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.
Illustration Netalie 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.

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.

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.
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.
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 http://pulitzercenter.org/