TAX NEWS - 2010

US tax-exempt funding of settlements

For years settlers have openly fund-raised in the United States - including in synagogues, on booze cruises, in churches and at gala dinners. Over time, millions of dollars have flowed, tax-exempt, to settlers and settlement-related causes, including to support settler extremists in Hebron and East Jerusalem, and even to support the settler-run hesder yeshivas (programs that combine IDF military service and study( that many believe are inculcating soldiers with an extremist, seditious ideology.

As a group that focuses a great deal of energy on the settlement issue, we have tracked this phenomenon for years. We regularly comb through guidestar.org - a website tracking non-profit organizations (NPOs) - to collect the tax filings of groups that fund settlers and settlements in the West Bank and East Jerusalem. Likewise, we have watched the rise and fall of this issue in the public debate and have made our research available to those examining the issue.It is clear that since the Obama Administration came into office and began taking a harder line on Israeli settlements, more attention has been focused on the issue of private US tax-exempt funding for settlements.

That attention reached a peak of sorts this week, with the publication by the NewYork Times  of a lengthy article on the issue.The Times reports, correctly, that hundreds of millions of dollars have flowed to settlers and settlement-related causes, including to support settler extremists in Hebron and East Jerusalem, and even to support the settler-run hesder yeshivas (programs that combine IDF military service and study) that many believe are inculcating soldiers with an extremist, seditious ideology.

The New York Times also notes, correctly, that most of this money appears to go to purposes that are legal under US laws governing tax-exempt funding.

However, the Times adds a very serious allegation: that these funds have"also paid for more legally questionable commodities: housing as well as guard dogs, bulletproof vests, rifle scopes and vehicles to secure outposts deep in occupied areas."

Given the intense focus on settlements and settler behavior right now, and given the kind of allegations made by the New York Times, we believe it is appropriate for activists to demand accountability and for policymakers to demand a closer look at the phenomenon of US private funding for settlements.

We also believe it is important to make clear what this demand for accountability is, and is not, about.


(1) The focus should be on accountability. Any NPO must operate within the law, regardless of its ideology or activities. The allegations made by the New York Times underscore concerns that settlement-related NPOs may not be doing so.

After so many years and so much tax-exempt money going to settlements, it is time for the US government and Congress to take a close look at the flow of funds from US citizens to settlements. Given the fungibility of funds, it may be difficult to prove that NPOs are collecting funds for purposes that are illegitimate or illegal, but it is something the US has a responsibility to investigate. Official US investigations into this issue will, in and of themselves, represent serious and unprecedented pressure on settlers on their US funders.

Grassroots efforts in this regard could include:

- Asking Congress to demand a report from the General Accounting Office on the general phenomenon of US tax-exempt funds going to settlements and settlement-related activities, including an assessment of the likelihood of cases of such funding violating US law.

- Urging the Department of Justice to investigate whether tax-exempt funding is going to support activities that are illegal, including activities that are related to violence or actions that are illegal under Israeli law. Urging the US Administration to raise the issue with Israeli officials, bearing in mind that Israel bears ultimate responsibility forthe activities of the settlers and for determining if they are breakingIsraeli law.


(2) The focus should not be on "US policy." The first reaction of manyof us when we hear about tax-exempt US funding for settlers is: the US opposes settlements, How can it be possible that the US is indirectly subsidizing settlements (given the fact that every tax-exempt dollar that goes to settlements represents a loss to the US Treasury of, say, 10-35 cents)? The conclusion is that on this basis the tax-exempt status of these groups should be taken away. But it is not so simple and the New York Times, laudably, does not jump on this very problematic bandwagon.

Here is the problem: from a free speech perspective it is dangerous and irresponsible to argue that an organization should be ineligible for non-profit status if its ideology/activities are inconsistent with US policy (as opposed to US law). Such an argument has very frightening implications.

For example, under George W. Bush, such an argument would have meant that most organizations working on women's health, the environment, human rights and even civil rights could have lost their non-profit status. Indeed, given the Bush Administration's tacit acceptance (according to Eliot Abrams) of much Israeli settlement construction, the activities of Americans for Peace Now - which opposes all settlement construction - could have been construed as inconsistent with US policy.

Targeting non-profits using the argument that "their activities violate US policy" is a slippery slope that should concern all of us who care about free speech and civil society organizing.


(3) We all need to keep our eyes on the ball. The millions of US dollars that make their way to West Bank settlements (not including East Jerusalem) are a drop in the bucket compared to the tens of billions of dollars that Israeli governments have for decades pumped into this disastrous enterprise through direct and indirect subsidies and investments. These privately donated American dollars may make the lives of the settlers a little easier, they have little impact on construction patterns. They can only marginally affect the reversibility of the settlement enterprise.

And whether a settlement is approved, built or extended, or whether an outpost - established against Israeli law - is removed, is not determined by foreign donations. All of these things are entirely in the hands of the government of Israel. Because everything that takes place in the West Bank requires the approval of Israel's ministry of defense.

Even in East Jerusalem - where settler organizations are relying on private donations to fund their feverish efforts to change the facts on the ground in the most sensitive areas in and around the Old City, with the openly-expressed goal of ensuring that there will be no future compromise with the Palestinians on Jerusalem - the government of Israel's role is key. Even these private projects could not go forward without the tactic support of the Israeli government.

Finally, it should be emphasized that most Americans who send money to settlers - especially big donors like Irving Moskowitz - don't do it forthe tax breaks; they give money because they are ideologically supportive of the settlement enterprise, especially in East Jerusalem. Most will continue to give, regardless of whether the donations are tax-exempt or not.

In the end, the only real antidote to settlement expansion is a peace agreement that - despite the best efforts of the settlers and their US supporters - ends Israel's West Bank settlement enterprise, once and for all, and achieves real peace and security for Israel.

This is what we are working for - it is what Peace Now is doing every single day: monitoring settlements; making information about settlements public so that Israelis and the world can hold the Israeli government and settlers accountable; and educating Israelis to support peace. It is what APN doing every day when we demand resolute and ever-stronger US government efforts to compel Israel's government to clamp down on settlement growth, including dealing with the "outposts" - construction that even Israel admits is illegal.

We must not lose sight of the real issue. Ending the expansion of settlements and ultimately reversing the settlement enterprise will come only as the result of political decisions by the Israeli government. And such decisions will only be the result of pressure from inside Israel and from friends of Israel worldwide. Shining a bright and unflattering light on private US funding for settlements can be part of this pressure, but ultimately, while private US dollars matter, but it is political capital that matter most.