Senate Unlikely to Consider Israeli Tax Pact This Year

The new U.S. Israel tax agreement, which seeks to avoid double taxation and includes provisions regarding deductions of taxable income for certain charitable contributions, probably will not be considered by the Senate until offer the new Congress convenes in January, the Jewish Telegraphic Agency was informed today.

Senatorial sources said one factor for the delay is the objection by Sen. Mike Gravel (D.Alaska) to referring the agreement, which is a protocol to the Israeli-U.S. treaty, to the Senate Foreign Relations Committee. Grovel wants the Senate Finance Committee, of which he is a member, to consider the agreement, too.

An aide to Gravel told the JTA that Grovel is “concerned about its provisions that would allow U.S. citizens to tax write-offs on contributions to Israel.” The agreement with Israel, however, is not unprecedented for Americans. The same provisions are incorporated in an accord between the United States and Canada already in effect, according to both Senate and U.S. government sources.

One provision of the new agreement would allow an American to deduct on his U.S. tax return contributions to officially recognized charities in Israel up to 25 percent of the income he derives from Israeli sources. The some applies to Israelis in reverse. Income from Israel Bonds as well as from commercial enterprises would be eligible for such deductions, a U.S. Treasury Department specialist reported.

Under this agreement, he said, charitable organizations in Israel are those that are created organized under the laws of Israel. In addition, their standard would be measured against U.S. tax laws regarding charities. The donations also would be limited to the U.S. tax laws on charitable contributions.

Because of the limitations on the deductibility of the contributions, the specialist indicated the Treasury Department anticipates the impact on total contributions and on U.S. tax revenues will be relatively small.

Grovel’s call for a Senate committee other than Foreign Relations to consider the treaty protocol is said to be unprecedented. The process for Senate ratification of a treaty or protocol to it is for it to be transmitted by the government through the Vice President, who presides over the Senate, to the Secretary of the Senate who makes a request for unanimous consent to refer it to the Senate Foreign Relations Committee. Grovel’s objection blocked unanimous consent.

While a Senate majority could set aside Grovel’s objection, Senate leaders and the Foreign Relations Committee’s key members were said to be bogged down in activities and involved in the national elections which precludes action apparently for the remainder of this session of Congress.

Another factor is that Grovel will not return to the Senate in January and without him procedural objection to the agreement will not arise. Grovel was defeated in Alaska’s recent Democratic primary. He alleged that his defeat was in part due to Jewish support for his opponent, Clark Gruening.