Fall-Out In Israel From The IRS Scandal Today


tax-scandalToday’s scandal with Jews and the IRS has a direct impact on the continuation of non-profits in Israel.

Over the past 2 years, many small non-profits in Israel – ranging from yeshivos to medical organizations – have fallen under scrutiny from the IRS. For the past 2 years, Israeli non-profits couldn’t understand the scrutiny. Today it became clear: No Jewish non-profit could be trusted to be legitimate.

While we can understand that the IRS wants to be cautious and certain, it has been absurd in its efforts to invalidate legitimate Jewish non-profits. For example, one major yeshiva in Jerusalem that serves American students was asked by the IRS why they don’t have a website for recruitment. Anyone in the Jewish community knows that major yeshivot (such as Mir, Ponevezh, etc.), particularly in the Haredi world, do not need and will not utilize a website for recruitment. But the IRS doesn’t understand that. And that challenges the credibility and legitimacy of the yeshivot. In another case (for which I have a copy of the letter), the IRS sent a letter to the American Friends of one small Israeli yeshiva demanding proof that none of its students are terrorists. How can we prove that none of them are terrorists? If they aren’t on the US Homeland Security list? Without proof, the IRS may not enable the yeshiva to maintain its tax deductible status. For 2 years, the IRS has been demanding copies of bank statements, questioning how checks get cashed and where the money goes, and demanding enormous time-consuming efforts by small, fully legitimate organizations in Israel that have an “American Friends” support organization in the US.

So what do today’s events mean for the future? All these small non-profits which have been fighting to keep their tax deductible status for the past year or 2 will have to work even harder to gain the confidence of the IRS. One that I know of already lost their tax deductible status without due cause. For example, by law the US non-profits are not required to keep minutes of board meetings. But every Jewish organization under scrutiny has been asked why they did not keep minutes. And why all the board members do not know exactly how every donation given is spent.

The actions of today essentially make every Jewish organization fall into question – is every non-profit set up to cover a money laundering scheme? While the general public may not think so, the IRS activity in the past 2 years definitely gives an impression that they harbor a doubt towards US non-profits that have Israeli affiliations. Organizations that help the poor and handicapped in Jerusalem will have to spend increased funds to have their accountants prove the legitimacy even more to the IRS. Sure, at the end of the day these organizations will pass the test. But they will have to spend much money and invest much time with accountants.

I’m not sure if all Jewish organizations with tax deductible status have been scrutinized over the past year, or just many that have Israel affiliations. I am personally aware of a number of cases, and I have worked with American accountants over the past 2 years who are familiar with many more.

With the fundraising efforts challenging enough in today’s economy, Israeli non-profits must be able to give tax-deductible receipts to their donors. Without IRS approval, US donations can completely dry up and shut down Israeli organizations. The IRS is re-evaluating their approval, and that can have a long-term impact on Israeli society.

Clearly, the fall-out from today is more than the bad press Jews will get on the heels of Madoff.

On behalf of many quality Jewish organizations in Israel that need the tax ID status from the U.S., please ensure that your coverage of the scandal today includes a message to the IRS that not every organization with Jewish or Israeli ties are conducting illegal activities!

{By Chevy (Fleischman) Weiss for Matzav.com}


  1. Oy l’rasha, oy l’shkheinav.

    Would learning Choshen Mishpat with the same seriousness as learning Orach Chaim help? Something isn’t getting passed on through the educational system here.

  2. OK, children, gather round and I’ll explain to you why we have fallen.
    1. We ignore the teaching of real, hard-hitting mussar, in the form of the Prophets. The mussar sforim taught are a pale shadow of the real thing. We ignored the neviim then, we ignore them now. It didn’t work out well then, it’s not working out well now.
    2. Charedim teach their children that goyim are worthless, their laws are worthless, that dina d’malchusa is best observed in the breach, that goyish money belongs to Jews anyway, that if you have to, cheat and steal and scam and do whatever. And that’s supposed to be the “Torah” way. With that attitude, you’ll have thousands of men doing time in Otisville. But at leastthey’ll be eating glatt kosher, learning the Daf and shuckling three times a day.

    Don’t you see how fraudulent this religion has become? We hear harangues about trivial stuff: a lecture on washing clothes during the 9 days, or the laws of fasting. NOTHING COULD BE LESS IMPORTANT. NOTHING! We are in galus because we hated each other 2000 years ago, and we still do. We’re not in galus because of laundry or the lack of eating.

    There isn’t a scintilla of honesty in the bones of so many of our “leaders.” Instead, as Reb Harry at Haemtza writes, it’s all silence, all the time, just like rabbinic silence at the Bar Kamtza fiasco. Instead, we’re asked to pony up money for some guy’s defense fund who himself brought upon us a colossal chillul Hashem. Let him use his own money. Our money should be sent to the hundreds of victims of that miserable, wretched place.

    Woe unto us for such leaders. WOE IS US! Pathological fraud/scams/cheating/tax evasion, unending. And the sounds of silence. Shame on klal Yisroel. Shame on us.

  3. shame on Shmuel! You are guilty of loshon hara and where is your being dan l’chaf zechus?
    Perhaps you’re just as scandalous as they are, if you include all of Klal Yisroel in these accusations!
    I’m surprised that Matzav could even post such a terrible letter. What does refraining from washing laundry during the 9 days have to do with it?
    You obviously have some very, very, very sour grapes against frum Jews.

  4. shame on you shmuel you should show people by example slandering people on a public forum when noone can see your laundry is disgusting

  5. Mazel tov! You’re upset. Mazel tov! And I’m at fault. Yes, it’s my fault for pointing out the obvious.
    Not a single point I made did you refute on its merits. Not one! Instead, I get lectured on “lashon hara.” The usual fall-back line for those with nothing to say. And I should be “dan lchaf zchus.” I would if I could. But I can’t. These scams, involving so many of our leaders and their friends, are unending. THEY NEVER END. Every 6 months, another frum man is accused of scamming these people, others are scamming the government, non-stop swindles of every sort imaginable. Tax evasion. Kickbacks. Money laundering. Others are slumlords, but that’s a different lecture for another day.

    Don’t you get it? This is what happens when you teach poison to your children, and poison is precisely what has been taught: ignore the goyim, get their money, they have no tzelem Elokim, etc. etc. ad nauseam. When you teach thousands such miserable drivel, such outright poison, this is what you’ll get: decades of corruption, scams, cheating, tax evasion, all done by the cholov yisroel crowd.

    It’s pathological. To have so much of it in one community, and that in a community which preens that its the very best of the Chosen people, well, it really defies belief. And don’t blame the media. It’s newsworthy when men who hold themselves out as holier than thou act like street gangsters.

    Am I as scandalous as they are? I’m not perfect (in the words of the Boss: “I’m no saint, that’s understood”) but noone is knocking down my door and accusing me of years of laundering ill-gotten money. Nor do I traffic in kidneys.

    You ask: “What does refraining from washing laundry during the 9 days have to do with it?” Everything. It shows displaced priorities. We care about the minutiae of laws which are meant to drive a point home about sensitivity to our loss of the Temple, and instead we spend hours “klering shailos” about those minutiae, reading books and attending shiurim on “The 9 Days”, all the while scamming, laundering money, evading taxes, etc. Don’t you see the ridiculousness of that? DON’T YOU?

    Sour grapes against frum Jews? I am one. And I’m sick of seeing frum Jews behave like the mafia, like common criminals, getting arrested Montag and Donnestag because they were taught narishkeit in their yeshiviz. If you consider goyim inferior to you, they and their laws worthless, this is the kind of behavior that you can expect. And you can expect to see dozens in jail, learning Daf Yomi and keeping kosher, bewildered as to how they got there.

    It’s the chinuch, friends. Time to stop teaching that trash like it’s Toras Moshe. Goyim have a soul. They are not to be looked down as inferior. Their laws are not meant to be broken by us. These men are off the derech, with their beards, payos and black clothing.

    Still think I’m wrong? Read the Netziv’s Hakdama to his Haamek Davar, and learn why the Patriarchs were called “yeshorim.” They treated the goyim around them with great respect. They never cheated them. Avraham prayed for God to spare Sodom! Can you believe it? And then read why the Temple and Jerusalem were destroyed. The “holier than thou” we’re cursed with, even among our own frum oilam, is nothing new. Same disastrous results await. But you blame me for speaking up. Shall I stay silent? For Zion’s sake I won’t be.

    And I’m glad Matzav is man enough to allow this opinion to be spoken. It’s what Yeshaya or Yirmiya would have said.

  6. shame on *you*, ‘mazel tov’!!! Somebody finally giving you mussar and you scream tzidkus? Dan l’chaf zchus? Sour grapes? You would’ve helped murder that no-goodnik musser-talking Zecharye Hanavie. What a chutzpa he had – loshon hara about Klal Yisroel, why didn’t he know about dan l’chaf zchus like you do? And while we’re on it, that other no-good self hating jew Ezra, speaking loshon hara about frum, “oiven un” yidden having non jewish wives, what was he thinking?
    Shmuel, get a life, take your head out the sand, & smell the coffee. Do I smell something rotten by you that you’re so sensitive to what he said? Have you heard about ‘areiven ze l’zeh?
    Take a look at the mechaber’s hakdama to Choshen Mishpat. He demands that to be in buisness you must chazer the entire Choshen Mishpat every 30 days. My dear ‘mazel tov’, when was the last time you did that? Have you even ‘gone through’ it once?

  7. SHMUEL IS RIGHT. The only error he makes is including all of us in his condemnation. There are many, many frum Jews who are right now feeling just the way he does. The last few years have seen a string of humiliating public incidents which should make us all rethink how we are living and thinking.

    As a wise friend of mine pointed out, “The Torah is perfect, but Jews aren’t.” The erhliche thing to do is admit it when someone has gone astray, not try to cover it up. We don’t need to gossip about it, but denying it is being the hole the mouse needs. If people were ashamed to face their friends they would be less likely to do things, instead of being able to count on being excused no matter what they do.

    BTW, Shmuel’s point about Mussar is not quite accurate. Read R’ Yisroel Salanter’s works. He pulled no punches. He also maintained that honesty in business dealings was just as or more important than whether your tzitzis are tied according to all the chumros. He required that people learn Nezikin, not just bein adam l’Makom.

    I used to do kiruv, but I haven’t been doing it lately. It’s too embarrassing trying to explain things to people who assume that believing in the Torah automatically makes you a better person. I just hope that we can get our priorities back in order soon so I can start again.

  8. IMHO the author makes a few generalizations without fully understanding the law AT ALL.
    The law is quite clear about what constitutes an “american friends” organization and most of our heimeshe organization aren;t set up properly to follow the law. Its a simple matter of setting policy and following it properly

    for example
    Rev. Rul. 63-252 then sets forth five examples of this point, each expressing a variation on the theme:
    A mere conduit entity formed by the beneficiary foreign organization in order to tap into United States resources;
    An organization with a similar origin and function to the first example, the only difference being that it was formed by persons in the United States interested in helping the designated foreign entity;
    An exempt domestic charity that is prevailed upon by a specific foreign organization to canvass for donations in the United States and to direct contributions to that foreign organization;
    An exempt domestic charity that makes grants to foreign charities after reviewing the grant applications to ensure that the foreign activities will further its own charitable purposes; and
    An exempt domestic charity that forms a subsidiary organization in a foreign country for administrative efficiency in conducting its foreign charitable programs, and minutely manages its foreign subsidiary.
    A common thread running through the first three cases is that the organizations are charities nominally created in the United States but organized or operated solely to solicit earmarked funds on behalf of a pre-existing foreign entity. The domestic entities are, in effect, agents or conduit organizations with respect to the foreign beneficiaries. As such, contributions to them are not deductible. (Note the distinction that the Tax Court made in Bilingual Montessori School of Paris, Inc., supra, between mere funding and actual involvement in operations.) Examples four and five discuss organizations that both solicit funds without any express understanding that they would be forwarded to a foreign entity and exercise “discretion and control” over the funds solicited from within the United States. These domestic entities, in other words, are independent actors with their own charitable programs, not mere intermediaries for foreign-based organizations; consequently, they are found to warrant deductible contributions.
    The organizations described in examples four and five are commonly known as “friends (of) …” organizations.
    What constitutes adequate control of the donated funds was clarified in Rev. Rul. 66-79, 1966-1 C.B. 48. That revenue ruling discusses the situation of a domestic charity that solicits contributions in the United States for a specific project of a foreign counterpart organization. The board of directors has taken specific steps to carefully review the project in advance of any funding and to monitor its continued adherence to the domestic charity’s goals. Notwithstanding that the donations are technically “earmarked,” as in negative examples one through three of Rev. Rul. 63-252, the domestic organization has demonstrated that it has full control of the donated funds and discretion as to their use so as to insure that the funds will be used to carry out the domestic charity’s function and purposes. These standards entail more than merely being able to decide whether or not to contribute and being able to require the foreign recipient to furnish a periodic accounting.

  9. D. Israel
    With respect to the State of Israel, a treaty has been negotiated, but it is not currently in effect because the instruments of ratification have not been exchanged
    between the two countries. As a point of information, the protocol, signed on May 30, 1980, provides:
    Article 15-A – Charitable Contributions
    In the computation of taxable income of a citizen or a resident of the United States for any year under the revenue laws of the United States, there shall be treated as a charitable contribution under such revenue laws contributions to any organization created or organized under the laws of Israel (and constituting a charitable organization for the purpose of the income tax laws of Israel) if and to the extent such contributions would have been treated as charitable contributions had such organization been created or organized under the laws of the United States; provided, however, that this paragraph shall not apply to contributions in any taxable year in excess of 25 percent of taxable income for such year (in the case of a corporation) or of adjusted gross income for such year (in the case of an individual) from sources in Israel.
    In the computation of tax liability of a resident of Israel for any taxation year under the income tax laws of Israel, there shall be treated as charitable contributions eligible for credit or deduction, as the case may be, under such income tax laws, gifts to any organization constituting a charitable organization for the purpose of the revenue laws of the United States, if and to the extent such contributions would have been treated as charitable contributions had such organization been a charitable organization for the purpose of the income tax laws of the State of Israel; provided, however, that this paragraph shall not apply to contributions in any taxation year in excess of 25 percent of taxable income for such year from sources in the United States.

  10. oh and your “letter” that you have is standard procedure on any 1023 application that has foreign activity especailly in areas where there are issue of terrorism
    it’s a simple please sign here (under perjury) that you’re not supplying funds to terrorism

  11. I am sorry to see that we are washing our dirty linen in public, however dirty it is.
    i want to make 2 points.
    1. there is something rotten in the chinuch of our children. they were not taught in their homes what it means to be moiser nefesh for avodas hashem.
    2. we do not know the laws of loshon harah. when we are afraid to correct misbehavior that is blatantly wrong, we remain silent and permit it to continue. loshon harah l’to’eless is required even if it is distasteful. it does have 7 tests before it is allowed to leave your mouth but if it passes the 7 tests it needs to be said.
    when I was a bochur in yeshiva, i discovered that someone had forged my signature on a document. i went to the Rosh Yeshiva and told him that due to that, there was no yiras elokim in the mokom and i must leave. i simply said” there is no hetter for forgery”. he sat back and said, “you are right”. and he gave me a brocha and i left the yeshiva. and a few months later, so did he. he was a yiras shomayim. i was just my father’s son.
    the forger later went to prison for other matters, but not before ensnaring other people into his schtick. 2 other bochurim also served time.
    the community has to straighten itself out. what is missing is the very healthy fear of Hakodosh boruch hu that once was palpalble in the pre-war Europe. that fear was constantly reinforced by the goyim beating on us.
    post wwll, something got lost and we need to find it. wake up and feel the bruises and turn to Hashem and ask for Rachamim.

  12. Shmuel:

    Your comments:
    “. Charedim teach their children that goyim are worthless, their laws are worthless, that dina d’malchusa is best observed in the breach, that goyish money belongs to Jews anyway, that if you have to, cheat and steal and scam and do whatever. And that’s supposed to be the “Torah” way.”
    is precisely what the Nazis and KKK are looking for.