Christian and Messianic donors (private individuals and organizations alike) are quick to open their hearts, and their checkbooks, to a group that comes to their congregation from Israel, or on behalf of Israel, telling about the great needs among G-d's chosen people.

The needs are real.  Average Israelis are struggling against poverty, unemployment, illness, new-immigrant woes, terrorism, and other trials that drain their financial resources and their hope for a normal life.

Many believers from abroad recognize that the needs among the Remnant - the Israeli believers in Yeshua - are even more acute.  Not only do they face the above-mentioned burdens that are the lot of other Israelis, PLUS the risk of persecution because of their faith; but the Israeli believers are generally not beneficiaries of the major funding brought to Israel by prominent Zionist Christians, who instead use their gifts to build goodwill with the Israeli government or religious Israelis (many of whom are offended by the presence of the Jewish believers in Israel).

Donors who have dedicated themselves to nurturing the Messianic Israeli community are to be commended for rectifying this imbalance.

And in the name of the needy Israeli believers, we at Restorers of Zion want to express our gratitude for your loving hearts, your generous spirits and your willingness to serve the Israeli believers simply because G-d has put this on your hearts.

At the same time, we are aware of well-meaning donors who want to demonstrate "trust" in the Israeli believers by donating without requiring a full accounting for how the funds are used.

Perhaps the trust is well-placed, and there is no need to track the funds because they are being used with integrity. But even if the Israeli charity is trustworthy, incomplete documentation can still endanger the donor's own financial wellbeing!

For this reason, we offer the following vital information, so that donors -- and U.S. ministries sending money to Israel -- can protect themselves as they share with their Israeli brethren.

Make sure that the U.S. charity receiving your donation for Israel is complying with the IRS requirements for 501c3 organizations that deal with foreign countries.

Why is this so important?

• If the U.S. charity fails to comply with all the IRS requirements, it can lose its tax-exempt status retroactively in an IRS audit (ie, lose that status for the entire time period in which the failure occurred, not just dating from the audit).
• As a result, your tax exemptions can be lost - even years after the fact - and result in a tax bill being sent to you for the affected donations (sums you had deducted from your taxable income, which are now added back).
• Since the discovery of terrorist activities funded by "501c3 charities" in the U.S., the IRS has been auditing ALL charities with any connection to the Middle East, in the context of the Homeland Security laws.
• Therefore, it can be assumed that all U.S. charities serving Israel will eventually be audited and scrutinized for compliance.

1. Documentation of all donations must be detailed and complete, establishing that the funds were used for charitable purposes, and appropriate to the stated purpose of the U.S. charity.

A. With funds distributed to needy individuals in a foreign country, the U.S. organization must keep the following records, and be able to show them to the IRS:

1. the name and address of each recipient
2. the amount distributed to each
3. the purpose for which each gift was given
4. the manner in which each recipient was selected
5. the relationship, if any, between the recipient and members, officers, or trustees of the organization

There is no need for a specific assessment of need for each recipient (no. 4).

The U.S. organization still needs to record "a reasonable and objective formula that is consistently applied" to all recipients in that category.

• reviewing and approving all projects carried out by a foreign charity which use the U.S. charity funds
• reserving the absolute right to halt financial assistance to any previously approved project at any time
• declaring to the IRS that it is "not serving as an agent for, or conduit of, a foreign charitable organization"
• preventing a situation where donations are "inevitably committed to go to a foreign organization" (in which case the foreign charity, and not the U.S. charity, is "the real donee")
• refraining from soliciting funds on behalf of a specific foreign organization, by which the funds "must in any event" go to that foreign organization

Contact the organizations sending you the tax-deductible receipts, and verify that they are in full compliance with these IRS regulations.

If you cannot verify IRS compliance with the charity of your choice, we can recommend either of our two U.S. funding partners, who are fully informed on IRS requirements and have demonstrated (through IRS audits) that they are fully compliant with the above regulations for tax-exempt (501c3) organizations.  Your donations and your exemptions will be safe with them.

The fact that they ARE compliant means of course that neither of these organizations is an automatic conduit for Restorers of Zion.  However, both have officially reviewed and approved RZ in general, and some of our projects in particular.  If you want to support our ministry or one of our projects and receive a tax deduction through them, please review the simple guidelines below.
 

If you are on the board of an American 501c3 organization, and you have been reading this page with growing dismay - because you realize that your charity is endangering its tax-exempt status by not following the IRS regulations - take heart.  Read about the experience of one of our funding partners.

1. Don't require the U.S. ministry to channel your donation to a specific group in Israel.

As the IRS document explains, "While a domestic charity can use the contributions abroad, it cannot merely transfer them to a foreign charity."  The U.S. charity cannot legally "take orders" from a donor to send the donation somewhere in particular; it must maintain "full discretion and control" over the funds.

2. Don't write anything on the "memo" line of your check.

This is one way donations are considered "earmarked" by the IRS.  Legally a U.S. 501c3 is required to return the check if any designation appears on it other than the name of the U.S. charity itself.

3. Do enclose a note WITH your donation, expressing your preference for its use.

Donors can always ask the U.S. charity to fund a particular project or group in Israel that interests them, with the understanding that the final decision is left up to the U.S. charity.  Most ministries do their best to honor such requests, and the IRS doesn't mind that.  After all, you and that ministry are both interested in supporting the same Israeli causes, otherwise you wouldn't be sending them a check at all!

4. Do keep tabs on the charity, verifying from time to time that it is remaining IRS-compliant.

Priorities and procedures can change, especially after a change in the leadership of an organization.  But a ministry that operates with integrity is always ready to demonstrate it by being transparent and answering donor questions fully and graciously.  It's good donor practice, and a good test of the leadership's attitude, to keep probing until you are satisfied that your faith in that ministry is well-founded.

* Two of our U.S. funding partners have already been audited by the IRS, in connection with the Homeland Security Act:

1. Nehemiah Covenant Corp (audited in 2005).  NCC was actually in violation for the first 2 years of its existence, but a new leadership in 2003 made sweeping changes, which included diligent compliance with the "full discretion and control" parameters as described above. This "self-correction before the audit" (as the IRS auditor termed it) was deemed sufficient to maintain its exempt status.

This offers hope for any U.S. ministry leaders who are reading this page and suddenly realizing that they have been in violation due to ignorance... and who are now wondering how they can correct the situation.

2. Road to Zion, Inc (audited in 2006).  R-to-Z was fully compliant from the beginning, and their audit (although nerve-wracking) went relatively smoothly.

They both informed us that passing their audit was possible because Restorers supplied them with complete documentation on all Israeli recipients of their funding, and because both organizations were able to demonstrate that they had full control and discretion over the funds they sent to Israel.
 

(this article posted January 08)

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