Tax Exemptions on Holocaust Compensation and Restitution Payments

United States

The United States Congress passed legislation in May 2001 exempting Holocaust survivors and their heirs from federal taxes on compensation and restitution payments received after Jan. 1, 2000.

The Claims Conference assisted Senator Peter Fitzgerald (R-IL) in drafting the legislation. Holocaust survivors or victims’ heirs should not include these payments as income when filing federal tax returns.

Only four U.S. states currently tax compensation and restitution payments: Alabama, Arkansas, Mississippi, and Pennsylvania.

A New York State website launched by The Empire Justice Center, The Legal Aid Society and Selfhelp Community Services of New York includes information on the protection of Nazi Victim payments from taxation and means-tested spend-downs under United States Fedetal laws. Note that pensions under German Social Security ("Ghetto Pension") or one-time payments awarded to Holocaust survivors through the German government ("Ghetto Fund" ) fall under the exempt categories. The website is designed for health advocates, caregivers and consumers of New York State, but the Holocaust compensation/restitution discussion applies to all U.S. states. For the site, go to http://nyhealthaccess.org or http://wnylc.com/health. For the information on Nazi Victim payments, go to http://wnylc.com/health/entry/65.

ZRBG Ghetto Pension/ BADV Ghetto Fund: Payments & Taxation in Germany

The German Government has announced that payments under the special Social Security law -ZRBG for Holocaust Survivors ("Ghetto Pension") are not subject to taxation in Germany. This exemption applies to monthly payments as well as to lump-sum retroactive payments. No tax declarations need to be submitted in Germany for these payments. The German Embassies in relevant countries have been informed. Countries with a bilateral tax agreement with Germany are also being alerted.

ZRBG Ghetto Pension/ BADV Ghetto Fund: Protection in Israel

Regulation 17(13) of the Income Supplement Regulations (amendment 5764-2003) excludes ZRBG payments from calculations relating to eligibility for Income Supplement benefits from the National Insurance Institutes. The updated version of the regulation was published by the National Insurance Institutes.

Article 224(d) (3) (b) of the National Insurance Law (amendment 129, 5771-2011) excludes ZRBG payments from calculations relating to eligibility for Nursing Hours from the National Insurance Institutes. That recent amendment has been approved by the Israeli Knesset on August 3, 2011.

Regulation 4.8- 3.1.2(2)e of the Social Workers Regulations (amendment 5769-2009) partially excludes every Holocaust-related pension, including under the ZRBG, from calculations relating to participatory payment for needy elderly homes under the Ministry of Social Affairs.

ZRBG Ghetto Pension/ BADV Ghetto Fund: Protection in USA

All Holocaust-related compensation and restitution payments in the United States are protected by 1994 federal legislation that excludes them from calculations relating to eligibility for federal benefits. The legislation (H.R. 1873 or Public Law 103-286) stated that payments made to individuals because of their status as victims of Nazi persecution are to be excluded from income and resources in determining both eligibility for and the amount of benefits or services to be provided under any Federal or federally assisted program which provides benefits or services based on need such as, but not limited to, Medicaid, Supplemental Security Income, food stamps and Federally subsidized Housing programs. Additionally, Holocaust compensation payments are not taxable. See our web pages under Payment Benefits and Tax Exemptions.

Also note that payments under Germany’s special ZRBG law (Ghetto Pension) or one-time payments awarded to Holocaust survivors through the German government BADV office (Ghetto Fund) fall under the exempt categories. For detailed analysis of this issue, see the webpage and Fact Sheet authored by the Evelyn Frank Legal Resources Program of Selfhelp Community Services, Inc. of New York.

Israel

The Claims Conference requested and obtained a ruling from the Ministry of Finance that exempts compensation for slave and forced labor from taxation.

United Kingdom

Lump sum compensation payments received by Holocaust survivors will be excluded from inheritance tax (IHT) under an extended concession announced in March 2002 by the British government.

Extra-statutory concession (F20) allows the amount of the compensation payment to be deducted from the claimant’s IHT chargeable estate, whether the payment is made to the claimant before their death or is made subsequently to their personal representatives.

The concession, does not, however, extend to payments received or expected from property restitution or compensation in respect of lost, stolen or confiscated assets.

In March 2006, the government of the United Kingdom agreed to make exempt from income and capital gains taxes compensation awards paid for accounts in foreign banks owned by Holocaust victims. Legislation was enacted to extend the terms of tax exemptions on Holocaust-related compensation originally enacted in 2000.

The proposed legislation would allow recipients of awards for, amongst other programs, dormant Swiss bank accounts from the Claims Resolution Tribunal (CRT), to be free from income and capital gains taxes. The exemption was enacted after talks between the Association of Jewish Refugees and the British government.

Recipients of qualifying awards where tax has already been paid will be entitled to a rebate. Claimants expecting a payment do not need to include the award in future tax returns. The Finance Bill will also make provision for an exemption from retrospective inheritance tax where the estate or heirs receive an award in respect of someone who died before the schemes were introduced.

Other countries in which taxes are not paid on compensation payments:

Australia
Canada
Finland
France
Greece
Hungary
Netherlands

The Claims Conference continues to work on obtaining tax exemptions for payments to survivors in other countries.

Compensation and income calculations for government benefits

United States

All Holocaust compensation and restitution payments are protected by 1994 federal legislation that excludes them from calculations relating to eligibility for federal benefits. The legislation (h.r. 1873 or public law 103-286) stated that payments made to individuals because of their status as victims of Nazi persecution are to be excluded from income and resources in determining both eligibility for and the amount of benefits or services to be provided under any Federal or federally assisted program which provides benefits or services based on need such as, but not limited to, Medicaid, Supplemental Security Income, food stamps and Federally subsidized Housing programs.

To view or print the letter from the Social Security Administration, click here.

The New York State Medicaid program made an important ruling reversing an earlier fair hearing decision which would have denied an elderly Holocaust survivor‘s application for Medicaid benefits to pay for his nursing home care. Read the press release issued on this victory by SelfHelp Community Services [PDF format].

United Kingdom

Following a November 2001 government decision, compensation payments to Holocaust survivors will be disregarded as capital when calculating housing and income related benefits following an extension to Social Security regulations. For more information, see www.ajr.org.uk/claimstax.htm.

Updated January 2010