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HR 11: Non-exempt charities: initial tax base
or “How a charity's assets and expenses are valued when it loses its tax-free status”
You could also call this:

“Tax rules for charities that lose their registration”

This section talks about what happens when a charity stops being registered. If you’re a charity that was registered and got tax-free income, but then got taken off the register, here’s what you need to know:

You might have to pay tax on the value of your things one year after you’re taken off the register. This is based on how much your stuff is worth minus what you owe. But there are some exceptions:

You don’t have to pay this tax if you get registered again within a year. Also, if you’re a company and someone buys your shares for a fair price, you don’t have to pay. If the amount would be $10,000 or less, you don’t have to pay either.

When figuring out how much your stuff is worth, you don’t have to count:

  • Things you gave away for charity purposes within a year
  • Things you got from the government to settle a Treaty claim or for Maori fisheries
  • Gifts or things left to you in a will when you were still a charity
  • Maori land set aside for a marae or meeting place
  • Shares in companies that are in the same situation as you

If the amount works out to be less than zero, it’s treated as zero.

When we talk about your things and what you owe, we mean everything you owned or controlled just before you were taken off the register. This includes all kinds of things you own and all kinds of things you owe or have to do.

There are special rules for working out how much your things are worth. Sometimes there’s a set value, and other times you have to use the market value or a special accounting standard.

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Next up: HR 13: Lloyd’s of London: life insurance

or “Tax rules for Lloyd's of London underwriters on NZ life insurance income”
Next

Part H Taxation of certain entities
Other entities

HR 12Non-exempt charities: treatment of tax-exempt accumulations

  1. This section applies to—

  2. a person who—
    1. is registered on the register of charitable entities under the Charities Act 2005 for a period; and
      1. derives exempt income under section CW 41 or CW 42 (which relate to charities) in the same period; and
        1. is deregistered as a charitable entity on the end date:

          1. This section does not apply if—

          2. the person is re-registered on the register of charitable entities within 1 year of the end date:
            1. the person’s end date arises because they are a company and shares in them are disposed of, and the disposal is for market value consideration:
              1. the person would, but for this paragraph, have $10,000 or less income under this section on their end date.

                1. The person has an amount of income derived on the day that is 1 year after the end date that is equal to the current market value, on the end date, of assets that the person has on the end date less the current market value, on the end date, of liabilities that the person has on the end date, but ignoring:

                2. assets that are disposed of or transferred for charitable purposes within 1 year of the end date, together with any rights and obligations, to—
                  1. a tax charity, other than a tax charity as defined in paragraph (c) of the definition of tax charity:
                    1. a New Zealand resident person, other than a natural person, that derives exempt income under any of sections CW 38 to CW 52, CW 55BA, or CW 64 (which relate to exempt income of certain entities):
                    2. assets received from the Crown—
                      1. to settle a Treaty of Waitangi claim:
                        1. in accordance with the Maori Fisheries Act 2004:
                        2. assets that are not money and are gifted or bequeathed to the person when they met the requirements to derive exempt income under section CW 41 or CW 42:
                          1. assets that are land set apart in a Maori reservation for the purposes of a marae or meeting place under Part 17 of Te Ture Whenua Maori Act 1993:
                            1. assets that are shares in companies, if this section applies to the companies and their end dates are the same as the person’s end date.

                              1. Repealed

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

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

                              4. mean the assets and liabilities owned, controlled, or held, wholly or in part, immediately before the end date; and
                                1. include—
                                  1. all assets of any kind; and
                                    1. 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.

                                    2. In this section,—

                                      end date means, for a person, the day of final decision

                                        current market value means—

                                        1. for an asset or liability for which section HR 11 gives a value for the purposes of this Act, that value:
                                          1. for an asset or liability for which section HR 11 does not give a value for the purposes of this Act,—
                                            1. the market value of the asset or liability; but
                                              1. if the person uses the Public Benefit Entity International Not-for-Profit Accounting Standard 17 (the standard), the fair value of the asset or liability under the standard.

                                            Notes
                                            • Section HR 12: replaced, on (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).
                                            • Section HR 12(1)(a): amended, on , by section 226(1) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(1)(b): repealed, on , by section 226(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(2) heading: replaced, on , by section 226(3) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(2): replaced, on , by section 226(3) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(3): amended, on , by section 226(4) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(3)(a): replaced, on , by section 103(1) (and see section 103(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                                            • Section HR 12(3)(c): amended, on , by section 226(6) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(3)(d): inserted (with effect on 14 April 2014), on , by section 226(7) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(3)(d): amended, on , by section 82 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                            • Section HR 12(3)(e): inserted, on , by section 226(8) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(4) heading: repealed, on , pursuant to section 226(9) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(4): repealed, on , by section 226(9) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(7) heading: replaced, on , by section 226(10) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12(7): replaced, on , by section 226(10) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                            • Section HR 12 list of defined terms current market value: inserted, on , by section 226(11) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).