New laws intended to reduce/eliminate money laundering have hit gemachs hard, and this is the subject of a controversy with the treasury in Israel. For many members of the frum community the gemachim are nothing less than oxygen, and without the gemachim, they would not be able to survive. A major portion of the machlokes surrounds the regulations from the US federal law known as FATCA.

As per the agreement signed between Israel and the United States, banks and financial institutions in Israel are compelled to report to the US tax officials regarding the accounts and holdings of US citizens with accounts in Israel.

The gemach issue was discussed in the Knesset Finance Committee on Monday, 7 Sivan, and it was decided heads of gemachs will have to complete a declaration that their organization is to serve the public and will comply with local laws governing such non-profits. This will permit recognize the gemachim as non-financial organizations, thereby removing them from FATCA regulations. The agreement for the new designation was reached between the committee chairman, MK Moshe Gafne and the treasury.

Gafne requested an extension for gemachim until mid-July to permit them to register as a non-profit without fear of closure of their bank accounts in Israel.

Deputy Chief Economist Frieda Yisraeli introduced the new arrangement for charitable funds (gemachim): “They are defined as public institutions under the Income Tax Ordinance and not considered financial institutions but will be an active public institution. They will be recognized as an institution for public benefit and therefore, FATCA regulations will not apply.

Such organizations will operate as a non-profit and specify its purpose in the declaration and shall be run by at least seven members who are not relatives. They will be given an extension for submitting a report for fiscal 2016.

During the meeting it became clear that the FATCA regulations to not apply to small entities with a volume of deposits of up to $50,000 per person or by volume of assets of $50 million.

At present, the heads of gemachim are supposed to submit all of their paperwork by June 30th. Gafne asked to extend this a month, to the end of July.

From Wikipedia

The Foreign Account Tax Compliance Act (FATCA) is a 2010 United States federal law to enforce the requirement for United States persons including those living outside the U.S. to file yearly reports on their non-U.S. financial accounts to the Financial Crimes Enforcement Network (FINCEN). It requires all non-U.S. (foreign) financial institutions (FFIs) to search their records for indicia indicating U.S. person-status and to report the assets and identities of such persons to the U.S. Department of the Treasury. The FATCA was the revenue-raising portion of the 2010 domestic jobs stimulus bill, the Hiring Incentives to Restore Employment (HIRE) Act, and was enacted as Subtitle A (sections 501 through 541) of Title V of that law.

(YWN – Israel Desk, Jerusalem)