I was dismayed when I heard that some American (and European) Foundations are requiring amutot [Israeli nonprofit organizations] to have the Se’if [Paragraph] 46a status, which declares donations to a charity to be tax-deductible.
This latest phenomenon demonstrates a lack of understanding of the intricacies of international nonprofit regulations and makes it harder for worthy Israeli charities to raise money abroad.
When grants or gifts cannot be made directly to a recipient (individual or organization) many times Fiscal Agents are used. These Intermediate charities are commonly referred to as Conduit Organizations because they are not the intended final recipient, rather just a pass-through.
With the right due diligence, control, and by-laws, this type of seemingly-indirect charity can be perfectly legal and advisable. (Please consult your lawyer to see if this solution is right for you or your organization.)
One such group that uses Conduits is such a way, is a charity located outside of the United States (and, thus, not considered tax-exempt in the eyes of the IRS) that is looking to collect donations from American citizens.
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.
Confused? 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?
“What do you mean that Israeli charities can be registered as companies?”
That was the question someone asked me last year that that had me thinking to myself, yet again, that charity legal/tax structure is a language onto itself and should require its own Ulpan.
And so, I shall now endeavor to explain the somewhat contradictory concept of a Chevrah LeTo’elet Hatzibur [Public Benefit Company].
Obtaining government funding seems to be every nonprofit’s goal, at least in Israel. I have heard countless lecturers, founders, and foundation representatives preach the Darwinian virtues of incorporating government grants into an Israeli charity’s fundraising strategy; after all, the nonprofit is servicing the Israeli public. It is to the Government’s benefit – if not its outright duty – to ensure that this charity’s program continues to exist
Not bad on paper. In practice, however, these Israeli government grants can sometimes be more trouble than they are worth.
For the purpose of this post, as a banker I would like to restrict my focus on the budgetary challenges associated with these grants. Specifically, the two disadvantages that arise because grant monies are dispersed only after expenses are incurred.