Document ID: chunk:federal_register_of_legislation:F2025C00172:body:0:p63
Version: federal_register_of_legislation:F2025C00172
Segment Type: other
Provision Reference: 
Character Range: 162745–165845

by an incorporated association.  The association's constitution states that its objective is to manage the community housing facility to meet the need for low-cost housing.  The association has not issued any equity instruments.

The relevant activities of the association comprise:

    * reviewing and selecting applicants for housing;

    * the day-to-day operation of the housing program;

    * maintaining the houses and common facilities; and

    * improving and extending the housing facilities.

The board of governors of the association has 16 members, with eight appointed by (and subject to removal by) the religious organisation.  The chair is appointed by the board from amongst the appointees of the religious organisation, and has a casting vote that is rarely exercised.  The board meets regularly and reviews reports received from the association's management.  Based on these reports, the board may confirm or override management decisions.  In addition, the board makes decisions on major issues such as significant maintenance and investing further capital to build additional housing, after reviewing vacancy levels and the demand for housing.

The religious organisation owns the land on which the housing facilities stand and has contributed capital and operating funds to the association since it was established.  The association owns the housing facilities.

The association retains any surplus resulting from the operation of the facilities and under its constitution is unable to provide a direct financial return to the religious organisation.

Example IG1A

Based on the facts and circumstances outlined above, the religious organisation controls the association.

The religious organisation appoints eight members of the board of governors, one of whom will become the chair, who has a casting vote.  As a result, the religious organisation has power over the association through substantive rights that give it the current ability to direct the relevant activities of the association, regardless of whether the religious organisation chooses to exercise those substantive rights.

The religious organisation also has exposure or rights to variable returns from its involvement with the association.  The religious organisation obtains non-financial returns through the association furthering its social objective of meeting the need for low-cost community housing.  Although not able to receive direct financial returns, the religious organisation obtains indirect returns through its ability to direct how the financial returns are to be employed in the community housing program.

The religious organisation also satisfies the final control criterion.  Through its appointees on the board, the religious organisation has the ability to use its power to affect the nature and amount of its returns from the association.

The religious organisation satisfies all three criteria for control and therefore the religious organisation controls the association.

Example IG1B

In this example, the facts of Example IG1A apply, except that:

    * the association's board