As a general matter, contributions to Israeli charities (and foreign charities in general) are not tax deductible for U.S. taxpayers. American taxpayers can make tax deductible donations to Israeli or other foreign charities by first donating funds to US charities that then may (or may not) choose to send some funds abroad. There are strict conditions that assure the tax-deductibility of gifts to charities that make grants to foreign charities.
Principle 1: The US charity must not be controlled by the Israeli or other foreign charity. A majority of the US charity’s board must be independent of the foreign charity. The US charity must never commit to US donors that funds will be transmitted to any particular charity and it must retain the power to withhold funds even after grants have been approved. If the US organization serves merely as a conduit, transferring donations from the American donor to a foreign charity, donations are not tax deductible for the US donor.
Lesson for transparency: The independence of the US charity from the grantee charity should be clear on the Form 990 which should relate only to the US charity. More generally, the unique identity of the US charity should be clear in public relations materials like mail solicitations, in-person funding requests and fundraising events. As one important example, the US charity should maintain its own internet website which highlights its own activities and finances.
Principle 2: The Israeli charity or other foreign charity must request grants from the US charity for specified projects. The US charity may submit funds to the foreign charity only after its board has reviewed and approved specific grant requests. Once approved by its board, the US charity may solicit contributions for the approved charity. However, the US charity determines how much is sent abroad and when it goes. Moreover, it may withhold funds entirely.
Lesson for transparency: Tzedakah, Inc. strongly encourages US charities to make clear to the public which particular projects of foreign charities they have agreed to fund. More broadly, donors should be given the option of funding specific projects. Requests for contributions should make it easy for donors to select projects to be funded with their contributions and that can easily be done on internet web sites.
Principle 3: The grantee charity must submit regular reports that itemize the use of funds granted by the US charity. The reports must assure the US charity that the funds were spent according to previously approved specifications.
Lesson for transparency: Summaries of written reports submitted by grantee institutions should be made available to the public. These should be included on the Form 990 as well as fundraising materials.
If you are interested in more detail on IRS regulations regarding US charities that raise funds for foreign charities, see:
© 2015-2021 Tzedakah, Inc. All rights reserved;