The Church of Jesus Christ of Latter-Day Saints Trust Board v CIR

• Jurisdiction: New Zealand
• Judge: Hinton J
• Judgment Date: 01 February 2019
• Neutral Citation: [2019] NZHC 52
• Docket Number: CIV-2017-404-001650
• Court: High Court
• Date: 01 February 2019

Between

The Church of Jesus Christ of Latter-Day Saints Trust Board

Plaintiff

and

Commissioner of Inland Revenue

Defendant

Between

Paul Ross Coward

Plaintiff

and

Commissioner of Inland Revenue

Defendant

[2019] NZHC 52

CIV-2017-404-001650

CIV-2017-404-001559

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

Taxation — donations made in connection with the missionary's — Income Tax Act 2007 (“ITA”) — definition of “gift”

Appearances:

W Akel, N Bland and K Teague for the Plaintiffs

H Ebersohn and C Kern for the Defendant

JUDGMENT OF Hinton J

This judgment was delivered by me on 1 February 2019 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules

……………………………………………………………………

Registrar/Deputy Registrar

1 The issue to be determined in this case is whether donations made to the Trust Board of the Church of Jesus Christ of Latter-Day Saints by a missionary, their family and others, in connection with the missionary's application, are charitable gifts under s LD 1 of the Income Tax Act 2007.

2 The Church (referring to the international body) is based in Salt Lake City, Utah, but has a world-wide presence, including in New Zealand. One of its more prominent activities is sending young men and women to proselytise in different countries to obtain converts to the Church's mission. Young members of the Church in New Zealand apply to be missionaries overseas. When they do so, they commit to paying or raising a “standard amount” towards supporting the Church's missionary work. The issue is over the deductibility of these payments. This money is not paid towards their mission overseas, but rather towards funding expenses of other missionaries in New Zealand. The missionaries sent overseas from New Zealand have their expenses paid by the country where they proselytise.

3 This judgment addresses two proceedings, which were heard together, both involving the Commissioner of Inland Revenue as defendant.

4 The plaintiff in the first proceeding is the Trust Board of the Church of Jesus Christ of Latter-Day Saints (the Trust). It is established by a Private Act of Parliament: the Church of Jesus Christ of Latter-Day Saints Trust Board Empowering Act 1957. The Act sets out the terms on which the Trust operates, including the purposes for which it holds its assets on trust. From now, when I refer to the Trust, I refer to this entity. When I refer to “the Church”, I refer to the Church as a whole, not just the New Zealand “branch”, as it were.

5 The first proceeding raises the broad question of whether the Trust can issue donation statements to any of the categories of people making the relevant payments.

6 The plaintiff in the second proceeding is Mr Coward, a member of the Church. His daughter was a missionary for the Church. Mr Coward made the standard payments for his daughter's application. This proceeding relates to whether the Trust can issue a donation statement for those payments.

7 The precise issue I must determine is whether the payments associated with a missionary's application, made to the Trust by the following classes of people, are gifts under s LD 1, so entitling the donor to a tax credit:

• (a) a missionary;

• (b) a parent or legal guardian of a missionary; 1

• (c) grandparents of a missionary;

• (d) siblings of a missionary;

• (e) a more distant relative of a missionary, such as a cousin, uncle or aunt; and

• (f) a church member unrelated to the missionary, such as a friend of a missionary or a member of the missionary's local ward.

8 It is accepted that the payments comply with s LD1(1) in all respects, except as to their being gifts.

9 The Commissioner, as a matter of practice, has allowed all claims for these payments up until 2015. Since 2015, the Commissioner has disallowed claims by a missionary and their immediate family, but not (to date) by more remote family, or members of the local ward, or stake. 2

10 Neither party takes issue over the form of the proceedings, or the jurisdiction of the Court to make the declarations sought. And both parties consider it would be of assistance to have answers to the wider questions posed in the first proceeding, rather than the narrow question of the status of payments made by Mr Coward.

Background

11 For the purpose of these proceedings, the parties have helpfully been able to agree on a set of facts upon which I am to determine the issues.

The Church's missionary programme

12 Young people in each country apply to be missionaries, 3 and submit to a process concluding with a determination by the First Presidency in Salt Lake City, Utah, as to their “worthiness”. Usually they will be sent to a designated country overseas, for 18–24 months' mission service.

13 There are approximately 70,000 young church members currently undertaking proselyting missionary service around the world. New Zealand has close to 300 church members undertaking such service overseas. Approximately 450 missionaries from various countries are undertaking such service in New Zealand.

14 The Church pays for a missionary's costs of travel, in-location travel costs in connection with the mission, and basic accommodation and food costs. The Church also pays other essential expenses, such as personal grooming items, laundry, cleaning supplies, haircuts, and postage for weekly letters to family. All other expenses are covered by the missionary.

15 For missionaries from New Zealand, these essential costs are met by the relevant Church-related entity in the country where the mission takes place. The Trust does not pay any of the missionary expenses for people travelling from New Zealand, but pays for missionaries who come here.

Payments to support a mission

16 It is an important principle within the Church that missionary service involves personal sacrifice. For this reason, it is expected that missionaries and their families should financially sacrifice to pay for a mission.

17 Because of the principle of sacrifice, as part of their application, a missionary is expected to commit to raising a “standard amount” fixed by the Church. This amount should come from a missionary and their family. If that is not possible, a missionary should seek assistance from their ward. At the time Mr Coward's daughter was called to service, the amount was $475 per month, or NZ$5,700 per annum. Mr Coward paid the full amount in response to his daughter's call to service.

18 In an application, the applicant is required to list the funds available per month from several specified sources: the applicant, his or her family, and his or her local ward. An applicant must then specify the total to be paid per month, and the currency. This will ideally meet or exceed the standard amount set in New Zealand.

19 The standard amount is not paid to the missionary, nor does it bear any direct relation to the actual costs incurred in relation to that missionary. The Church sets an international “equalised contribution” amount for missionaries whose home wards are in “designated countries”. That is set by estimating the average cost to the Church of proselyting missionary service undertaken by missionaries throughout the world, expressed as a monthly cost figure. New Zealand is not a “designated country”. The standard amount in New Zealand is an assessment made by the Area President, taking into account the equalised contribution set by the Church internationally and the circumstances in New Zealand.

20 If a missionary does not raise the standard amount sought, the local bishop will encourage the particular missionary and their family to consider contributing more. If this is not possible, the bishop may invite members of the ward to contribute. It is also possible to have assistance from the General Missionary Fund, which is controlled by the Church, not the Trust. The plaintiffs say this is a notional fund only, and money attributed to it is normally only used to effectively “top up” regional Ward Missionary Funds as needed, rather than helping individual missionaries with their fund-raising.

21 The continuation and completion of a missionary's service is not affected by whether or not any these payments have been paid by those who committed to do so.

22 I am advised that in New Zealand, the standard amount is either invariably, or almost invariably, entered in the application form and paid, typically by the missionary or their immediate family.

Ward Missionary Fund Payments

23 The payments made in support of a missionary are termed “Ward Missionary Fund”, or “WMF” payments. This is terminology used by the Church internationally, and the Trust. The Church guidelines, extracts of which are reproduced below, contemplate that these payments go into a separate fund in each country, to be used to support missionaries from other countries who are proselyting in that country. The arrangement is effectively a global “tit for tat” arrangement. None of these WMF payments are refundable, even if the missionary is unable to complete the full term of their mission. Once a WMF payment has been made, the funds belong to the relevant Church-entity for use in its discretion. This is made clear in the form when the prospective missionary makes their application.

24 In New Zealand, there is no separate “Ward Missionary Fund”. All WMF payments go into a general account held by the Trust. This is the same account it uses to receive grants and tithes from the members in New Zealand. The Trust applies the funds in this account for the Church's work in New Zealand, as the Trust sees fit. This being said, the Trust does keep records of the amount of WMF payments it receives, and to which missionary's call to service the payments can be attributed.

25 The Trust does not remit any funds overseas. Its expenses outweigh its income. It relies on substantial grants from the Church for assistance...