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US sued over tax-exempt donations for illegal Israeli settlements

by Charlotte Silver      5 January 2015      The Electronic Intifada

Seinfeld star Jason Alexander with Israeli Staff Sergeant Elle Shmuel, a combat soldier during Israel’s summer 2014 attack on Gaza. The pair were at a November 2014 fundraiser in Los Angeles hosted by Friends of the IDF, a US nonprofit organization named in a lawsuit against the US Treasury. (via Facebook)

A group of American citizens is suing the US Treasury because they say the agency is allowing billions of dollars of tax-exempt charitable donations to flow to the Israeli army and support the expansion of illegal Israeli settlements in the occupied West Bank and East Jerusalem.

The lawsuit, filed in federal court in Washington, DC, on 21 December, alleges that around 150 US nonprofit organizations send about $1 billion a year “to fund the forcible expulsion of all non-Jews” and expand settlements in the occupied Palestinian territories.

Martin McMahon, the lawyer for the plaintiffs, told The Electronic Intifada that he believes the organizations are violating eight federal criminal statutes and up to six Treasury regulations.

Criminal activities

The lawsuit seeks a court order to compel the Treasury to investigate the alleged criminal activities, revoke the tax-exempt status of the organizations and recover hundreds of millions of dollars in back taxes.

One of the three plaintiffs is Palestinian American author Susan Abulhawa. “I want a court, somewhere, somehow, to hold accountable those who have financed my pain of dispossession and exile; to hold accountable the financiers of Israel’s wholesale theft of another people’s historic, material, spiritual and emotional presence in the world,” Abulhawa says in a statement included in the complaint.

The exact amount that US charities send to settlements is unknown because tax regulations were amended in 2008 so that organizations no longer have to specify what country is receiving funds, only a general geographic region.

The US Internal Revenue Service has granted these organizations tax-exempt status, which allows US taxpayers to deduct donations they make to them from their taxable income. The organizations also do not have to pay taxes on the income they receive.


By law, tax-exempt status is granted only to organizations that engage in “charitable” activities.

These include the relief of poverty, the advancement of science, education and religion, lessening the burdens on government, “eliminating prejudice and discrimination” and “defending human and civil rights secured by law.”

The lawsuit accuses the Treasury, of which the Internal Revenue Service is a part, of “turning a blind eye” to the “rampant criminal activity” that US tax-exempt organizations are promoting overseas by funneling charitable contributions to Israeli settlements.

The Israeli settlement of Avnei Hefetz near the Palestinian village of Shufa in the occupied West Bank. A lawsuit is challenging the US government for allowing charitable funds to flow to such settlements that are built in violation of international law.   Ahmad Al-BazzActiveStills

Noting that the US government declared that the settlements were illegal under international law as far back as 1980, the lawsuit claims that the colonization effort would have been abandoned decades ago were it were it not for the subsidies from the US.

“For 30 years at least, the US taxpayer has been funding and/or subsidizing criminal activity overseas, i.e., murder, arson, malicious property destruction, assault and battery and ethnic cleansing,” the lawsuit states.

Military gear

The lawsuit names businessmen Sheldon Adelson and Irving Moskowitz, as well as Christians United for Israel founder John Hagee, as examples of donors who have sent millions of dollars in charitable funds to support settlements.

According to the complaint, their objective is the “wholesale ethnic cleansing of the Palestinian population and explosive settlement growth to accommodate the needs of the ever-growing settler population.” “They don’t want to just fund settlements but they want the American taxpayers to subsidize their political agenda,” plaintiffs’ lawyer Martin McMahon told The Electronic Intifada.

The lawsuit claims that the organizations have helped demolish or confiscate 49,000 Palestinian homes over the last 30 years and forcibly expel 400,000 to 500,000 Palestinians since 1967.

The lawsuit says that the Israeli army received $60 million in a single month from the tax-exempt US charity Friends of the IDF.

Tax-exempt donations have been used to purchase military gear, including night-vision goggles, sniper scopes and guard dogs for Israeli settlers as well as to set up “sniper schools.”

Friends of the IDF holds fundraisers all over the United States, often with theendorsement of celebrities including singer Barbra Streisand, Seinfeld star Jason Alexander and film actor Antonio Banderas, or politicians such as US Senator Mark Kirk of Illinois.

Other tax-exempt entities identified in the complaint are the Jewish National Fund, the Falic Family Foundation, American Friends of Ariel, Gush Etzion Foundation, American Friends of Har Homa and the Hebron Fund – many organizations reflect the names of the settlements they finance.

The complaint also alleges that US tax-exempt organizations are funding the ongoing dispossession of Bedouins in the Naqab (Negev) region in the south of present-day Israel.

Several corporations hired by the tax-exempt organizations are also named in the lawsuit. They include multinational prison and security firm G4S, information technology company Hewlett Packard, real estate seller Re/MAX and settlement builder Africa Israel Investments.

Clear standards

The role of US charities in funding the illegal Israeli colonization of Palestinian land has come under increasing scrutiny in recent years. In 2013, a group of Palestinians tried to sue several US charities funding settlement activity under anti-terrorism laws, but the complaint was thrown out.

In early 2015, the group resubmitted a petition against five US-based organizations.

McMahon said the plaintiffs in this case chose to sue the US Treasury because the agency has clear standards in place to enforce.

He said that before pursuing litigation he wrote letters to the Treasury, asking them to investigate the organizations in question. His firm is working without fees on the lawsuit and is looking for more plaintiffs.

Since filing the complaint last month, he says more than 50 people have contacted him with an interest to join. The US Treasury, which has not commented on the litigation, has 60 days to respond to the lawsuit.

The State Department affirmed in an email to Al Jazeera that the administration of President Barack Obama, “like every administration before it since 1967, views settlement activity as illegitimate and counterproductive to the cause of peace.” The plaintiffs want the US government’s actions to match its words.

Editors Note: An earlier version of this article stated that the lawsuit alleges that charitable contributions were used to buy military gear for the Israeli army. In fact, the lawsuit alleges that the funds were used to buy military gear for settlers. It has been corrected accordingly.


Where Do Tax-exempt U.S. Donations to the Settlements Go?
by Uri Blau      15 December 2015         Haaretz Investigation
Haaretz SettlementDollars investigation: Explore a map showing the main benefactors and recipients in the flow of tax-free donations from non-profits in the U.S. to Israel's West Bank settlements
From illegal outposts to academic research, from legal aid for Jewish terrorists to yeshivas, the tens of millions of dollars that U.S. non-profits send each year to the settlements support all sorts of activities in Jewish enclaves across the West Bank.
As part of the Haaretz investigation into the flow of tax-exempt dollars to the settlements, here is a map showing some of the key donors and their main beneficiaries.  
The months-long investigation by Haaretz correspondent Uri Blau focused on some 50 U.S.-based organizations that funnel money to the settlements or to Israeli non-profits that support them. 
The American charities, known as 501(c)(3) organizations under the Internal Revenue Code, are granted tax-exempt status by U.S. authorities and donors to them can claim a tax deduction on their gift.
Between 2009 and 2013, the last year for which there is extensive data, these organizations reported combined revenues of more than $281 million (over one billion shekels). Most of these funds came from donations, while some came from returns on capital investments.
Some $224 million of this income was transferred to the occupied territories as grants, mostly through Israeli non-profit groups.
Uri Blau
Haaretz Correspondent
Haaretz Investigation: U.S. Donors Gave Settlements More Than $220 Million in Tax-exempt Funds Over Five Years
Registered non-profit groups are lavishly funding with tax-deductible U.S. dollars the same West Bank settlements the Obama administration considers obstacles to peace.
Illustration: Registered non-profit groups are lavishly funding with tax-deductible U.S. dollars - the same West Bank settlements the Obama administration considers obstacles to peace.
IllustrationNetalie Ron-Raz
Private U.S. donors are massively funding Israeli settlements by using a network of tax-exempt nonprofits, which funnelled more than $220 million (about 850 million shekels) to Jewish communities in the West Bank in 2009-2013 alone, a Haaretz investigation has found.
Private U.S. donors are massively funding Israeli settlements by using a network of tax-exempt nonprofits, which funnelled more than $220 million (about 850 million shekels) to Jewish communities in the West Bank in 2009-2013 alone, a Haaretz investigation has found.
The funding is being used for anything from buying air conditioners to supporting the families of convicted Jewish terrorists, and comes from tax-deductible donations made to around 50 U.S.-based groups.
Thanks to their status as nonprofits, these organizations are not taxed on their income and donations made to them are tax deductible – meaning the U.S. government is incentivizing and indirectly supporting the Israeli settlement movement, even though it has been consistently opposed by every U.S. administration for the past 48 years.
The findings also show that while Israel’s political right often criticizes left-wing organizations for receiving foreign donations – and has made several attempts to curtail such funding – groups that support the settlements also receive extensive funding from abroad, albeit from different sources.
While left-wing NGOs and human rights groups receive large donations from foreign governments and institutions, Israeli settlement groups are mostly supported by private individuals who donate through nonprofit organizations.
The flow of private U.S. funds to groups supporting the settlements (in millions of $)
2009                2010               2011               2012              2013               2014
44700439 53072506 51540181 59061849 73074508 Revenues
36286934 42406412 44468657 46916316 54517970 Grants
Low transparency requirements in both the United States and Israel make it difficult to gather comprehensive information on all of the donors, but some of the benefactors are known and include major donors to Prime Minister Benjamin Netanyahu. Some also donate to the U.S. Republican Party.
These and other issues will be detailed as part of Haaretz’s in-depth coverage of U.S. funding of settlements, which will be published over the next few weeks.
Legal aid for Jewish terrorists

Conducted over the last year, the Haaretz investigation exhaustively analyzed thousands of documents from the tax filings and official papers of dozens of American and Israeli nonprofit organizations.
The probe found that at least 50 organizations from across the United States are involved in raising funds for settlements and settlement activities in the occupied territories.
Their revenues between 2009 and 2013 – the last year for which there is extensive data – amounted to over $281 million. Most of these funds came from donations, while some came from returns on capital investments.
Nearly 80 percent of this income (about $224 million) was transferred to the occupied territories as grants, mostly through Israeli nonprofits.
In 2013 alone, these organizations raised $73 million and allotted $54 million in grants.
Initial data for 2014 suggests that figures for last year could be even higher.
Haaretz’s investigation shows some of the funding has gone toward providing legal aid to Jews accused or convicted of terrorism, and supporting their families, through an Israeli nonprofit called Honenu. Annual reports filed by the group with Israeli authorities show that Honenu received nearly 600,000 shekels ($155,000) – 20 percent of its income – from U.S. sources last year.
Among those who benefited from the group’s support in 2013 were the family of Ami Popper, who murdered seven Palestinian laborers in 1990, and members of the Bat Ayin Underground, which attempted to detonate a bomb at a girls’ school in East Jerusalem in 2002.
In the past, Honenu has also raised money for Prime Minister Yitzhak Rabin’s assassin, Yigal Amir, who is serving a life sentence for his crime.
“Honenu, a legal aid organization, has always operated within the law and only in accordance with its goals,” the group said in a statement to Haaretz. It added that, due to confidentiality rules, it could not discuss specific cases, but said it has provided aid to thousands of suspects, including Israeli police officers, soldiers and civilians.
From yeshivas to buying buildings

One of the largest U.S. organizations involved in funding Jewish communities in the West Bank is the Brooklyn-based Hebron Fund. It transferred $5.7 million to the Jewish settlement in Hebron from 2009-2014. Much of the funding has been invested in parks, playgrounds and libraries, in line with the fund’s stated goal of “the improvement of the daily life for the [Jewish] residents of Hebron.”
However, it has also paid the monthly salary (cumulatively amounting to hundreds of thousands of shekels) of Menachem Livni, who headed the nonprofit Renewal of the Jewish Community in Hebron between 2010 and 2012, which in turn was funded by the U.S. organization.
Menachem Livni in 2009.
Menachem Livni in 2009.Alex Levac
A convicted murderer, Livni was one of the leaders of the Jewish Underground, which operated in the territories in the 1980s, killing three Palestinian students and severely injuring two Palestinian mayors and a Border Police sapper. Livni was sentenced to life imprisonment, but was released after six years.
Dan Rosenstein, executive director of the Hebron Fund, declined to answer questions about the fund’s activities or discuss its donors and beneficiaries.
Another leading source of donations is the Central Fund of Israel, which operates out of the offices of a textile company, owned by the Marcus brothers, in the Manhattan garment district. The fund’s revenues exceeded $19 million in 2013 – a $3 million increase over the preceding year. While many of the groups cited in this investigation have yet to file reports for 2014, the CFI has done so: last year it showed a sharp increase in its revenues, which jumped to $25 million – with almost $23 million forwarded to Israel. 
Among the institutions supported by the Central Fund is the Od Yosef Chai yeshiva, in the West Bank settlement of Yitzhar. The heads of the yeshiva, Rabbis Yitzhak Shapira and Yosef Elitzur, are the authors of “The King’s Torah” (“Torat Hamelech”), a book that outlines the circumstances under which it is permissible to kill non-Jews. The two rabbis were questioned by the police, but not prosecuted, on suspicion of inciting racism. Last year, following violent attacks against the Israeli army, Border Police took control of the yeshiva for several months.
In a meeting with a Haaretz reporter, CFI director Jay Marcus said the organization makes donations to a number of Israeli nonprofits operating on both sides of the Green Line (i.e., in Israel proper and the occupied territories). He declined to disclose the percentage of donations going to the settlements, saying it was not an issue and insisted that the money did not serve political purposes.
Despite this massive influx of U.S. dollars, Israel and its taxpayers are the settlement’s main bankrollers. Security, infrastructure construction and educational, religious and cultural activities are all financed by the citizens of Israel, either directly or through municipalities, regional councils and other channels.
Money arriving from the United States is considered more an added luxury for the settlements, contributing to religious education (such as the financing of the Neveh Shmuel yeshiva in Efrat); improving living conditions (air-conditioning units for the dining room in the Ohr Menachem school in Kiryat Arba); leisure activities (the construction of a promenade between settlements in the Etzion Bloc); but also the purchasing of buildings in the West Bank and East Jerusalem (including a house next to Rachel’s Tomb, near Bethlehem).
The Neve Shmuel Yeshiva in the settlement of Efrat.
The Neve Shmuel Yeshiva in the settlement of Efrat.Uri Blau
The White House responds

Asked whether the granting of tax-exempt status to these organizations did not contradict the U.S. position on settlements, a senior White House official told Haaretz that “the policy of every administration since 1967, Democrat and Republican alike, has been to object to Israeli settlement beyond the 1967 borders.
“The present administration is no different,” the official continued. “Concordant with permanent U.S. policies, this administration never defended or supported any activity associated with the settlements. It doesn’t support or advance any activity that will legitimize them.”
There are many groups in the United States that support all manner of causes and are registered with authorities as 501c3 charities – the designation that grants them tax-exempt status and makes donations to them tax deductible. The running of these charities and the regulations governing them have stirred controversy before: from questions raised earlier this year over donations received by the Clinton Foundation to a recent campaign by John Oliver’s “Last Week Tonight” show to curb the tax privileges granted to televangelists.
The Haaretz investigation adds to this debate, as it shows that the United States is tacitly supporting, through tax-exempt contributions, the growth of the settlements – a process that its government strongly condemns.
Reporting for this story was supported by a grant from the Pulitzer Center on Crisis Reporting

Uri Blau
Uri Blau
Haaretz Correspondent
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