IRUSA ZAKAT POLICY - Islamic Relief USA

Islamic Relief USA Zakat Policy

Updated 2023

We’re committed to collecting and distributing Zakat in accordance with Sharia, and in an honest and ethical manner. We believe this is paramount to fulfilling our organizational values, such as Ihsaan (excellence) and Amana (custodianship). Therefore, we have enlisted the expertise of some of the leading and most respected Islamic scholars to form an independent Zakat Advisory Board and uphold Islamic Relief’s Zakat Policy.

The Zakat Advisory Board, made up of a group of respected scholars, have ratified our Zakat policy and will provide oversight and verification of the distribution of Zakat by Islamic Relief. However, the Zakat Advisory Board scholars are not responsible for the implementation of IRUSA’s Zakat Policy — that is the sole responsibility of Islamic Relief USA.

Our Zakat Advisory Board is made up of the following renowned scholars:

  • Sheikh Dr. Muzammil H. Siddiqi (CA)
  • Sheikh Dr. Zulfiqar Ali Shah (WI)
  • Sheikh Dr. Mohammed Moussa (NJ)
  • Sheikh Dr. Saad Eldegwy (CA)

Read IRUSA’s 2023 Zakat Policy

1.0 Purpose

To outline Islamic Relief USA’s policy positions on the collection, handling, programming, and disbursement of funds intended to be used for Zakat, in accordance with Islamic Law (shari’ah). This policy seeks to ensure that Islamic Relief USA’s global Zakat activities are in full accordance with the teachings of Islam, thus enabling Islamic Relief USA (IRUSA) to fulfill its trust/amanah in the best way possible.

Overall categories of Zakat have been clearly outlined in the Qur’an, but the rulings surrounding implementation can be complex and subject to a diverse range of opinions. As a non-partisan, non-sectarian organization, inspired by Islamic values and principles, IRUSA strived to accommodate the diversity of thought and belief within the American Muslim community when developing this Zakat policy.

The specific aims are:

  • To ensure appropriate governance of the trust from a theological perspective, in accordance with relevant IRS & Attorney General (AG) regulations related to nonprofit organizations’ use of designated/restricted fund
  • To provide clear guidance to Islamic Relief USA staff and partners on how Zakat funds should be collected, allocated, distributed, monitored, and reported on
  • To provide clarity to donors and beneficiaries on how they can expect Islamic Relief USA to collect, allocate, and distribute Zakat funds as an agent that administers Zakat on their behalf
  • To improve internal and external communications on Islamic Relief USA’s activities related to Zakat
  • To ensure that Islamic Relief USA’s Zakat activities are conducted in the most transparent and Islamically-compliant manner possible
  • To enable Islamic Relief USA to utilize Zakat within our programs in a manner that ensures maximum impact and efficiency in alleviating suffering and poverty

2.0 Definitions

Allowable Support Cost Rate: Zakat funds that IRUSA is permitted to utilize for its operations and programs, through the course of distributing Zakat to those who are eligible, as administrators of Zakat. The allowable support cost rate shall not exceed 20%, inclusive of IRUSA Direct Zakat Program Support Costs and Indirect Zakat Program Costs at the implementing partner/field office level.

IRUSA Program and Overhead Costs for Zakat:

  • 88% for Zakat Program Costs: Zakat program costs provide aid and services to beneficiaries. This includes costs required to implement the project, which may be shared between different projects and services to maximize efficiency, and salaries for Programs staff and portions of staff salaries for roles that provide support towards implementation of programs–these are essential for ensuring project results are delivered.
  • 2% for Islamic Relief Worldwide Indirect Zakat Program Costs: These include IT, HR, or Finance costs that cannot directly be linked to the project but are required in order to effectively implement the project in the field.
  • 10% for IRUSA Administrative Costs: Expenses reported on the IRS 990 by IRUSA for all costs that cannot be directly linked to a program. These costs are leveraged to ensure that our work is impactful, effective, up-to-date and in compliance with all necessary laws and practices, is innovating to increase efficiency, and supports the essential departments that keep our organization running at optimal levels. IRUSA overhead costs are used to cover Legal, Finance, IT, HR, fund development, marketing, communications, and volunteer engagement, including staff salaries. IRUSA overhead costs also pay for advertising, events, technology, software, supplies, utilities, and other office-related expenses.

Beneficiaries: Individuals, households, or communities that receive benefit through the provision of aid and/or services both directly and indirectly.

Sadaqah:
Voluntary charity that may be given by donors at any time and may be used to fulfill any charitable need of the organization or individual recipients.

Zakat: One of the five pillars of the Islamic faith requiring Muslims who meet the necessary criteria to give a part of their wealth each year to a charitable cause.

3.0 History

IRUSA has adapted a similar Zakat Policy as one developed by Islamic Relief Worldwide, and updated it to fit the US context. IRUSA has formed an internal Zakat Committee, which has reviewed the IRW Zakat Policy and provided feedback and guidance to inform the development of the IRUSA policy. The IRUSA Zakat Policy has been reviewed by the internal Zakat Committee, the Executive Committee, and the Board of Directors. A thorough review of the policy has been conducted by respected US-based Islamic Scholars, namely:
Sheikh Dr. Muzammil H. Siddiqi (CA)
Sheikh Dr. Zulfiqar Ali Shah (WI)
Sheikh Dr. Mohammed Moussa (NJ)
Sheikh Dr. Saad Eldegwy (CA)

The scholars consulted are not responsible for either the implementation or compliance of IRUSA with the policy. The final version of this policy will be considered and approved by the Islamic Relief USA Board of Directors and Executive Committee. Implementation of this policy is the responsibility of IRUSA only.

4.0 Applicability

IRUSA recognizes the importance of transparent and accountable governance of zakat funds based on the overarching principles outlined in the Qur’an and sunnah from a theological perspective, in addition to the relevant IRS and Attorney General (AG) regulations concerning nonprofit organizations in the US.

This policy ensures a consistent approach to zakat funds, with detailed and relevant guidance centrally disseminated. This policy will assist with:

  • Guiding IRUSA on which projects are eligible to receive Zakat
  • Establishing a process for decision-making and accountability for IRUSA regarding allocation of Zakat funds
  • Consolidating scholarly opinions on issues relating to IRUSA Zakat activities, such as questions around support costs or the disbursement of Zakat to different categories of beneficiaries
  • Establishing a policy framework to measure against to ensure the collection, allocation, distribution, monitoring, reporting, and outcomes of Zakat funds entrusted to IRUSA and its partners are transparent, participatory, efficient, and compliant with Islamic principles
  • Driving higher levels of internal and external transparency on the collection, allocation, disbursement, monitoring, reporting, and impact of Zakat funds entrusted to IRUSA

5.0 Policy

As one of the fundamental pillars of Islam, IRUSA believes that Zakat is at the core of our work. IRUSA is in a unique position to assist Muslims in fulfilling their obligations, by providing a means for their Zakat funds to assist in protecting lives and dignity, strengthening communities, and lifting people out of poverty around the world.

As such, IRUSA takes the responsibility placed on it by donors, beneficiaries, and Allah (SWT) seriously in order to distribute Zakat in accordance with Islamic values and teachings. This policy seeks to ensure that IRUSA’s global Zakat activities are in full accordance with the teachings of Islam, thus enabling IRUSA to fulfill its responsibility in the best way possible.

Collecting Zakat Funds

  • IRUSA shall provide clear and accessible guidance to donors on the importance of paying Zakat and support them in calculating how much Zakat they are obliged to pay both online and in-person.
  • IRUSA allows donations to be collected under country-restricted Zakat funds or the Global Zakat fund.
  • All fundraising materials for Zakat will include a disclaimer (clearly visible to the donor when making their donation) indicating that where Islamic Relief USA is unable to spend restricted Zakat in the requested manner, Zakat will be reallocated to where it is most needed within the framework of IRUSA Zakat Policy.
  • Frontline teams (Marketing, Fundraising, Volunteer Management) will be trained on Zakat eligibility criteria, basic elements for calculating Zakat obligations, and on IRUSA protocols for managing and reporting on Zakat funds so they will be able to provide clarity and understanding to stakeholders.
  • Zakat funds will only be allocated based on criteria that follows below.
  • IRUSA acts as an agent to collect and distribute Zakat funds on behalf of its donors as soon as practicable, but the donor’s religious obligation is fulfilled once their Zakat has been paid to IRUSA.
  • IRUSA will consider a range of projects that will be funded with these resources, and will allocate to both emergency and long-term development projects that strive to alleviate poverty for vulnerable groups. Long-term development projects require more time to implement, but yield a higher impact. To balance the need for more time to implement these projects using Zakat and the desire to deliver Zakat to eligible recipients in a timely manner, IRUSA will apply Zakat funds towards projects that are close to their completion whenever possible to reduce the time to disburse donor Zakat funds. Otherwise, Zakat funds will be applied to projects from their onset and will be fully disbursed upon their completion.
  • Zakat will be utilized in a way that provides long-term solutions to the deprivations or needs of an individual, thus creating more Zakat donors and less Zakat recipients globally. This could be achieved through developing sustainable development projects, investing in the provision of basic needs, or supporting other sustainable development activities for individuals in poverty. IRUSA will strive to lift individuals out of poverty through its sustainable development projects, especially where Zakat funds are applied, to facilitate supporting the lifetime needs of those eligible to receive Zakat under this category.
  • Zakat will also be utilized to support immediate, short-term needs of individuals, particularly those affected by disasters and humanitarian crises. Short-term solutions deliver life-saving aid and recovery support that enable individuals to be sustained through periods of volatility and insecurity, and allow them to have losses restored so they may resume their previous living standards, or even improve upon previous standards.
  • Zakat will be delivered to eligible recipients in the form of cash, goods, or services. Ultimately, the aim of Zakat is to alleviate poverty for the vulnerable, poor, and ultra-poor, and Islamic Relief USA’s distribution of Zakat must fulfill this purpose above all else.
  • Zakat is a restricted fund category and accounting for Zakat funds must separately indicate income and expenditures from all other funds with a justification provided for every project that receives Zakat allocations. IRS and AG regulations relating to fund restrictions must be adhered to in addition to what is outlined in this policy.

In the event that funds cannot be distributed to a country to which Zakat funds have been restricted, IRUSA must make a determination based on the context and most-suitable scenario for how Zakat funds will be best utilized for the alleviation of poverty and suffering. IRUSA shall consider any of the following options:

  • Rejecting the donation and/or refunding the donor
  • Communicating with the donor about IRUSA limitations for spending Zakat funds as intended and encouraging funds to be re-allocated to Global Zakat or another country where funds may be utilized
  • Further postponing the allocation of funds until a more suitable condition has materialized in the country
  • Re-allocating Zakat funds to a comparable project within a country, in accordance with IRUSA’s legal disclaimer. Donors will be informed of any changes made to how their Zakat funds are utilized within the same country
  • Re-allocating Zakat funds to a different country, with the prior knowledge of the donor, provided they do not object to this change within the specified timeframe

IRUSA will focus its Zakat implementation in areas where there is Muslim majority. However, as a humanitarian organization, IRUSA will do this in a way that does not discriminate between beneficiaries on the grounds of race, religion, gender, or ability, and is bound by the internationally recognized humanitarian principles of impartiality, neutrality, independence, and humanity.

To ensure non-Muslims in such situations receive the same level of assistance, additional funding will firstly be sought from other sources of funds. In exceptional cases only, if other funds are not available then Zakat shall be used to support non-Muslims, with the approval of the donor.

Eligible Zakat Recipients
The Qur’an clearly outlines the eight (8) categories of people who are eligible to receive Zakat in verse 60 of Surah Taubah:Alms are meant only for the poor, the needy, those who administer them, those whose hearts need winning over, to free slaves and help those in debt, for God’s cause, and for travelers in need. This is ordained by God; God is all knowing and wise (Al Qur’an, Surah Taubah, Verse 60)

IRUSA staff must only distribute Zakat to projects or beneficiaries which are eligible according to the categories outlined here. When allocating Zakat funds to projects, IRUSA staff must provide a justification as to how this project matches the criteria of Zakat.

While the categories themselves are clearly set, their definition and interpretation – particularly in the current context – requires some clarification.

Categories 1 and 2: Fuqara and Masakin (Poor and Needy)

  1. IRUSA recognizes that in mentioning both fuqara and masakin, Allah (SWT) is guiding us to address the needs of both the poor and the ultra-poor. As such, it is critical that the needs of the ultra-poor are considered and prioritized when applying Zakat funds.
  2. IRUSA recognizes that poverty is multidimensional and cannot be measured by a monetary index alone. Poverty manifests itself in different ways depending on the context, as standards of poverty vary from country to country. As such, it is incumbent to justify how Zakat recipients are considered fuqara or masakin, referencing national and/or international standards (such as the Multidimensional Poverty Index) when allocating Zakat funds to projects.
  3. IRUSA believes that emergency relief survivors are considered fuqara and masakeen, and Zakat funds can and should be used for emergency relief activities. This includes the provision of cash, food, shelter, medication and healthcare, water and sanitation, education, or any other items or activities which can alleviate the poverty or suffering of affected individuals.

Sectors

  • Food Security and Livelihood
  • Emergency Response and Preparedness
  • Seasonal Programs
  • Orphans and Vulnerable Children
  • Education
  • Water, Sanitation, and Hygiene

Category 3: ‘Amileena ‘Alayha (Administrators of Zakat)

  1. IRUSA believes that Islamic Relief USA employees are considered legitimate administrators of Zakat. As such, Islamic Relief USA is permitted to take an allowable support cost from Zakat funds to cover Program Indirect Costs & IRUSA Overhead Costs as they relate to the collection, allocation, and distribution of Zakat.
  2. Critically, any funds taken from Zakat to cover Program Indirect Costs & IRUSA Overhead Costs must not exceed the total allowable support cost rate, across all parties.
  3. When Program Indirect Costs & IRUSA Overhead Costs required for project implementation exceed the allowable support cost rate, Islamic Relief USA must identify other means through which to fund the additional costs (e.g. general unrestricted funds for relevant projects).
  4. Islamic Relief USA will ensure that all staff engaged in working with Zakat receive adequate training on the rulings, policy, and guidelines related to Zakat.

Category 4: Mu’allafati Quloobuhum (To Reconcile Hearts)

  1. As a humanitarian agency, Islamic Relief USA does not engage in any proselytization activity, which has been interpreted as the main application of this category.
  2. Interpreting Islamic Relief USA’s peace-building and conflict transformation work is considered as a legitimate interpretation of mu’allafati quloobuhum. This is especially relevant in our work with communities affected by conflict and engaged in competition over limited resources, especially as a result of climate change and displacement.
  3. Public Affairs & Advocacy work that serves to educate the public on critical needs and issues is considered Zakat eligible. This work also mitigates Islamophobic risks and builds alliances for IRUSA that prevents harm that may come to the organization and beneficiaries.
  4. Spending in this category will not be used for political contributions or political activism. Zakat funds will primarily be used to support event-based activities and staffing costs in this area.
  5. Project Examples: Peace-building between refugees and host community

Category 5: Riqaab (Emancipation of Slaves)

  1. Where Islamic Relief USA finds people suffering from a modern form of slavery – such as bonded labor, forced labor, human trafficking, or inmates – Zakat funds shall be utilized to emancipate people from such forms of slavery and to prevent at-risk individuals from falling into such hardships (provided that the Zakat funds do not profit “slave-owners” who have violated national or international law).
  2. Project Examples: Child protection/anti-trafficking; Anti-slavery project in Mali; Green Re-entry project with IMAN Chicago (Halfway House)

Category 6: Gharimeen (Those in Debt)

  1. Islamic Relief USA will use Zakat funds to assist individuals in need who are suffering from an immediate debt, the repayment of which is preventing their basic needs from being met.
  2. Zakat will be used to fund Islamic microfinance loans provided to individuals in need, with the understanding that the funds will be repaid and re-distributed. There are no requirements for ownership of the Zakat for the recipient in this category (See section on Ownership). Murabaha loans may not be disbursed using Zakat funds, but administrative fees for Islamic Microfinance services may be collected from loan recipients that receive Zakat funds.
  3. Zakat funds will be used to pay unsustainable/unrecoverable debts. For example, in microfinance projects, Islamic Relief USA is permitted to create an accounting write-off against the individual’s loan records using Zakat funds if the individual has incurred such a debt.
  4. Project Examples: Food Security and Livelihood

Category 7: Fi Sabeelillah (In the Cause of God)

  1. It is permissible to fund communal welfare assets and projects, such as clean water sources, health clinics, critical medical equipment, temporary food producing outlets (e.g., bakeries), water containers, schools, training centers, seed banks, communal farmlands, water dams, etc., to reduce poverty and hardship in disadvantaged communities.
  2. Islamic Relief USA shall only fund Public Affairs or Advocacy work with Zakat funds, for the purpose of educating the public on critical needs and issues if specifically indicated by the donor. In exceptional circumstances when no other unrestricted funds are available Zakat funds may be used out of necessity.This is in or if specifically indicated by the donor.
  3. Projects involving communal welfare will promote the principle of community empowerment through ownership. The following conditions when funding communal welfare assets with Zakat must be fulfilled:
    • The clear majority of the beneficiaries can be classified as being eligible to receive Zakat (i.e., poor, needy, travelers/refugees, etc.).
    • An assessment of the beneficiary community has been conducted, demonstrating the need for the asset in question in alleviating poverty and suffering.
    • Consent must be sought from the target community to develop or implement the proposed asset.
    • The project will ensure that beneficiaries can act as effective and responsible managers of the asset.
    • Once completed, ownership and management of the asset is transferred to the local community (e.g., to a local community cooperative comprising an inclusive group of people), with an agreement to protect the asset’s intended usage for communities and individuals in need. It must explicitly state no person in need will be refused.
    • The communal asset must always remain a not-for-profit property and for general welfare.
    • The asset shall not be owned by any one person or a single group of people.
  4. Zakat funds will be used under this category for education and training purposes to directly teach beneficiaries about issues and skills that will allow them to come out of poverty. For example, learning how to start a home-based enterprise, farming methods, tailoring, animal rearing, health issues, hygiene and sanitation awareness, and other livelihood options.
  5. Large-scale communal assets that are funded from Zakat shall also include cost budgeting for maintenance and long-term quality assurance to ensure the investments are preserved and benefits endure for the communities.
  6. Project Examples: Water, Sanitation, and Hygiene (WASH) Projects; Supporting Health Centers; Establishing Schools

Category 8: Ibn As-Sabeel (Travelers)

  1. Islamic Relief USA will use Zakat funds to provide basic needs for travelers in need and the displaced, including homeless individuals. Basic needs include, but are not limited to, food, water, sanitation, clothing, shelter, transportation, education, healthcare, rental assistance, etc.
  2. Project Examples: Refugee Resettlement; IDP Camps; US Programs – Day of Dignity, Hot Meals

Additional Policies Relating to Zakat

  1. Ownership
    • Under the category of fuqara and masakin, Zakat will be given in the form of cash or tangible assets (e.g. books, tools, clothes, shelter, or medicine, depending on the needs of the individual) which individuals can enjoy full ownership over.
    • Communal welfare assets funded under fi sabeelillah are not subject to such restrictions on ownership. Zakat funds distributed under the categories of riqaab (emancipation of slaves), gharimeen (those in debt), or ibn as-sabeel (travelers, which includes refugees or homeless people) are also not subject to restrictions on ownership.
    • The beneficiaries receiving funds, equipment, and services with Zakat funds will remain the rightful owners of these and can not be deprived of these under no circumstances.
  2. Spending Zakat Locally vs Internationally
    • Islamic Relief USA will use Zakat funds both in the US and internationally based on the need, impact, donor intent, feasibility of implementation, and accountability of partners.
  3. Time Period for Delivering Zakat
    • Islamic Relief USA will ensure that Zakat funds are disbursed as soon as practicable.

Questions? Connect with us at 1-855-447-1001 or donorcare@irusa.org.

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