Nonprofit Newswire | Tax-Exempt Funds Aid Settlements in West Bank

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July 6, 2010; Source: New York Times | Some years ago in an NPQ article, we noted the oddity of the Capital Athletic Foundation, established and run by Jack Abramoff, providing military assistance to West Bank settlement groups—and having that qualify as philanthropic activity. Like Senator John McCain who questioned Abramoff’s association at a public hearing, it was mind-boggling that they would have thought that donation was appropriate and that the IRS didn’t come down lobbyist Jack’s chimney.

The New York Times just revealed that Jack Abramoff’s charitable giving wasn’t the oddity that we had thought. Several U.S. charities, particularly Christian groups that view the establishment and survival of Israel as an important step toward the second coming of Christ, provide support to West Bank settlers and other groups. The funds from these tax exempt entities (presumably from charitable donations deducted from donors’ income taxes) support the settlement process even while the U.S. government is trying to stop the creation of additional settlements.

The Times counts 40 U.S. groups making grants during the past decade worth $200 million to groups in favor of West Bank settlement. Oddly, the donations are tax deductible in the U.S., but in Israel, tax breaks for donations to groups devoted to settlement building in the West Bank are illegal. The U.S. State Department called these tax deductible donations to settlement groups “unhelpful to the efforts that we’re trying to make,” though State doesn’t appear able or interested in trying to stanch the donations from U.S. groups.

Palestinian groups were more openly critical: “Settlements violate international law, and the United States is supposed to be sponsoring a two-state solution, yet it gives deductions for donation to the settlements?” the chief Palestinian negotiator asked. To be legitimately tax deductible donations, the U.S. groups that funnel money to West Bank groups cannot simply be pass-throughs, they have to have some sort of independent function and deliberation with their grantmaking.

Critics of the Times article suggested that this was not new news, but was rehashed at this time to create a pall over the scheduled meeting between President Barak Obama and Israeli Prim Minister Binyamin Netanyahu. If that was the purpose, it clearly failed, as Obama lavished the Israeli PM with surprisingly effusive praise and barely mentioned the words “West Bank” or “settlement.”

While U.S. donors think of their charitable gifts as purely private, in the rest of the world, they are seen as tax breaks awarded by the U.S. Treasury and reflective in some way of U.S. policy. The President today said that peace between the Israelis and Palestinians could be reached before the end of his first term. How will the White House, now interested in Middle East diplomacy, react to these charitable donations to West Bank settlement groups?—Rick Cohen