MANDATORY Compliance with the I.R.S.’ VOLUNTARY Best Practices

A charitable foundation’s worst fear is that its grant will be used for non-charitable purposes. The U.S. Internal Revenue Service (IRS) stresses that this risk increases drastically when dealing with foreign grant making and expenditures.[1] The U.S. Department of the Treasury released its third and final version of its “Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S. Based Charities” (VBP) in September of 2006 to help charities implement procedures that will reduce the risk of unintended diversions of funds to terrorist causes.

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Insight Not Accuracy: Why The New York Times is Important

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.

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

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.

Weekly Must-Reads: June 6

A list of great articles I’ve read and posted to Twitter between May 23 – June 5, 2010.  This week’s topics include: I.R.S.; Sector Trends; Social Media & Internet; Finance & Economy; and Potpourri.

While it has been two weeks since my last Must-Read, don’t worry about overload. Between my daughter running into a door and needing stitches and my internet being on the fritz for four days, its been a slow couple of weeks.  Well, here’s hoping for a better week that last…

4 Reasons Why NOT to Establish an “American Friends of” Organization

Israeli charities (amutot in Hebrew) rely on donations from overseas – no secret there.  Many foreign-based charities choose to create an American based nonprofit, more commonly referred to as a “Friends of” organization so donations can be tax-deductible vis-a-vis the American Federal Government. (In a previous post, I spoke about IRS trends when a “Friends of Organization” is applying for tax-exempt status.)

However, it could be that establishing a “Friends of” organization is not in your charity’s best interest. The following are some considerations that elaborate on:

Why not to establish a U.S. registered “Friends of” Organization to help fundraise?

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

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.

Weekly Must-Read Links: January 3

A list of my favorite articles that I posted to Twitter from December 27, 2009 – January 2, 2010.  This week’s categories: Nonprofit Strategy; Internet & Social Media; Israel Economy & Finance;  Global Economy & Finance; and Potpourri.