A recent decision by the Israeli Supreme Court has cleared the
way for FATCA implementation by lifting a temporary injunction on
the disclosure of information to U.S. authorities under
Israel's intergovernmental agreement (IGA). In connection with
the decision, the Israeli government has agreed to give individual
taxpayers at least thirty days to object to the inclusion of their
information in data transferred to U.S. authorities under the
The government also agreed to delay the implementation of the
IGA to September 30, 2016. Israeli financial institutions now have
until September 20, 2016, to provide the Israeli Tax Authority with
the required data on U.S. taxpayers. This is a notable development
in Israel where, reportedly, as much as five percent of the
population – upwards of 300,000 people – holds U.S.
The decision arose from Republicans Overseas-Israel, et al.
v. Israel, et al, where the plaintiffs challenged the
constitutionality of FATCA implementation under Israeli law,
claiming that the IGA's required reporting to U.S. authorities
violated Israel's sovereignty. Earlier in September, the
Israeli Supreme Court issued a temporary injunction preventing the
disclosure of financial information to U.S. authorities under the
IGA. In its more recent decision, however, the Court rejected the
challenge to Israeli sovereignty and analyzed the claim as an issue
of privacy. The Court considered whether the privacy of U.S.
taxpayers was being infringed and, if so, whether the harm was
reasonable. It assumed that there was some infringement on privacy,
but found that the privacy concerns were outweighed by the need for
Israel to abide by its agreement to provide international financial
cooperation, and that Plaintiffs failed to show that the State did
not limit the impact on privacy as much as was possible.
For those U.S. persons with Israeli bank accounts who have yet
to come into compliance with U.S. tax filings, there is little time
remaining. The IRS has announced a series of voluntary disclosure
programs and options, some of which can give rise to zero
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