (CRT) and Charitable Lead Trusts (CLT). Charitable Remainder Trusts are so named because the remainder of the assets in the trust passes to a designated charity at the death of the grantor or one or more beneficiaries. A current tax deduction is given for the portion that is determined to be the expected amount the charity will receive in the future, which is called the remainder. During the lifetime of the primary beneficiary, a percentage of assets or a fixed dollar amount are paid to the primary beneficiary. There are two primary types of CRTs: Charitable Remainder Unitrusts (CRUT), where a percentage of assets is received by the lifetime beneficiary, and Charitable Remainder Annuity Trusts (CRAT), where a fixed dollar amount is received every year. Charities or other trustees are also allowed to set up [[pooled trust]]s that operate similarly to individual CRTs except that they receive contributions from multiple donors. This allows each donor similar benefits as an individual CRT without the expense of creating the trust themselves.[http://cobrands.public.findlaw.com/estate_planning/nolo/ency/3045416C-EDC6-48F2-A310DAF212E2361D.html] The Charitable Lead Trust is essentially the reverse of a Charitable Remainder Trust ([http://www.michiganestateplan.com/CM/ResourceLinks/Glossary.asp]). In this form, the lifetime payments go to the charity and the remainder returns to the donor or to the donor's estate or other beneficiaries. Thus the two types of CLTs are CLUTs and CLATs, which are analogous to CRUTs and CRATs.
+
US [[tax law]] also allows [[trust (property)|trusts]] that do not qualify as exempt under 501(c)(3) to get significant tax advantages if they are set up with specific provisions.<ref>Internal Revenue Service. [https://www.irs.gov/charities-non-profits/private-foundations/charitable-trusts Charitable Trusts] ''United States IRS''. Retrieved February 27, 2021.</ref> These are called Charitable Remainder Trusts (CRT) and Charitable Lead Trusts (CLT). Charitable Remainder Trusts are so named because the remainder of the assets in the trust passes to a designated charity at the death of the grantor or one or more beneficiaries. A current tax deduction is given for the portion that is determined to be the expected amount the charity will receive in the future, which is called the remainder. During the lifetime of the primary beneficiary, a percentage of assets or a fixed dollar amount are paid to the primary beneficiary.  
  
Similarly named and often confused with CRUTs and CRATs are Grantor Retained Unitrusts (GRUT) and Grantor Retained Annuity Trusts (GRAT) ([http://www.irs.gov/irb/2005-11_IRB/ar10.html]). The difference is that GRUTs and GRATs do not involve charitable beneficiaries and therefore are not given the charitable deduction.
+
There are two primary types of CRTs: [[Charitable remainder unitrust|Charitable Remainder Unitrusts]] (CRUT), where a percentage of assets is received by the lifetime beneficiary, and [[Charitable Remainder Annuity Trust|Charitable Remainder Annuity Trusts]] (CRAT), where a fixed dollar amount is received every year. Charities or other trustees are also allowed to set up [[pooled trust]]s that operate similarly to individual CRTs except that they receive contributions from multiple donors. This allows each donor similar benefits as an individual CRT without the expense of creating the trust themselves. The Charitable Lead Trust is essentially the reverse of a Charitable Remainder Trust. In this form, the lifetime payments go to the charity and the remainder returns to the donor or to the donor's estate or other beneficiaries. Thus, the two types of CLTs are CLUTs and CLATs, which are analogous to CRUTs and CRATs.
  
=== United Kingdom ===
+
===United Kingdom===
In the [[United Kingdom]], [[Gift Aid]] is a scheme to enable tax-effective giving by individuals and companies to UK charities. In outline, Gift Aid allows individuals who are subject to UK income tax to complete a simple, short declaration that they are a UK taxpayer. Any cash donations that the taxpayer makes to the charity are then treated as being made after deduction of income tax at the basic rate (22% in 2006/7), and the charity can reclaim the basic rate income tax paid on the gift, adding approximately 28 per cent to the value of the gift. Higher-rate taxpayers can also claim a deduction for income tax purposes.
+
There were over 200,000 registered charities in the [[United Kingdom|UK]] at the start of 2005. Over one hundred ninety thousand charities in [[England]] and [[Wales]] are generally registered with the [[Charity Commission]] for England and Wales. The Charity Commission has an online register listing them all. Many charities take the form of limited liability companies and these are also registered with [[Companies House]]. Major changes to English charity law are contained in the [[Charities Act 2006]].<ref>[https://www.legislation.gov.uk/ukpga/2006/50/contents Charities Act 2006] ''Legislation.Gov.UK''. Retrieved February 27, 2021. </ref>
  
== See also ==
+
The nearly 20,000 charities in [[Scotland]] are registered with the [[Office of the Scottish Charity Regulator]] (OSCR), who also publish a Register of charities online. The five thousand or so charities in [[Northern Ireland]] are registered with the [[Inland Revenue]].
* [[Charitable trust]]
 
* [[Foundation (charity)|Foundation]]
 
* [[Cy pres doctrine]]
 
* [[List of environmental organizations]]
 
* [[Fraternal and service organizations]]
 
* [[Program evaluation]]
 
* [[Social enterprise]]
 
* [[:Category:Charities]]
 
  
== References ==
+
In the [[United Kingdom]], [[Gift Aid]] is a scheme to enable tax-effective giving by individuals and companies to UK charities. In outline, Gift Aid allows individuals who are subject to UK [[income tax]] to complete a simple, short declaration that they are a UK taxpayer. Any cash donations that the taxpayer makes to the charity are then treated as being made after deduction of income tax at the basic rate (22 percent in 2006-2007), and the charity can reclaim the basic rate income tax paid on the [[gift]], adding approximately 28 percent to the value of the gift. Higher-rate taxpayers can also claim a deduction for income tax purposes. Charitable companies are also exempt from paying [[corporation tax]] on any profits they make. Charities also gain more favorable treatment for [[value added tax]] purposes as well. For example, donated materials for charity shops are classed as zero-rated for VAT purposes and [[advertising|advertisements]] placed by charities are also zero-rated in many circumstances.
<References/>
 
  
==External links==
+
Although strictly intended for cash donations, charities can also claim tax relief on goods donated (such as via charity shops) for sale.<ref> [https://www.gov.uk/donating-to-charity  Tax relief when you donate to a charity] ''GOV.UK''. Retrieved February 27, 2021.. </ref>
<!-- Please note the External links section is NOT for listing individual charities. It is reserved for the more important national bodies. Any other links will be quickly removed! Notable charities can be included in Category:Charities. —>
 
===Charity regulating bodies===
 
* [http://www.ccra-adrc.gc.ca/tax/charities/menu-e.html Canadian Revenue Agency]
 
* [http://www.ato.gov.au/nonprofit/ Australian Taxation Office]
 
* [http://www.ird.gov.hk/eng/tax/ach_tgc.htm Hong Kong's Inland Revenue Department]
 
  
====United Kingdom====
+
==Examples of Charities==
* [http://www.charity-commission.gov.uk/ Charity Commission for England and Wales]
+
All links retrieved February 27, 2021.
* [http://www.oscr.org.uk/ The Office of the Scottish Charity Regulator (OSCR)]
+
*[https://www.amnesty.org/en/ Amnesty International] – draws attention to human rights abuses and campaigns for compliance with international standards. It works to mobilize public opinion which exerts pressure on those who perpetrate abuses.
* [http://www.institute-of-fundraising.org.uk/ The Institute of Fundraising]
+
*[https://www.heifer.org/ Heifer International] – is a non-profit charitable organization based in Little Rock, Arkansas, dedicated to relieving global hunger and poverty. Retrieved November 12, 2007.
* [http://society.guardian.co.uk/voluntary/ Society Guardian Voluntary Sector]
+
*[http://www.kofc.org/en//index.html Knights of Columbus] – is the world's largest Catholic fraternal service organization.
* [http://www.ncvo-vol.org.uk National Council for Voluntary Organisations - England]
+
*[https://www.mercyhome.org/ Mercy Home] – is an American privately-funded childcare and residential home for abused, homeless and neglected children.
* [http://www.wcva.org.uk Wales Council for Voluntary Action]
+
*[https://www.oxfam.org/en Oxfam International] – is a confederation of 13 organizations working with over 3000 partners in more than 100 countries to find lasting solutions to poverty and injustice.
 +
*[https://www.unicef.org/ UNICEF] – promotes developing community-level services to aid the health and well-being of children.
  
====United States====
+
==Notes==
*[http://www.irs.gov/charities/index.html US's Internal Revenue Service]
+
<references/>
*[http://www.independentsector.org/ Independent Sector]
 
*[http://apps.irs.gov/portal/site/pub78/ Confirm a charity is real]
 
  
===Evaluations of charities===
+
== References ==
====United States====
 
* [[Charity Navigator]]
 
* [http://www.charitywatch.org The American Institute for Philanthropy]
 
* [http://www.ecfa.org The Evangelical Council for Financial Accountability]
 
* [http://www.guidestar.org/ Guide Star]
 
* [http://www.give.org/ BBB Wise Giving Alliance (Give.org)]
 
  
====United Kingdom====
+
*Friedman, Lawrence., and Mark McGarvie. ''Charity, Philanthropy, and Civility in American History''. Cambridge University Press, 2004. ISBN 9780521603539.
 +
*Frumkin, Peter. ''Strategic Giving: The Art and Science of Philanthropy''. University of Chicago Press, 2006. ISBN 9780226266268.
 +
*Grossman, Allen, Christine Letts, and Ryan Williams. ''High Performance Nonprofit Organizations: Managing Upstream for Greater Impact''. Wiley, 1998. ISBN 9780471174578.
 +
*Ott, Steven. ''The Nature of the Nonprofit Sector''. Westview Press, 2000. ISBN 9780813367859.
 +
*White, Doug. ''Charity on Trial: What You Need to Know Before You Contribute''. Barricade Books, 2006. ISBN 9781569803011.
  
* [[Intelligent Giving]] - transparency ratings of all types of UK charity
+
==External links==
* [http://www.keystonereporting.org/ Keystone] - thinktank developing accountability methods for international NGOs
+
All links retrieved February 27, 2021.
* [[Development Ratings]] - research and recommendations on development charities
+
*[https://www.canada.ca/en/services/taxes/charities.html Charities and Giving] ''Canadian Revenue Agency''.
* [http://www.guidestar.org.uk/ GuideStar UK] - comprehensive information on charities
+
*[https://www.gov.uk/government/organisations/charity-commission Charity Commission for England and Wales].
 
+
*[https://www.oscr.org.uk/ The Office of the Scottish Charity Regulator (OSCR)].
===Starting a charity===
+
*[https://www.irs.gov/charities-and-nonprofits Tax Information for Charities and Nonprofits] ''Internal Revenue Service'', USA.
*[http://ahereford.com/nonprofit.html Legal Information for Nonprofit Organizations] Checklist for establishing and running a nonprofit organization (United States)
+
*[https://bestaccountingsoftware.com/tax-resources-charities-nonprofits/ Useful tax resources for charities and nonprofits] ''Best Accounting Software''.
 
+
{{Credits|Charitable_organization|147953954|}}
 
 
 
 
 
 
 
 
{{Credit1|Charitable_organization|116631075|}}
 

Revision as of 15:27, 2 June 2021

Andrew Carnegie's philanthropy depicted as a golden shower. Puck magazine cartoon by Louis Dalrymple, 1903

A charitable organization (also known as a charity) is a trust, company, or unincorporated association established for charitable purposes only. The law favors charities because they promote goodwill and lessen the government's burdens. They are therefore ordinarily exempt from paying income or property taxes. Charities are usually non-profit organizations.

A charitable organization is designed to benefit society or a specific group of people within that society. Its purpose may be educational, humanitarian, or religious. A charity goes beyond giving relief to the poor or homeless, extending to the promotion of happiness and the support of many worthy causes that are for the betterment of society as a whole. It is an example of encouraging people to live for the sake of others.

Definition

A charitable organization (also known as a charity) is an organization with charitable purposes only. Trusts, foundations, unincorporated associations and in some jurisdictions specific types of companies, may be established for a charitable purpose or may acquire such purpose after establishment. Charities are non-profit organizations while not all non-profit organizations are charities. Organizations that are only partly dedicated to charitable purposes are sometimes considered as, or treated as, charities, depending on specific regulations at a given jurisdiction. Some charitable organizations may be established by companies as part of tax planning and strategies.

In law, the concept of "charitable" purpose has a technical meaning which is not quite the same as the way that the word is used in normal language. There is no statutory definition of a charitable organization, but case law in England and Wales has identified four principal charitable purposes,[1] namely trust for:

  1. the relief of poverty;
  2. the advancement of education;
  3. the advancement of religion;
  4. other purposes beneficial to the community, not falling under the previous heads.

Thus, a charity as a group designed to benefit society or a specific group of people, may have educational, humanitarian, or religious purposes. A charity goes beyond giving relief to the indigent, extending to the promotion of happiness and the support of many worthy causes.[1]

Charities are generally exempt from paying income or property taxes, since they lessen the government's burdens. To qualify for such tax exemptions, though, charities must be non-profit organizations.

History

Charitable work was a part of western civilization long before it was nationalized. Charity has been a virtue recognized and fostered by religion throughout human history, and has been an integral part of European civilization. In medieval Europe, the Church bore the responsibility for organizing and promoting poor relief and it was not until the sixteenth century that the state began to take over this responsibility.

In England, the first statutory measures to alleviate poverty were enacted in the late Tudor period. Relief, however, was directed not at the population at large but at the poor and disabled and the method employed was to place responsibility on the parishes which were helped by a poor rate. During this period, there was a surge of private charity and a resentment of state paternalism.[2]

The Charitable Uses Act of 1601 listed a number of purposes to be enforced and protected by law, purposes that by virtue of precedent can be still be relevant in charity case law today.[3] United Kingdom charity law has evolved through the courts by degrees of similarity or deviation from the spirit of the 1601 Act. As a result, where no precedent can be established by reference to other case law, the Charitable Uses Act can still act as the ultimate test of a proposed charity's purposes. However, this course of action is now highly unlikely.

The commissioners appointed by the 1601 Act were the first to oversee, investigate, and enforce charitable trusts in Britain. However, after a promising start the commissioner's potency fell away and by the end of the seventeenth century they were a defunct body.

The next significant development in legislation affecting charity in Britain came in 1736 when the Mortmain Act was introduced to protect the rights of heirs and frustrate benefactors determined to disinherit their families. The Mortmain Act invalidated charitable gifts of land or buildings unless they were made in the last year of the donor's life.[4]

The Christian ethic as interpreted by the Puritan middle class called for dedication to work, honesty, thrift, and charity. It was fundamentally opposed to the corruption and paternalism associated with the institutionalized church and state. Until the twentieth century, welfare continued to be characterized by its focus on the genuinely poor or disadvantaged, the localized system of distribution and the emphasis on private duty to help one's fellow man. These duties were expanded upon as the twentieth century progressed, and private charities were formed to benefit different causes and sympathies.[2]

Today, charitable organizations exist for a broad spectrum of specific purposes, all within the overarching commitment to benefit, ameliorate, or uplift humankind mentally, morally, or physically. Organizations to prevent cruelty to animals, to erect a monument in honor of a famous historical figure, or to beautify a designated location are examples of charitable purposes intended to foster kindness to animals, patriotism, and community well-being, respectively. The relief of poverty, the improvement of government, and the advancement of religion, education, and health are further examples of common reasons for the establishment of a charitable organization.

Charities in different countries

Australia

Under Australian law, there is no centralized system of government regulation or recognition for charities. The notion of a charity touches upon several distinct areas of the law; it is up to each individual agency to decide on what is a charity with respect to the laws it is administering. If an entity disagrees with the decision of the agency, it can challenge it through the Courts. It is possible for an entity to be recognized as a charity by some agencies but not others. For example, in the early 1980s, Scientology was recognized as a religious charity by the governments of most States and Territories, but the Victorian taxation system refused recognition, until Scientology successfully challenged that decision through the courts.

The most important of the laws around charities is the registration with the Australian Taxation Office as deductible gift recipients (DGR). This results in the people being able to deduct donations to the charity from their income tax. However, there are also several other areas where charity comes into play: the States regulate charitable fundraising, to ensure only bona fide charities engage in it; ASIC charges reduced fees for companies established for a charitable purpose; charities can avail themselves of exceptions to the company naming provisions under the Corporations Act; trusts for charitable purposes can escape the rule against perpetuities in trust law.

The definition of trust in Australia is derived through English common law, originally from the Statute of Charitable Uses Act 1601, and then through several centuries of case law based upon it. In 2002, the Federal Government established an inquiry into the definition of a charity. That inquiry proposed that the government should legislate a definition of a charity, based on the principles developed through case law. This resulted in the Charities Bill 2003. The Bill incorporated a number of provisions, such as limitations on charities being involved in political campaigning, which many charities saw as an unwelcome departure from the case law. The government then appointed a Board of the Taxation inquiry to consult with charities on the Bill. As a result of widespread criticism from charities, the Government decided to abandon the Bill.

As a result, the government then introduced what became the Extension of Charitable Purpose Act 2004. This Bill did not attempt to codify the definition of a charitable purpose; it merely sought to clarify that certain purposes were indeed charitable, whose charitable status had been subject to legal doubts. These purposes were: childcare; self-help groups; and closed/contemplative religious orders.[5]

United States

In the United States, there are complex tax law differences between private and public charities.

Donations to charities in the United States are deductible for income tax purposes if the organization has exempt status from the Internal Revenue Service, usually under non-profit organization sec. 501(c)(3) of the tax code. Such organizations file a tax return by using IRS Form 990, which is monitored by watchdog groups like Charity Navigator to analyze their business practices. Any organization meeting the rules of section 501(c)(3) can be classified a charity in the U.S., including trusts, foundations, and corporations.[6]

US tax law also allows trusts that do not qualify as exempt under 501(c)(3) to get significant tax advantages if they are set up with specific provisions.[7] These are called Charitable Remainder Trusts (CRT) and Charitable Lead Trusts (CLT). Charitable Remainder Trusts are so named because the remainder of the assets in the trust passes to a designated charity at the death of the grantor or one or more beneficiaries. A current tax deduction is given for the portion that is determined to be the expected amount the charity will receive in the future, which is called the remainder. During the lifetime of the primary beneficiary, a percentage of assets or a fixed dollar amount are paid to the primary beneficiary.

There are two primary types of CRTs: Charitable Remainder Unitrusts (CRUT), where a percentage of assets is received by the lifetime beneficiary, and Charitable Remainder Annuity Trusts (CRAT), where a fixed dollar amount is received every year. Charities or other trustees are also allowed to set up pooled trusts that operate similarly to individual CRTs except that they receive contributions from multiple donors. This allows each donor similar benefits as an individual CRT without the expense of creating the trust themselves. The Charitable Lead Trust is essentially the reverse of a Charitable Remainder Trust. In this form, the lifetime payments go to the charity and the remainder returns to the donor or to the donor's estate or other beneficiaries. Thus, the two types of CLTs are CLUTs and CLATs, which are analogous to CRUTs and CRATs.

United Kingdom

There were over 200,000 registered charities in the UK at the start of 2005. Over one hundred ninety thousand charities in England and Wales are generally registered with the Charity Commission for England and Wales. The Charity Commission has an online register listing them all. Many charities take the form of limited liability companies and these are also registered with Companies House. Major changes to English charity law are contained in the Charities Act 2006.[8]

The nearly 20,000 charities in Scotland are registered with the Office of the Scottish Charity Regulator (OSCR), who also publish a Register of charities online. The five thousand or so charities in Northern Ireland are registered with the Inland Revenue.

In the United Kingdom, Gift Aid is a scheme to enable tax-effective giving by individuals and companies to UK charities. In outline, Gift Aid allows individuals who are subject to UK income tax to complete a simple, short declaration that they are a UK taxpayer. Any cash donations that the taxpayer makes to the charity are then treated as being made after deduction of income tax at the basic rate (22 percent in 2006-2007), and the charity can reclaim the basic rate income tax paid on the gift, adding approximately 28 percent to the value of the gift. Higher-rate taxpayers can also claim a deduction for income tax purposes. Charitable companies are also exempt from paying corporation tax on any profits they make. Charities also gain more favorable treatment for value added tax purposes as well. For example, donated materials for charity shops are classed as zero-rated for VAT purposes and advertisements placed by charities are also zero-rated in many circumstances.

Although strictly intended for cash donations, charities can also claim tax relief on goods donated (such as via charity shops) for sale.[9]

Examples of Charities

All links retrieved February 27, 2021.

  • Amnesty International – draws attention to human rights abuses and campaigns for compliance with international standards. It works to mobilize public opinion which exerts pressure on those who perpetrate abuses.
  • Heifer International – is a non-profit charitable organization based in Little Rock, Arkansas, dedicated to relieving global hunger and poverty. Retrieved November 12, 2007.
  • Knights of Columbus – is the world's largest Catholic fraternal service organization.
  • Mercy Home – is an American privately-funded childcare and residential home for abused, homeless and neglected children.
  • Oxfam International – is a confederation of 13 organizations working with over 3000 partners in more than 100 countries to find lasting solutions to poverty and injustice.
  • UNICEF – promotes developing community-level services to aid the health and well-being of children.

Notes

  1. 1.0 1.1 West's Encyclopedia of American Law (West Publishing Company, 1998, ISBN 978-0314201560).
  2. 2.0 2.1 Mark Cooray, 24.2 Political History Of Charity The Australian Achievement (1996). Retrieved October February 27, 2021.
  3. What is the Charitable Uses Act 1601? Courthouse Libraries, BC. Retrieved February 27, 2021.
  4. Gareth Jones, The Mortmain Act, 1736 History of the Law of Charity, 1532-1827 (Cambridge University Press, October 2011). Retrieved February 27, 2021.
  5. Extension of Charitable Purpose Bill 2004 Information and Research Services, Parliamentary Library. Retrieved February 27, 2021.
  6. Peter Frumkin, Strategic Giving: The Art and Science of Philanthropy (University of Chicago Press, 2006, ISBN 9780226266268).
  7. Internal Revenue Service. Charitable Trusts United States IRS. Retrieved February 27, 2021.
  8. Charities Act 2006 Legislation.Gov.UK. Retrieved February 27, 2021.
  9. Tax relief when you donate to a charity GOV.UK. Retrieved February 27, 2021..

References
ISBN links support NWE through referral fees

  • Friedman, Lawrence., and Mark McGarvie. Charity, Philanthropy, and Civility in American History. Cambridge University Press, 2004. ISBN 9780521603539.
  • Frumkin, Peter. Strategic Giving: The Art and Science of Philanthropy. University of Chicago Press, 2006. ISBN 9780226266268.
  • Grossman, Allen, Christine Letts, and Ryan Williams. High Performance Nonprofit Organizations: Managing Upstream for Greater Impact. Wiley, 1998. ISBN 9780471174578.
  • Ott, Steven. The Nature of the Nonprofit Sector. Westview Press, 2000. ISBN 9780813367859.
  • White, Doug. Charity on Trial: What You Need to Know Before You Contribute. Barricade Books, 2006. ISBN 9781569803011.

External links

All links retrieved February 27, 2021.

Credits

New World Encyclopedia writers and editors rewrote and completed the Wikipedia article in accordance with New World Encyclopedia standards. This article abides by terms of the Creative Commons CC-by-sa 3.0 License (CC-by-sa), which may be used and disseminated with proper attribution. Credit is due under the terms of this license that can reference both the New World Encyclopedia contributors and the selfless volunteer contributors of the Wikimedia Foundation. To cite this article click here for a list of acceptable citing formats.The history of earlier contributions by wikipedians is accessible to researchers here:

The history of this article since it was imported to New World Encyclopedia:

Note: Some restrictions may apply to use of individual images which are separately licensed.