by Shuey Fogel

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?

A United States “Nonprofit”

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

Simply 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.

In short, 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 Hata’agidim (Registrar of Companies). Both registrars can contain organizations that would be considered non-profit and for-profit under American standards.

In short, the simple word charity, isn’t a tax label, but rather 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), it is logical to start the analysis from here.

1. 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.
2. 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.
3. 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.”
4. 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.
5. 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 fraction of nonprofit organizations exist as Chevrot Leto’elet Hatzibor [Public Benefit Company]. These organizations are governed by company laws and are registered with the Rasham Hata’agidim [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 (links in English where available):

Rasham Ha’amutot [Registrar of Charities] – 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] (Hebrew) – 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.

Shuey Fogel is a nonprofit professional turned banking specialist. He is currently Director of Nonprofit Services for an Israeli bank. Shuey shares relevant conversations, articles, and experiences on his blog, nonprofitbanker.com.

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)

[2] Ibid

Bibliography

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

501(c) (Wikipedia, The Free Encyclopedia)

Application to be Recognized as a Public Institution (Israeli Tax Authority)

Presentation of Documents to Obtain Certification of Sound Management for 2010 (Israeli Ministry of Justice)

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)

Translations of Hebrew words to English were done through Morfix.