Draft Bill – New Transparency Obligations on Israeli NGOs with Foreign Funding
A new Israeli government draft bill was published last week for public comments – “Disclosure Obligations of Recipients of Support from Foreign Political Entities Law (Increased Transparency by Recipients of Support, when the Majority of their Funding is from Donations from Foreign Political Entities).”
The objective of this draft bill is to impose increased transparency on NGOs (associations/NPOs and public-benefit companies) regarding their activities, when the majority of their funding is from donations from ‘Foreign Political Entities’, beyond the transparency that is imposed on all recipients of such donations.
A “recipient of support” (NPO or public-benefit company) shall be deemed “a recipient of support that receives the majority of its funding from foreign political entities” if the majority of its sources of financing during the last fiscal year for which financial statements must be filed, or during the previous fiscal year in which it received donations from foreign political entities. The sources of financing are to be calculated cumulatively and must include all donations received from foreign political entities in each of the aforesaid fiscal years.
The term “foreign political entity” has already been defined in existing legislation in Israel in sweeping terms – foreign countries, federations of foreign countries, bodies and authorities of foreign countries and local authorities of foreign countries, donations from the Palestinian Authority or from corporations controlled by any of the aforesaid.
According to the draft bill, recipients of support that receive the majority of their funding from ‘foreign political entities’ will be obliged to disclose this in their publications and reports that address or are available to the public.
The obligation of recipients of support to disclose their status as recipients of the majority of their funding from ‘foreign political entities’ shall also apply in relation to particular interfaces with elected officials and civil servants. Thus, a recipient of support that receives the majority of its funding from ‘foreign political entities’ will be obliged to declare this fact in every written document to an elected official or civil servant, as well as during documented meetings held at the work place of the elected official or the civil servant.
In addition to disclosing the fact that the majority of its funding is from foreign political entities, when writing to elected officials or to civil servants, and in reports that the recipient of support prepares and disseminates, the recipient of support is also required to list the names of the foreign political entities that contributed to it during the relevant years.
When a representative of a recipient of support that receives the majority of its funding from foreign political entities is present in the Knesset, he must wear an identity tag that displays his name and the name of the recipient of support that he is representing. This arrangement is similar to the arrangement imposed on lobbyists, pursuant to the Knesset Law.
A failure to comply with the obligation to disclose its status as a recipient of the majority of its funding from foreign donations, when it is required to do so in writing, or a failure to comply with the obligation of wearing an identity tag when in the Knesset will constitute an offense pursuant to section 64.A. of the Amutot (NPO) Law, 5740 – 1980. Currently, the fine for such an offense is a total of NIS 29,200.
This draft bill, if passed (in this or some other format), will join the steadily increasing trend in recent years of imposing more stringent obligations of transparency, reporting and supervision over third-sector organizations in the State of Israel through legislation addressing the overall regulation of their activities in general, and particularly, relating to these organizations’ funding and political activities. The explanatory remarks accompanying existing legislation in this regard state that many organizations in Israel are receiving donations from foreign countries and from foreign political bodies and that frequently, these donations are being used for political activities in Israel. The remarks further state that, therefore, the purpose of this legislation is to achieve balance between the rights of political organizations in a democratic country to operate freely, and the right of the Israeli public to know who is funding the promotion of this or that political position.
The string of legislation currently in effect in Israel in this regard includes a number of reporting obligations imposed on recipients of donations from “foreign political entities” (apart from organizations expressly exempted from these obligations in the legislation), including: (a) quarterly reporting to the relevant registrar in the Israeli Corporations Authority at the Ministry of Justice about such donations that were received during that quarter, regardless of the financial turnover of the recipient of support (a failure to file such a report constitutes an offense subject to a fine of up to NIS 29,200, and the inclusion of misinformation in such reporting constitutes an offense that is subject to three years of incarceration); (b) the quarterly reports must be published on the website of the Ministry of Justice and, if the recipient of support or any party on its behalf has a website, this information must also be conspicuously displayed on this website; (c) insofar as a donation is earmarked for funding a particular publicity campaign, this must be specified in that publicity; (d) recipients of support must do everything in their power to ascertain whether any donation that they received is a donation from a foreign political entity.
In addition to all of the obligations referred to above currently in effect, pursuant to the Amutot Law, NPOs with a financial turnover during any single tax year in excess of NIS 300,000 are obligated to expressly state in their financial statements whether they did or did not receive donations from a “foreign political entity” at a cumulative value in excess of NIS 20,000. If they did receive such donations, they are required to list them in their financial statements and to disclose, inter alia, the identities of the donors, the sum of the donation, the purpose or designation of the donations, and the conditions for issuance of the donations, if conditions are stipulated. An additional provision of the Amutot Law prescribes that NPOs with larger annual turnovers (of at least NIS 750,000) are obliged to maintain income and expenses ledgers that differentiate and have separate entries for donations from “foreign political entities.”