U.S. Banking

Insight Not Accuracy: Why The New York Times is Important

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A recent New York Times’ article attacked American charities that help build communities in Israel’s West Bank and IRS policy that enables donations to these organizations to be tax-deductable. As with any piece about the Palestinian-Israeli conflict, many people have been quick to attack or defend the veracity of the article.

To nonprofit organizations, the value of the article is not the accuracy of the authors’ claims, but rather the article’s insight into current concerns and trends influencing the nonprofit sector. These can serve as warnings and guidelines to US charities that operate internationally.

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4 Reasons Why NOT to Establish an "American Friends of" Organization

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Israeli charities (amutot in Hebrew) rely on donations from overseas – no secret there. Many foreign-based charities choose to create an American based nonprofit, more commonly referred to as a “Friends of” organization so donations can be tax-deductible vis-a-vis the American Federal Government. (In a previous post, I spoke about IRS trends when a “Friends of Organization” is applying for tax-exempt status.)

However, it could be that establishing a “Friends of” organization is not in your charity’s best interest. The following are some considerations that elaborate on: Why not to raise funds through a U.S. registered “Friends of” Organization?

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Are “American Friends of” Organizations a Thing of the Past?

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International organizations have been highly successful in raising funds from the United States through U.S. based charities commonly referred to as “Friends of” organizations. These charities are registered in the States and have 501(c)3 tax-exempt status and, thus, allowing these donations to these essentially foreign organizations to be tax-deductible.

As you can imagine, many international causes consider a “Friends of” organization as a crucial step in their fundraising strategy.

Hence, recent conversations I have had are causing me to worry.

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