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Controversial Bill on Israeli foundations

The Interdisciplinary Center (IDC) Herzlya

Sammy Offer School of Communications
Fundamentals of Social and Political Thought
Paper #1: Controversial Bill
by Luke Gasiorowski

Background: The existing law in Israel and the proposed amendment

The “Law of Non-Profit Associations” (Hok HaAmutot) was created to organize the establishment and actions of an AMUTA (non-profit organization). According to Israeli, an AMUTA is defined as

“Two people or more who wish to unite (associate) for a legal objective that is not intended for profit distribution between the members, may establish an AMUTA; the AMUTA will be established upon its registration in the “AMUTA registration” (Pinkas Ha-Amutot from the Hok HaAmutot.


The law states that such an AMUTA must maintain its financial accounts in a clear way that will allow the authorities to verify its operations.  The financial activities in an AMUTA must be credible and legitimate toward the AMUTA’s goal (35 (alef) LeChok HaAmutot). Such an AMUTA will be required to account for its financial income and earnings through an annual report (36 (alef)).
Until recently there have been no laws or regulations to limit the donations or the income of an AMUTA. As long as the donation is legal, the AMUTA is free to receive funds in order to support its purposes and cause.
Recently, an amendment was suggested. The original amendment (suggested by Knesset Member Akonis) was to limit the donations that political AMUTAs receive in Israel from foreign governments. He suggests that they would receive no more than 20,000 NIS per year. Shortly after, a suggestion (by Knesset Member Kirshenbaum) was made to impose 45% taxes on donations to AMUTAs. 
Prime Minister Benjamin Netanyahu asked to moderate the amendment and to combine both initiatives that were suggested. As a result, the final amendment is to divide the Israeli AMUTAs into three categories:
  1. AMUTAs that are absolutely prohibited from receiving donations– these are the AMUTAs that boycott against the State of Israel and its laws, and that identify with associations against the State of Israel. Examples of such AMUTAs include “Adalla”, “Yesh Gvul” and “Profile Chadash”. 
  2. AMUTAs that are permitted to receive donations without any limitations or restrictions- These are political AMUTAs that receive funds from the Israeli government. These AMUTAs will be able to continue receiving unlimited donations from foreign countries. Such AMUTAs include “Mada” and the Hebrew University.
  3. AMUTAs that will be required to go through a hearing at the Financial Knesset Committee- Until they are voted by the Knesset Committee, AMUTAs will be imposed a 45% tax on every donation. This category includes “Shalom Achshav”, “BeZelem” and “Rofiim Lezchuyot HaAdam”.
A total ban on donations from foreign governments will apply to AMUTAs that deny the existence of Israel, incite racism, support armed struggles against the State of Israel, initiate prosecution of the elected Israeli officials and IDF soldiers in international courts, and who support boycotts against the State of Israel.


1.     The law from two democratic countries other than Israel

It should be noted that what is known as an AMUTA in Israel has many international and cultural interpretations: Non-government organization (NGO) and Nonprofit organization (NPO), which within them hold several categories (public charities, private foundations, private operating foundation, etc.). Each country has its own definitions and its own terminology for what is known as an AMUTA in Israel.

The United States of America does not impose any tax for donations to nonprofit organizations. The State divides the nonprofit organizations into three primary categories:

1. Public Charities: organizations that are “not a private foundation”. They receive a substantial portion of their revenue from the general public or from the government. Donations can be tax deductible to the individual (up to 50% of his income) and to the corporate donor (up to 10% of its income). Examples of such organizations include churches, benevolence organizations, animal welfare agencies, educational organizations and etc.
2.  Private Foundations: often referred to as non-operating foundations as they typically do not have active programs. Revenue comes from a relatively small number of donors, even small donors. These organizations are usually thought of as non-profit that support the work of public charities through grants. Donations to private foundations can be tax deductible to the individual donor (up to 30% of his income). An example of such an organization is a family foundation.
3.   Private Operating Foundations: often maintain active programs similar to public charities. These organizations are often hybrids. Most of the earnings must go to the conduct of programs. Donations are deductible, similarly to a public charity.

All three types of these nonprofit organizations must apply to the IRS for recognition in order to obtain a 501(c)(3) status. Without such a status, federal tax exemption will not be allowed.

Germany – Any foundation is allowed to be created for public or private purposes as long as it keeps with the concept of the German common law. A German foundation can either be charitable or serving private interest. No tax is imposed on donations to foundations. In practice, at least €50,000 is considered necessary to start a foundation. Charitable foundations benefit from tax shelter and can at the same time be engaged in commercial activities, if so only the commercially active part of the entity is taxed. A family foundation (serving private interest) is taxed like any other legal entity.  Foundations are supervised by local authorities within each state (Bundesland), due to the fact that each Bundesland has exclusive legislative power over the laws governing foundation. Any foundation can be shut down if it pursues anti-constitutional goals. German law allows a tax sheltered charitable foundation to distribute up to one third of its profit to the founder and to his family. This benefit is subject to taxation. There are about 15,000 foundations in Germany. 85% of these are charitable foundations. Foundations are the main providers of private scholarships (Stipendien) to German students.

1.     Comparison of the four aspects


1.     Discuss the findings

Upon observing and evaluating the laws and regulations in Israel, the United States and Germany, many similarities and difference can be found. There is no doubt that the reason for the dissimilarities is the cultural diversity between the people of these three nations, as well as their histories and current policies.
     Israel, who has always tried to maintain itself as a strong democracy in the Middle East, for internal reasons as well as to prove itself to the International community, has strongly believed in pluralism and in the practice of freedom of speech and expression. To prove this, Israel allows Gay Pride protests and parades – when homosexuality is in fact act that in its essence defies basic religious laws in the TANACH, which is the book that holds the core beliefs of the nation’s identity. Pro-Palestinian protests by Israeli-Arabs are allowed in Israel; protests by parents from a certain group (Jewish religious) who oppose the governmental system of education for children are also allowed among many other examples. Israel has been very tolerant towards protests and public stances from these groups.
     There are many other extreme organizations in Israel who have been allowed to operate and who have made it an objective to condemn the State of Israel in front of the eyes of the world and to persecute IDF soldiers and IDF officers, while slandering or violating their reputations. These foundations, who often call themselves “human rights organizations” receive funding from countries and sources that are anonymous, whose full intention is to damage and change the public political discourse in Israel from within.     
    The amendment’s purpose is to limit the interference in the Israeli discourse by prohibiting support to Israeli foundations. The foundations that identify themselves with the leftist and the radical leftist wings in the Israeli government that receive donations from foreign countries will be prevented from jeopardizing image of the State of Israel. Among these foundations, “Tzelem”, “Yesh Gvul”, “HaVead Neged Inuiim” and “Shovrim Shtika” would be directly affected by the amendment.


Academic References
“Chok HaAmutot”, TISHAM – 1980
Section 501(c) of the United States Internal Revenue Code 




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