[News] How US "charities" break tax laws to fund Israeli settlements

Anti-Imperialist News news at freedomarchives.org
Sat Sep 3 11:11:14 EDT 2011

How US "charities" break tax laws to fund Israeli settlements

Electronic Intifada
3 September 2011

In addition to providing $3 billion in annual military aid to Israel, 
Americans are subsidizing the construction of Israel's illegal settlements.

In spite of US government statements about its displeasure with the 
expansion of 
settlements, US based organizations are abusing the 501(C)3 section 
of US tax codes to provide billions in subsidies to do exactly that.

There are hundreds of these tax-exempt, so-called charities funneling 
money to illegal Israeli settlements, often with the names no more 
creative than "American Friends of name an Israeli settlement."

One such organization, American Friends of Ariel Inc., paints a 
picture of how these US based front groups collect tax-deductible 
donations, and use them to build and expand illegal Israeli 
settlements, and in some cases, purchase weapons for the settlers 
within them. In many cases, including that of American Friends of 
Ariel Inc., the organization does not make substantial efforts to 
disguise the fact that the US based tax exempt entity is nothing more 
than a shell organization being used to transfer money abroad.

For example, the president of American Friends of Ariel, Ron Nachman, 
also happens to be the longtime mayor of Ariel. The sole programmatic 
function of American Friends of Ariel is to transfer funds to a 
non-exempt organization based in Ariel called the Ariel Development 
Fund, also controlled by Nachman, which describes itself simply as 
the "fundraising arm of the city of Ariel." Under Ron Nachman's 
leadership, American Friends of Ariel transferred more than $5 
million to the Ariel Development Fund over the last several years.

It is worth noting that much of the funding for American Friends of 
Ariel has come from Christian Zionist groups, and in general, these 
groups have played an increasingly dominant role in the financial and 
political support for the illegal Israeli settlement enterprise.

Devastating impact

The work of American Friends of Ariel Inc., and the many tax-exempt 
organizations like it, is having a devastating impact on local 
Palestinian communities. A recent report by the UN Office of 
Humanitarian Affairs, covered by the Ma'an News Agency, described the 
"alarming trends of forced displacement of Palestinians in Area C" as 
a result of settlement expansion, and found that "more demolitions 
have taken place so far in 2011 than in all of 2009 and 2010 
Marked increase in forced displacement of Palestinians," 21 July 2011).

In addition to the gross human rights violations inherent in illegal 
Israeli settlement expansion, US taxpayers simply cannot afford to 
build homes and walls in illegal Israeli settlements while record 
numbers of Americans are losing their homes, and unmet domestic needs 
in the US are at an all time high.

American Friends of Ariel, and the vast number of organizations like 
it, not only violate Palestinian human rights, they violate US laws. 
American Friends of Ariel Inc. flouts US laws in two ways.

The first has to do with the structure of the organization, and the 
fact that most of these tax exempt 501(c)3 organizations are simply 
shells that transfer money to non-exempt organizations abroad, and 
the second deals with the exempt purposes set forth by the Internal 
Revenue Service (IRS) and Treasury Department.

The rule concerning the use of tax exempt entities as conduit 
organizations is clear, and states that "the code would be nullified 
if contributions inevitably committed to a foreign organization were 
held to be deductible solely because, in the course of transmittal to 
a foreign organization, they came to rest momentarily in a qualifying 
domestic organization" (Section 170(c)(2)(A)). That is exactly the 
case with American Friends of Ariel Inc., and hundreds of 
organizations like it, a fact which is abundantly clear upon review 
of their publicly available 990 tax forms.

Exacerbating poverty and neighborhood tensions

The second major legal violation occurs because these organizations 
fundamentally violate the purpose for which charities can be 
organized, namely to provide "relief of the poor, the distressed, or 
the underprivileged; lessening neighborhood tensions; eliminating 
prejudice and discrimination; defending human and civil rights 
secured by law; and combating community deterioration and juvenile 

Illegal Israeli settlements, mostly built on expropriated land and 
operated with stolen resources, exacerbate poverty and systematically 
create an underprivileged class of people. Race-based colonies 
inherently increase neighborhood tensions, and they effectively annex 
occupied Palestinian land through a system of apartheid 
infrastructure that has been detrimental to Palestinian communities 
across the West Bank, including occupied East Jerusalem.

The raison d'etre of illegal Israeli settlements is rooted in 
institutionalized discrimination, and therefore technically violates 
IRS regulations on a daily basis in the same way that Bob Jones 
University violated those same regulations barring discrimination 
Jones University v United States).

In 1983, the Supreme Court ruled that the IRS had the authority to 
revoke the tax-exempt status of Bob Jones University because they 
openly discriminated against interracially married individuals. The 
court ruled that such behavior was "wholly incompatible with the 
concepts underlying tax exemption," and clarified by stating that 
"whatever may be the rationale for such private schools' policies, 
racial discrimination in education is contrary to public policy." 
Fundamental human rights like equality are not confined by 
jurisdiction, and organizations operating abroad are similarly bound 
to respect and uphold them.

The numerous and flagrant violations of the tax-exempt purposes set 
forth by the IRS and Treasury department should be reason enough to 
revoke the tax-exempt status of these organizations. It is hard to 
imagine the US playing any constructive role as an "honest broker" 
when in addition to providing $3 billion in annual military aid to 
Israel, Americans are also being forced to subsidize the construction 
and expansion of the same illegal settlements that our government is 
politely telling Israel are very unhelpful.

Because of the US government's unwillingness to equally enforce the 
law, or use the proverbial stick instead of just carrots, money that 
would otherwise be going into our national treasury to pay down the 
debt or build affordable housing in the US, is instead being used to 
construct and defend Jewish-only colonies in the occupied West Bank.

Mike Coogan is a member of Virginians for Middle East Peace.

Freedom Archives
522 Valencia Street
San Francisco, CA 94110

415 863-9977

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