On September 1 Israel's Supreme Court of Justice issued a temporary injunction prohibiting any attempt by the government to share Israeli citizens' financial account details with the IRS before September 30. September 30 is the effective date of legislation which was accepted by Israeli parliament on July 12, and which allows for the sharing of financial data and information in relation with FATCA with the US authorities.
The Foreign Account Tax Compliance Act (FATCA) requires American taxpayers, citizens and green card holders, to report to the U.S. Treasury the financial information, regarding foreign accounts overseas. Also foreign banks are required to report information about the accounts of their American clients to the United States Treasury if the total balance equals or exceeds $50,000. Also have Israel and the United States a Tax Information Exchange Agreement (TIEA) in place ensuring that banks report the information to the U.S. Treasury, required under FATCA. Israel has signed a Model 1 ('IGA 1') FATCA agreement with the USA by which Israeli banks and financial institutions must report relevant information to the domestic tax authorities for later forwarding to the IRS. The IGA 1 was adopted into law in Israel in July, after also a number of amendments had been implemented to tax law allowing the tax authorities to release information which was - until these amendments - prohibited.
Banks and brokerage firms in Israel have become wary of opening accounts for American citizens or green card holders. A great number of Israeli's living and working in the US with monies in Israel, and similarly so Israel resident holders of a US citizenship, have come under these information regulations. Renouncing citizenship is not always the best solution for these accidental US tax payers.
The decision of Israel's supreme court of September 1 has temporarily blocked the government from transferring financial information of American citizens to the U.S. Treasury under FATCA regulations, until the contention that the sharing of the financial information as intended is a "violation of privacy, property and equal treatment" and without a compelling public purpose, shall be considered in a hearing not later than September 15; until then the State must cease and desist from transferring of FATCA information.
Considerable opposition to FATCA has existed within Israel and not only among its American or dual American-Israeli citizens. Many of the tax payers subject to the FATCA laws have not been to the US for years, or have only a US citizenship by descent, but are still potentially subject to US taxation.
Concerns have been raised that should Israel fail to comply with FATCA by the instructed deadline, which action the United States will want to take.