UK Supreme Court on Charity, Public Benefit, Health Care, and Serving Poor People
A few days ago, I asked with righteous indignation who was behind Revenue Ruling 69-545’s decision to make poor people optional in tax exempt health care. Whose idea was it to allow a tax-exempt hospital to ignore, if not actively shun or hound poor patients? My indignation signaled that I knew with certainty (and the benefit of hindsight) that Revenue Ruling 69-545 was a bad decision. Well, I’ve been severely and immediately rebuked by a group of jurists composing the Supreme Court of the United Kingdom.
In London Borough of Merton Council v. Nuffield Health, released today, the UK Supremes said “[shut up Darryll],” the failure to serve the poor does not preclude charitable status or necessitate a finding against public benefit. Long story short, an exempt hospital system with about 30 clinics or hospitals and 115 gyms was charitable even with regard to the gyms at which paid membership is required and there are no subsidies or discounts for poor people. The ease with which the conclusion is articulated belies what seems a fairly important decision in the UK, and a highly persuasive one in the US. It’s a must read. It will take three or four reads, though, before I can regain my confident, righteous indignation.
Below, you can watch and hear the 7 minute announcement of the opinion, all by a Justice who looks kinda like Anthony Bourdain and sounds like the patriarch on Downtown Abbey (but without the charm of either fellow).
The UK Supremes render a concise, in depth academic read not unlike opinions from the US Supremes. The opinion waxes eloquent on the history and meaning of charity as a legislative matter, the meaning of private benefit as it relates to serving the poor, the history of property tax, and the charitable exemption from property taxes. One interesting note is that charitable exemption from property taxes first occurred only on an ad hoc basis, as local assessors felt moved to provide discounts to churches, hospitals and schools. The ad hoc nature proved inefficient and unfair, obviously, so the law evolved into official recognition of charitable property tax exemption. But the opinion has relevance to the definition of charity under both an income and a property tax. Here is a snippet containing some of what the Court said about public benefit and serving the poor:
25. The public benefit requirement is set out in section 4. By section 4(3) any reference in the relevant chapter of the 2011 Act to the public benefit is a reference to the public benefit as that term is understood for the purposes of English charity law. As explained by Nugee LJ in the Court of Appeal in the present case at para 141, the public benefit requirement in English charity law has two aspects to it (see also ISC, para 44). The first is the nature of the purpose. Again, it is common ground that the purpose for which Nuffield Health is established, namely (in short) the advancement of health, satisfies the first aspect of the public benefit requirement. The second is a matter of scope. It requires that the specified benefit is available to a sufficient section of the public, so that the provision of that benefit is for a public rather than private purpose. That section of the public may be defined by a variety of contours, such as residents of a particular locality, or even by age. Thus the inhabitants of a small village or large town will be a sufficient section of the public, but the entirety of the current and former employees of a large corporation will not, however numerous: see Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297, 305-307. The old and the young may each be a sufficient section of the public: see Joseph Rowntree Memorial Trust Housing Association Ltd v Attorney General [1983] Ch 159 for the old and In re Sahal’s Will Trusts [1958] 1 WLR 1243 for the young. But however broadly defined, the purpose will not be for the benefit of a sufficient section of the public if it excludes the poor (meaning, in modern parlance, not the destitute but those of modest means): see In re Resch’s Will Trusts [1969] 1 AC 514, 543-544 (“Re Resch”), and ISC, paras 178-179.
26. It by no means follows that a purpose (other than of course the relief of poverty) which serves both the rich and the poor only satisfies the public benefit requirement so as to be charitable in the benefit which it provides to the poor members of its beneficial class. On the contrary, the “scope” element of the public benefit requirement is satisfied by reference to the whole of the section of the public thereby benefitted, rich and poor alike. Even if this may perhaps not accord with the perception of every modern-thinking person untrained in charity law, this is true both as a matter of logic and authority. Logically if a body, established for the purpose of promoting the health of all comers paying a membership fee which did not exclude the poor or the rich, was only charitable in the service which it provided to the poor, then having a (non-charitable) purpose also to serve the rich would mean that it was not established for charitable purposes only. Such a body would not be a charity. If this were so it is hard to imagine how any fee-paying independent school could be charitable; but, as reviewed in ISC, many fee-paying schools are charitable.
darryll jones