At the center of the Haaretz investigation into private U.S. funding of settlements stands a network of tax-exempt charities that has funneled hundreds of millions of dollars to Jewish communities in the West Bank.
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These findings add a new element to the broader debate in the United States on the regulation of charitable organizations - a system that has sparked political storms, been abused by funders of terrorism, and even ended up in the sights of comedian John Oliver.
The hundreds of millions of dollars transferred from New York, Miami, Texas, ending up in Hebron or the Old City of Jerusalem all come from organizations for which donations are tax deductible in the United States.
Hamas, UFOs and John Oliver
Incentivizing support for non-governmental organizations that operate on a not-for-profit basis is common in many countries.
Under U.S. law a private citizen cannot claim tax benefits for donations made to organizations outside the United States. However, U.S.-based charitable groups, known as 501(c) (3) organizations after the section of the Internal Revenue Code that regulates them, are exempt from paying taxes and can transfer funds for religious, educational and similar purposes, both within and outside the country. Donors who declare such donations to U.S. tax authorities can reduce the amount of income tax they pay, proportionately to their contribution.
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While 501(c) (3) charities do not pay tax on their income, they must file a report to the IRS detailing their finances and activities. Much of the findings in the Haaretz investigation come from analyzing these documents, as well as reports filed with Israeli authorities by local non-profits that support the settlements and received funds from their U.S. counterparts.
U.S. law prohibits support for a small number of politically unpalatable states, listed terror groups and individuals or organizations facing sanctions. A black list is maintained by the Office of Foreign Assets Control in the U.S. Treasury Department and includes groups ranging from Italian crime syndicates to Hamas and Iran's Revolutionary Guards. Funding entities on the black list can lead to dire consequences. The Holy Land Foundation for Relief and Development, once considered the largest Muslim charity in the United States, was shut down by authorities for funneling money to Hamas and in 2009 five of its former members were handed sentences of up to 65 years in prison.
Israeli settlements are not blacklisted, and there are many other controversial or peculiar causes for which it is possible to raise tax-free donations in the United States, from the Church of Euthanasia – whose main slogan is "Save the Planet, Kill Yourself" – to a UFO museum in Roswell, New Mexico.
Still, the privileged status of 501(c) (3) charities is quick to spark debate, particularly when political leaders or large sums of money are involved. Earlier this year, a New York Times investigation raised questions about donations made by a uranium mining company to the Clinton Foundation, established by former U.S. President Bill Clinton.
This summer, John Oliver started a campaign that took aim at the charity status of churches run by televangelists who, the comedian charged, use their tax-exempt earnings to fund villas, airplanes and a lavish lifestyle.
In tongue-in-cheek style, Oliver founded his own 501(c) (3) – the Our Lady of Perpetual Exemption Church – challenging the government to stop the flow of donations. According to its website the group has since been shut down, but not due to government intervention.
In the case of the settlements, Haaretz's analysis shows that the U.S. government and the American taxpayer are indirectly subsidizing activities that are strongly opposed by the U.S. administration. U.S. presidents have repeatedly defined the settlements as an "obstacle to peace," yet hundreds of millions of dollars flow from the United States' own backyard to support this very "obstacle."
Haaretz approached the White House to ask whether allowing donors to make tax-free donations to activities in the settlements is not counter to the official U.S. position.
“The policy of every administration since 1967, Democrat and Republican alike, has been to object to Israeli settlement beyond the 1967 borders," a senior White House official said on condition of anonymity. “The present administration is no different.”
“Concordant with permanent U.S. policies, this administration has never defended or supported any activity associated with the settlements. It doesn’t support or advance any activity that will legitimize them.”
Internal Revenue Service spokesman noted that acquiring tax-exempt status as a recognized charitable organization for donation purposes is not dependent on the organization’s policies.
“All such groups that are recognized by the IRS need to meet certain criteria, but they are permitted to hold diverse opinions and indeed do so,” the official said.
Not a complete picture
It should be noted that some of the U.S. organizations included in Haaretz's investigation may also donate to Israeli groups that operate within the Green Line. Haaretz's examination shows that even U.S. authorities do not have a complete picture of the target destinations of the donations made out of the country, as they do not require provision of that information. Therefore, the data on the transfer of funds from non-profit groups to overseas organizations – which is partly available to the public – is not always broken down according to target countries and, under U.S. law, does not have to include the distribution of the funds within those countries.
In many cases, organizations give “Middle East” as the destination of the funds without specifying a country, meaning there is no complete data regarding which non-profits in Israel receive which donations.
To isolate the flow of cash from the United States to the settlements, Haaretz identified the organizations that donate primarily to Israel and correlated the amounts sent from the U.S. to those received by Israeli groups operating in the territories as shown in records obtained from Israel's Registrar for Non-profit Organizations.
Israeli law requires that non-profit groups name the source of every donation over 20,000 shekels (just over $5,000.) This enabled Haaretz to identify some of the sources, though the picture is still not complete, as the Registrar does not always verify that donors are properly listed or even reported. Some NGOs have obtained permission from the Registrar to withhold the names of their benefactors, but many do so even without such a waiver.
In a recent internal exchange obtained by Haaretz, the Registrar commented on this issue, explaining that donations are one among many reporting requirements for non-profits, and that these are not scrutinized during routine checks.
The Registrar will investigate any lax reporting if it "receives an indication that the non-profit organization has not detailed the names of the donors according to the requirements of the law, or the matter surfaces during a planned audit," the comment says. If it does not correct the problem, the non-profit can face possible sanctions, including liquidation of the organization, it says.
No double counting
During the course of the Haaretz investigation, care was taken not to count twice funds that, before reaching the settlements, passed through different U.S. charities.
Haaretz therefore intentionally excluded from its calculations groups and individuals who are major donors of other U.S. non-profits whose contributions to the settlements had already been taken into account.
Some of these donors excluded from the calculations include non-profits connected to Irving Moskowitz, a Miami-based businessman and one of the main benefactors of Jewish settlements. The Irving Moskowitz Foundation and the Cherna Moskowitz Foundation, named after his wife, raised more than $50 million between 2009-2013. Large parts of that sum were transferred to U.S. groups that support the settlements, such as the Central Fund of Israel, One Israel Fund, American Friends of Old City Charities and others. Emails and calls requesting comment from the Foundations were not returned.
Other U.S. based non-profits that donate to the settlements but were not included in Haaretz's lists for the same reason are the Tikvah Fund and the Hertog Foundation, both connected to Jewish-American businessman Roger Hertog, formerly one of the owners of the New York Sun. In recent years Hertog has used the funds to support the controversial excavations in the City of David site located in the East Jerusalem neighborhood of Silwan. For example, in 2013, the Hertog Foundation donated $650,000 to the Friends of Elad, a group that supports archaeological digs and settlement in the Palestinian neighborhood of Silwan in East Jerusalem.
The foundation also gave generously to the Or Torah Yeshiva in the West Bank settlement of Efrat; transferred money to the Central Fund of Israel, and more. In 2011, Hertog’s Tikvah Fund gave $665,000 to the Ein Prat academy in the Binyamin Regional Council. Hertog's organizations did not respond to requests for comment.
Reporting for this story was supported by a grant from the Pulitzer Center on Crisis Reporting http://pulitzercenter.org/