The Nonprofit Banker » Tax-Exempt

Defining an Amutah [Israeli Charity]

NonProfitBanker — Wed, 22 Dec 2010 16:16:19 +0000

The Hebrew word amutah, referring to a charity in Israel, is used both correctly and incorrectly to describe just about any nonprofit organization registered in the country. But wait, it get’s more confusing. Not all charities are charities, sometimes they’re companies. And sometimes a charity isn’t tax-exempt while a company might be.

Perplexed? Don’t worry. In this post I’ll cover the various terms and statuses available to Israeli charities — along with links to government websites — that will help you find the answer to the bottom-line question burning in your mind: Is this organization worthy of my donation?

A UNITED STATES “NONPROFIT”

Like many things, sometimes the easiest way to explain something is to first define what it is not; thus, a look at our brothers and sisters across the ocean in the United States.

Simpy put, in the United States, all for-profit and nonprofit organizations are corporations. Each company is registered in the state where it is headquartered; the definition and governance of these companies differs slightly from state to state.

In the United States the label of “nonprofit” is granted by the Federal Government, specifically by the I.R.S., and is only a tax designation; referring to any organization that is exempt from some federal income taxes (although many states use the federal guidelines to exempt similar organization from state taxes, as well). All organizations that fall into this category are labeled as 501(c). While there exist 28 categories, only those organizations belonging to the 501(c)3 category will allow an individual’s donation to be tax-exempt. This group is divided into public charities and private foundations. For the purpose of this article, the definitions of the two groups are not relevant. In short, it is these 501(c)3 organizations that have been colloquially dubbed “nonprofits” in the United States.

To summarize: a charity in America is a Federal label pertaining strictly to tax status.

WHAT IS AN “AMUTAH“?

In Israel, traditional nonprofits are called amutot (or amutah in singular) and have their own governmental oversight body, called the Rasham Ha’amutot (Registrar of Charities). Companies have a separate governmental body tasked with overseeing them called the Rasham Hachavarot (Registrar of Companies). Both registrars can contain organizations that would be considered non-profit and for-profit under American standards.

To summarize: the simple word charity, isn’t a tax label, but rather only a function of the particular Governmental Body in which a nonprofit organization is registered. In our case, Rasham Ha’amutot (Registrar of Charities).

THE 5 CERTIFICATIONS AVAILABLE TO ISRAELI CHARITIES

Further investigation reveals that within each registrar are subcategories that will be referred to as licenses or statuses for the purpose of this article. Again, as most nonprofits are registered with the Rasham Ha’amutot (Registrar of Charities), this article will only analyze these types of organizations.

Mispar Ha’amutah [Nonprofit Organization Number] – This is simply a number that the charity receives letting the public know that this organizations is registered with the government under the Registrar of Charities; as such, this charity is subject to government scrutiny under the Amutah (Nonprofit) Law. This number will function like an I.D. number (for Israelis) or like a social security number (for Americans). This number is for identification purposes only and does not label donations the charity receives as tax-exempt. The process for receiving a nonprofit ID number takes approximately a month, according to the staff at the Registrar of Charities.
Nihul Takin [Sound Management] – This is a certificate awarded to organizations that follow an additional set of management guidelines as decreed by the Registrar of Nonprofits. This status is assigned to organizations that have been in activity for no less than two years. For the first two years, there is an interim document that can be obtained called “Certification of Validity of Presentation of Documents.” An organization will not be able to obtain grants or contracts from the government without the nihul takin status. For better of for worse, many institutions outside Israel are using the nihul takin as their benchmark, as well.
Mosad Tziburi [Public Institution] – This status is given by the Ministry of Finance and declares the organization’s funds are to be tax exempt; for example, profit earned from investments made with a bank or financial institution would be tax exempt for this kind of organization. This status does not brand the donations that the charity receives as tax deductable. A nihul takin license is required when applying to be a “public institution.”
Se’if 46 [Paragraph 46] – This status is granted by the Finance Committee of the Knesset on the recommendation of the Finance Committee to organizations that have obtained status as a public institution. It is the “Paragraph 46” status that is comparable to the nonprofit 501(c)3 status in the United States. Individuals that donate to charities that have Paragraph 46 status can get up to a 35% refund on their taxes. An expert accountant in the field estimated the minimum time required to receive Paragraph 46 status as six months. Practically speaking, this means that two and a half years of existence is the absolute earliest an Israeli nonprofit can expect money donated to them to be tax-exempt. It is important to note that only approximately a third of the charities operating in Israel have this status.
Malkar [Institute Not-Intended for Profit] – This license is granted from the Ministry of Finance and can be interpreted as “additional level of fiscal approval.”[1] Organizations with this status can sell goods and services without charging VAT [Value Added Tax], or sales tax. Purchases made by the charity, however, are still subject to VAT.

CHARITIES AS COMPANIES

A small number of nonprofit organizations exist as a Chevrah Leto’elet Hatzibor [Public Benefit Company]. These organizations are governed by company laws and are registered with the Rasham Hachavarot [Registrar of Companies]. These institutions can also apply for all of the above licenses, if they are founded “for the promotion of commerce, arts, science, religion, charity, or any other social function with the aim of benefiting the public.”[2]

(For a more detailed explanation of a Public Benefit Charity, please see this previous post.)

WHAT CERTIFIES A NONPROFIT AS KOSHER?

This is where things get a tad fuzzy.

While the Amutah (Nonprofit) Law established by the Knesset is quite clear and concise, the guidelines managing nonprofits in Israel are murky, cumbersome, and confusing; this is due to the Israeli Government having created additional licenses and leaving them in the control of different branches of the government — Knesset, Ministry of Justice and Ministry of Finance.

Those individuals or institutions looking to make a comparison between organizations registered in the United States and Israel will, thus, find their compass missing its needle. The simple charity ID number does not tell a donor or oversight committee anything about the organization. The additional steps of obtaining public charity, tax-exempt, or malkar status are less an evaluation of the management of the amutah and more analysis if the organization is not-for-profit — not the same thing, at all. And even this is only according to the guidelines set by the Israeli Government.

This leaves the general public with only the nihul takin (albeit its own deficiencies and stringencies) as the only judge of an organization’s charitable nature — assuming the organization has even bothered to apply for it.

Not a perfect solution. But the best the Israeli public has for the time being.

If you’re already on the net, here are some sites to check out an Israeli nonprofit organization:

Rasham Ha’amutot [Registrar of Charities] (Hebrew) - Basic information about Israel’s charitable organizations registered with the Registrar of Charities.

Rasham Hachavarot [Registrar of Companies] (Hebrew) - Basic information about Israel’s companies (including PBCs) registered with the Registrar of Companies.

Guidestar Israel (Hebrew and English) - FOR CHECKING AMUTOT ONLY. The site has yet to incorporate those organizations registered with the Registrar of Companies as PBCs. Here you can find scanned financial statements and other basic information about Israel’s charities.

Mas Hachnasah [Tax Authority] – Tax Exempt Status, Donations (Paragraph 46a Status) - Ability to check if an amutah or chalatz has tax-exempt status.

Tizku Lemitzvot,

Shuey

Disclaimer: This document is intended to summarize and provide basic information only and should not to be considered advice. This blog houses my personal opinions. As charity laws can be quite complex, please refer all questions to qualified and licensed professionals. Read the full disclaimer.

_______________________________________________________________________________

Works Cited

[1] Eliezer David Jaffe “The State, Volunteers and Nonprofit Organizations in Israel: the Nature of the Relationship” (Giving Wisely, The Internet Directory of Israeli Nonprofit
and Philanthropic Organizations), http://www.givingwisely.org.il/npo/State.htm

[2] Ibid

Bibliography

To supplement my own knowledge and experience, I drew upon the following resources:

“501(c)” (Wikipedia, The Free Encyclopedia),http://en.wikipedia.org/wiki/501(c)

“Application to be Recognized as a Public Institution” (Israeli Tax Authority),http://www.finance.gov.il/taxes/docs/malkar_2006-09-20.pdf

“Presentation of Documents to Obtain Certification of Sound Management for 2010” (Israeli Ministry of Justice)http://www.justice.gov.il/NR/rdonlyres/EB554008-BB8D-4C9C-A040-D02FB3BFDEFC/0/nihultakinamutot2011.pdf

“The State, Volunteers and Nonprofit Organizations in Israel: the Nature of the Relationship” Eliezer David Jaffe, (Giving Wisely, The Internet Directory of Israeli Nonprofit and Philanthropic Organizations), http://www.givingwisely.org.il/npo/State.htm

Translations of Hebrew words to English were done through Morfix @ http://morfix.mako.co.il/

Insight Not Accuracy: Why The New York Times is Important

NonProfitBanker — Thu, 15 Jul 2010 17:18:54 +0000

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.

Towards this end, I have highlighted themes in the article through blocks of text.

Charity Law as an Extension of US Policy

Using tax-exempt donations to help Jews establish permanence in the Israeli-occupied territories – effectively obstructing the creation of a Palestinian State.

Mr. Obama has particularly focused on them as obstacles of peace.

As the American government seeks to end the four-decade Jewish settlement enterprise…the American Treasury helps sustain the settlements through tax breaks on donations to support them.

Washington has consistently refused to allows Israel to spend American government aid in the settlements.

The article hints to a link between United States charity regulation and governmental policy. While there necessarily shouldn’t be a connection between the two, the facts on the ground seem to hint otherwise. More because of increased scrutiny by the governmental department tasked with overseeing nonprofits rather than because of changes in law.

It would behoove organizations operating overseas to consider this growing link (at least during President Obama’s tenure) and to consider US policy when formulating strategy and governance.

Board Members and Officers Should Not Be A Rubber Stamp

It [Shuva Israel, a US tax-exempt charity] has two volunteers who double as board members. “I’ve never been to the board,” said one of them, Jeff Luftig.

Independence and control: two running themes in nonprofit legislation, regulation, and audits.

Volunteers who agree to serve as a board member should understand that this voluntary service comes with mandatory responsibilities. The same holds true for a nonprofit searching for potential candidates. The United States Government and the public look to a Board of Directors as the brains and power behind a charity; as such, the board is expected to actively participate in the running and planning of a nonprofit.

Local Charity, Local Board

Although IRS rules require that American charities exhibit “full control of the donated funds and discretion as to their use,” Shuva Israel [a US tax-exempt charity] appears to be dominated by Israeli settlers.

The IRS does not want an American charity to be a puppet, subservient to the wishes of another organization or individual — local or foreign. While foreigners are allowed to sit on the boards of American charities, the nonprofit should never appear as if it has lost its American identity and independence.

Silence Speaks Volumes

Settlements violate international law…

In some ways, American tax law is more lenient than Israel’s.

Asked whether it had ever filed a tax return, he responded, “I’m not in a position to answer that.”

Records from the group [Manhigut Yehudit] say a portion of the $5.2 million collected has gone to Israeli “community facilities”…neither man would answer questions about the nature of the “community facilities.”

Silence can sometimes be the worst answer an organization can give as it hints that perhaps no employee knows the answer or, even worse, that the organization has never bothered to ask the question. Conferencing with lawyers, accountants, and other professionals can often turn up most of the potential challenges facing the charity. It is to the benefit of the organization to prepare responses to expected Frequently Asked Questions and designate employees and volunteers best equipped to answer them.

The organization’s reputation demands an answer better than silence.

Filing with the IRS: The Best Defense is a Good Offense

Religious charities are still more opaque; the tax code does not require them to disclose their finances publicly.

Religious groups have no obligation to divulge their finances, meaning that settlements may be receiving sums that cannot be traced.

Religious organizations – like many of the charities that support Israel – that expect to come under government or general scrutiny should consider filing relevant IRS paperwork even though they are not required. Entering background, managerial, and financial information information ahead of any “investigative piece,” is convincing evidence that the nonprofit’s intentions are noble, as well as legal.

Conclusion

As the United States Government loses millions of dollars from noncollectable donations to tax-exempt organizations, charities will always be subject to public and governmental scrutiny.

After reading the excerpts from the Times article, one can certainly understand more of the public and regulatory sentiment towards US registered charities operating abroad, especially those supporting Israel. This said, American nonprofits can still fulfill their mission, operating at their peek capacity.

Among the many DON’Ts mentioned by the authors were also some excellent DOs, which, if followed, can prevent the very accusations highlighted in the article:

The [US] tax code encourages citizens to support nonprofit groups that may diverge from official policy, as long as their missions are educational, religious or charitable.

The Time’s review of pro-settler groups suggests that most generally lie within the rules o the American tax code. Some, though, risk violating them by: (1) by using the money for political campaigning and residential property purchases, (2) by failing to file tax returns, (3) by setting up boards of trustees in name only and (4) by improperly funneling donations directly to foreign organizations.

But the IRS does allow deductions for donations to American nonprofits that support charitable projects abroad, provided the nonprofit is not simply a funnel to another group overseas.

Truly, good advice to follow.

Tizku Lemitzvot,

Shuey

Disclaimer: This blog houses my personal opinions and is for informational purposes only – not advice. As charity laws can be quite complex, please refer all questions to qualified and licensed professionals. Read the full disclaimer.

Homeland Security Scrutinizing New Nonprofits: What Can We Expect & How Can We Adjust

NonProfitBanker — Wed, 30 Jun 2010 12:57:02 +0000

And the hits just keep on coming…

Nonprofit organizations have yet another hurdle to cross when applying for tax-exempt status.

A while back, a colleague of mine, a director of a nonprofit organization, applied for tax-exempt status in the United States. The IRS had questions for him, which was to be expected. What was not expected, however, was that after answering the IRS’ questions, his file was then forwarded to the Department of Homeland Security [DHS].

That’s right, the U.S. Government Department that oversees (no pun intended) counter-terrorism, border security, disaster response, and immigration is also an integral part of the tax-exempt approval process.

Why is the Department of Homeland Security Scrutinizing Charities?

The DHS investigating is no random act. As explained in a previous post:

The U.S. Internal Revenue Service (IRS) stresses that the risk that a grant will be used for non-charitable purposes increases drastically when dealing with foreign grant making and expenditures…intelligence information hinting “to the effect that international charities are the second principal source of money that underwrites terrorist activity”

Questions asked by Homeland Security

1. IRS Type Questions

Similar, if not exact repeats, of questions asked by the IRS.

2. Nature of Activities – Lobbying/Advocacy

The nature of the activities of the charities abroad that would be receiving the money. Specifically, if the receiving charity participates in lobbying and/or advocacy. In the United States, certain types of lobbying/advocacy label the organization 501(c)4 tax-exempt charity. Donations to (c)4 charities are not tax-deductible. If an organization is worried if they fit this category, they might want to look into the 501(h) test.

3. Control Measures

Control measures in place to ensure that the money will be used strictly for charitable purposes.

4. Legal Status of the Recipient Organizations

The DHS asked if the recipient charity is considered a 501(c)3 charity in its respective country. This question is a little tricky because countries have different definitions of what it means to be a nonprofit organization.

In Israel, for example, is the DHS referring to the Nihul Takin [Certificate of Proper Management] given out by the Registrar of Charities [Rasham Ha'amutot] or Seif 46a [Paragraph 46a] certification given out by the Tax Authorities [Mas Hachnasah]?

5. Independence

My colleague stressed that the DHS was very interested to know that the funds sent abroad were not limited to only one recipient. It is crucial for the IRS that the American entity be an independent, self-governing body that is not subservient to any other foreign or local individuals/organizations. And yes, this is a running theme in my blog posts. (A previous post, “Reasons Why Not to Establish an ‘American Friends Of’ elaborates on this Independence.)

Conclusion

What lessons can we learn from this organization’s experience?

1. Longer Process

US registered nonprofits who are applying for tax-exempt status can expect the process to take longer. This is not necessarily a must – maybe no red flags will be raised and it will be smooth sailing. However, I wouldn’t count on it.

2. Treat the DHS Seriously

Even though it might seem that the DHS shouldn’t be in the picture or that their questions are repetitive (maybe even ludicrous and pointless), don’t belittle their role. Whereas the IRS has control only over your tax-exempt status, the DHS can freeze your assets. The Patriot Act allows the U.S. Government to freeze assets first and ask questions second, if they should think that the accounts are connected to terrorism. As of today, the DHS has a big mandate. Don’t mess with them.

3. Adjust Accordingly

The right experts can help you write your By-Laws (including mission and mandate) in a way that raises less flags. I am not advocating lying, fibbing or stretching the truth. Just the opposite: Good charities shouldn’t suffer simply because they wrote their By-Laws in a way that doesn’t accurately describe the activities of the organization.

4. Plan in Advance

If you can theorize the types of questions that your organization’s application will elicit, then you should also being able to prepare answers in advance.

When fundraising, acquiring 501(c)3 tax-exempt status quickly can make-or-break attracting that big, elusive donor. Why unnecessarily lengthen the process?

Tizku Lemitzvot,

Shuey

Weekly Must-Reads: May 23

NonProfitBanker — Sun, 23 May 2010 18:19:19 +0000

A list of great articles from around the web that I posted to Twitter from May 16 – May 22, 2010. This week’s topics include: Strategy & Governance; US Tax Tidbits; Social Media & Fundraising; Economy & Finance; and Potpourri.

Tizku Lemitzvot,

Shuey (@nonprofitbanker)

Strategy & Governance

Guidestar CEO stresses that good metrics help nonprofits attract (strategic) deep-pocket donors http://ow.ly/1LFba #philanthropy

US Tax Tidbits

RT @NAFund & @aznonprofits: 6 Important Facts about Tax-Exempt Organizations http://bit.ly/9n8Qcz // The ABCs of donating money to US NPOs

New online tax form for small US charities: Good. IRS deadline-extension of new form: Bad. http://ow.ly/1ODte via @philanthropy

Social Media & Fundraising

6 Ways Board Members can fundraise w/out having them solicit peers, by @GailPerrync http://ow.ly/1LDdY via @npmaven @PamelaGrow

Engaging consumers about their social/environmental concerns? 75% believe you should (by @andrealearned) http://ow.ly/1NQkP via @elainecohen

Real-Life stories from nonprofits on incorporating social media into marketing strategy http://ow.ly/1OAyg via @nptechblogs @reedstockman

The mantra for all who work with social media >> The Cornerstone of Social Media Strategy is Clarity, by @askdebra http://ow.ly/1OD3d

Intro in “What the Hastag,” a wiki hash directory & metric analyzer, by @jewishagency http://bit.ly/bskHmx via @eJPhil

Economy & Finance

Rethinking the metric of a good economy, maybe the G.D.P. isn’t the best judge. On @nytimes http://ow.ly/1LFvj

Haaretz: European crisis could cause #Israel exports to fall by $1 billion http://ow.ly/1LWi7

Haaretz: Why gold is spiking & why it matters to the Bank of #Israel http://ow.ly/1LWoM // Good summary of currency fluctuations & inflation

Potpourri

ATM-style vending machine that dispenses GOLD! http://ow.ly/1LSTh Not to be confused with ATM-style vending machine that dispenses French Fries http://ow.ly/1LSXX

Who says Britons don’t have a sense of humor? >> RT @johnhaydon: Man loses licence after drunk driving in toy Barbie car http://ow.ly/1NQxP

4 Reasons Why the I.R.S. Interim Report "Exempt Organizations – Universities Compliance Project" is an Important Read

NonProfitBanker — Mon, 10 May 2010 19:47:14 +0000

Too many times the IRS has hinted at the direction to which it is heading, with people taking little notice. Well, in quiet screams, the IRS is doing it again, with the release of their interim report last week: “IRS Exempt Organizations – Colleges and Universities Compliance Project.”

I preface that I have not yet read the report, but I will. And here’s why I think you should too:

1. The I.R.S. is Cracking Down

The interim report summarized responses to “compliance questionnaires sent to 400 public and private colleges and universities in October 2008″ (IRS press release). This is not the first report (the IRS did a similar report on nonprofit hospitals) that the IRS has sponsored nor will it be the last.

2. Knowing is Half the Battle

Reading the report can give a nonprofit – especially schools — a sense of what to expect:

The interim report contains preliminary information on the respondents’ organizational structures, demographics, exempt and unrelated business activities, endowments, executive compensation as well as governance practices. (IRS Newswire IR-2010-058)

3. The IRS has Teeth

The report was not just some intellectual study.

The IRS has opened examinations of more than 30 organizations that were selected based on responses to the questionnaire. These examinations focus primarily on unrelated business income and executive compensation issues. A summary of findings and information learned from the examinations will also be included in the final report. (IRS Newswire IR-2010-058)

Last time I checked, examinations were not a good thing.

4. The IRS is Learning

“This compliance project, like our previous one on nonprofit hospitals, gives us a lot of valuable information on activities conducted by those organizations that will help us in our enforcement and services efforts,” said Lois Lerner, Director of the IRS Exempt Organizations. “Our findings will be reported in a final report after we have completed our analysis of all of the data.” (IRS Newswire IR-2010-058)

In other words, the IRS is learning more and understanding better how organizations work; the IRS sees itself as better equipped to oversee tax-exempt charities and judge their activities. In my opinion, this feeling will lead to an increased desire by the IRS to put their newfound understanding to use and create more pinpointed inspections — performed both before and after a 501(c)3 tax-exemption has been issued.

Conclusion

I only happened to come across this announcement by accident (I can’t seem to unsubscribe from the IRS Newswire email list), but I am glad that I did. We are seeing the IRS on an almost consistent basis increase its oversight of charities. The old ways of running a nonprofit — little transparency, fiscal responsibility, and strategy — are quickly and quietly becoming extinct. Or they should, if you want your organization to survive the IRS’ version of natural selection.

Tizku Lemitzvot,

Shuey

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

NonProfitBanker — Thu, 22 Apr 2010 16:43:17 +0000

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, allowing donations to these essentially foreign organizations to be tax-deductible.

As you can imagine, many charities registered outside of the United States consider an “American Friends of” organization as a vital part of their fundraising strategy.

Jewish causes, especially those based in Israel, are no exception to this rule. A recent report compiled by Dr. Nissan Limor estimated that foreign donations to Israeli charities from sources outside of Israel stood at 2.165 billion dollars in 2007, with much of that coming from the United States (although, he didn’t stipulate how much). There are about 1,000 new Israeli charities [amutot] created every year and it would hold that many of these organizations will seek to create an “American Friends of” supporting charity.

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

The Reduction of 501(c)3 Exemptions Granted

In late July, I wrote about the scandal that rocked the Jewish community of Brooklyn and Deal, culminating in the arrest of three mayors, five respected community rabbis, and a score of government officials. Specifically, my third post on the scandal described the The IRS Expected Response.

In that post, one prediction I made was the “Reduction of 501(c)3 Exemptions Granted”

The easiest way to prevent future international fraud is to restrict the organizations that can gain tax-exempt status…The U.S. Department of Treasury has only enough manpower to audit between 2 – 3% of registered charities in America. Scrutiny of organizations that already have 501(c)3, then, seems almost like an impossibility. However, as every new organization that wants tax exempt status needs approval from the IRS, it would be a relatively simple procedure to restrict approval to new charities; more specifically, to new charities that donate to international causes.

Well, unfortunately, this seems to becoming a reality. Three recent conversations are shedding light on what seems to be new practices by the IRS. (Specific names are being withheld as applications and relationships are still ongoing.)

The Name “American Friends of” Bothers the IRS

On a recent trip to the States, I had the fortune to sit with a prominent lawyer that represents many Jewish nonprofits. He informed me that he submitted a file for 501(c)3 approval for the “The American Friends of _______,” an organization that would like to raise funds for a charity operating outside of America (but not in Israel). The application is taking an inordinate amount of time, mostly due to the staggering number of questions the lawyer has received from the IRS representative assigned to his file. His application folder measures an astounding 2.5 inches! Having been submitting similar applications for decades, the lawyer is quite surprised at the level of scrutiny and feels that it is the organization’s name that is evoking this reaction. The lawyer is losing patience and if nothing changes, will close the application and resubmit under a different name, hoping this will solve the problem.

Charities Should be Supporting a Mission, Not Supporting an Organization

The following day I met with a well known nonprofit consultant that works with both Jewish and non-Jewish charities. He informed me that it has come to his attention that the IRS will no longer approve 501(c)3 status for organizations that are founded simply to support one specific institution. In other words, when applying for exemption, the papers should list the mission or objective that the charity supports, not what organization it supports. It was implied, however, that in practice, a 501(c)3 charity can transfer money to (i.e. support) a single foreign organization without fear of losing its tax-exempt status — the American nonprofit, though, must be able to prove its independence. (More analysis, tips and background on international charity emanating from America can be found on an article I wrote: “International Charity in the Face of Global Terrorism.”)

Don’t Go Against American Policy

And finally, upon returning to Israel, I was speaking to a director of a Israeli nonprofit who told me of a colleague of his whose American charity had applied for 501(c)3 tax-exempt status. At the time, the applicant informed this director that in his application he stated that the mission was to support Judea/Sumaria/Gaza. The applicant assured the director that the approval was imminent. A half a year later, his approval had yet to come and this applicant soon gave up.

The Obama administration is not in favor of what it calls the “Territories.” Leaving politics aside, we are seeing organizations whose mission clashes with American policy and/or opinion having trouble obtaining 501(c)3 tax-exempt status.

Conclusion

In closing, I would like to stress that whether these trends are good or bad is not the issue. The important point is that Israeli nonprofits and their American supporting counterparts should take notice and act accordingly.

These conversations stress:

New organizations that have the words “American Friends of” in their name will have trouble getting their 501(c)3 tax-exempt status approved.
By-laws of organization should list the cause that the organization is supporting, and should not specify particular organizations.
When applying for tax-exempt status from the American government, it might be best to “tow the party line.”

Tizku Lemitzvot,

Shuey