From 2002 through 2008, a network of at least 171 United States tax-exempt organizations (116 private foundations and 55 public benefit "charities") raised over $236.6 million to support the settlement enterprise. The amount spent during that period increased each year, going from $21.6 million in 2002 to more than $40 million in 2008, the last year that complete data is available.¹

As has been extensively reported in the media, fundraising by taxexempt organizations for the settlements has supported activities that are in conflict with U.S. policy.² The tax code enables Americans to subvert their government's promotion of the peace process and undermines their country's goal of creating a viable Palestinian state. By shielding the funding of the settlement enterprise from taxation, the tax laws allow Americans to provide material support to organizations that are perpetuating the Israeli- Palestinian conflict, which, as General David Petraeus noted, strains the United States' relationships with its regional allies, lends legitimacy to foreign groups that are hostile to the U.S., and undermines U.S. interests in the region. And by reducing the amount of taxable income that would help address the nation's education, health and social needs, the tax laws enlist all Americans into the settlement enterprise.

The flow of money generally involves three stages. First, private foundations and individuals give money to non-profit "charities." Second, the "charities" send money to an organization or organizations operating in Israel or in the Occupied Palestinian Territories (OPT), which then spend(s) it for projects and activities that further the shared goals of the three entities. In order to be exempt from taxation, the private foundations and non-profit "charities" involved in this chain must fulfill a number of legal requirements. Among them is the requirement that a foundation must distribute money only to tax-exempt organizations, and tax-exempt organizations can only use the money for charitable, religious, educational, scientific and literary purposes or to test for public safety, foster national or international amateur sports competition or prevent cruelty to children or animals. Promoting political goals and purchasing property, unless it is in connection with an educational institution, are not tax-exempt activities. Tax-exempt foundations and organizations must also file annual reports to the Internal Revenue Service (IRS). These reports can be accessed on the Internet at www2.guidestar.org.

It is ironic that while the U.S., along with the entire international community, does not recognize Israel's annexation of East Jerusalem and its surrounding area, it is subsidizing through its tax laws the Israeli right's political goal of preventing the eastern part of the city from ever becoming the capital of a future Palestinian state. Tax-exempt funding has enabled organizations to acquire property in Palestinian neighborhoods and villages, expel Palestinian residents and transfer Jewish Israelis into the vacated homes. This material support from the U.S. is part of a matrix of Israeli legislation, government financial assistance and administrative procedures that is altering the city's ethnic composition and isolating Palestinians in Jerusalem from the rest of the OPT.

Unfortunately, the full extent of the financial support by the web of individuals, foundations, and organizations in the U.S. advancing Israel's goals in Jerusalem cannot be fully determined. This network deliberately refuses to meet the standard for transparency set, for example, by the New Israel Fund. With an informative website, the New Israel Fund lists all donors who contribute more than $1,000 and identifies all recipients and the amount they received. Most of the tax-exempt foundations and organizations supporting the settlements, in contrast, do not have websites, and those that do fail to identify their donors and their recipients. Compounding the lack of information on the Internet, the foundations and organizations frequently submit annual reports to the IRS that hide the names of donors and recipients, are incomplete and often contain inaccurate and misleading information. The lack of transparency can be seen in the filings of the American Friends of Ateret Cohanim, Friends of Ir David and the Irving Moskowitz Foundation. Enough information, however, has been disclosed by these organizations as well as other foundations to create a partial picture of the tax-exempt funding network that is promoting activities in Jerusalem that are damaging U.S. interests.

The American Friends of Ateret Cohanim has raised nearly $10 million between 2002 and 2008 for the Israeli organization Ateret Cohanim. According to Daniel Luria, the executive director of Ateret Cohanim, this was 60% of its revenue.³ Founded in 1987, the American Friends of Ateret Cohanim is at the center of a network of supporters that includes at least 14 foundations.⁴ The American Friends of Ateret Cohanim also has an annual fundraising dinner for the Jerusalem Reclamation Project, which was founded in Israel in 1978 as an arm of Yeshiva Ateret Cohanim, the same year the yeshiva was established in the Muslim Quarter of the Old City, for the purpose of "restoring Jewish life to all parts of the Old City and surrounding neighborhoods."⁵ Most of the money that Ateret Cohanim receives from the American Friends of Ateret Cohanim is transferred to the Jerusalem Reclamation Project to purchase Palestinian property.⁶ The Jerusalem Reclamation Project also has an American presence, but unlike the American Friends of Ateret Cohanim, it does not have tax-exempt status. Sharing the same mailing address, overlapping leadership (Shani Hikind is the fundraising director of the Jerusalem Reclamation Project and executive director of the American Friends of Ateret Cohanim⁷) and a joint annual dinner, the Jerusalem Reclamation Project and the American Friends of Ateret Cohanim are the same organization but with two different faces. To the IRS, it is the American Friends of Ateret Cohanim, which funds the tax-exempt purposes of supporting Ateret Cohanim Institutions and their residents in the Old City, day camps and nurseries, housing renovation and repairs, security equipment, seminars, newsletters and tours. But to the hundreds of guests who attend the annual dinners, which raise hundreds of thousands of dollars to promote the political goal of "strengthening, securing and keeping Jerusalem united," the organization is the Jerusalem Reclamation Project which funds the non-taxable purpose of purchasing and renovating "buildings to provide housing…and communal facilities."

While Ateret Cohanim is involved in property acquisition in several areas in Jerusalem, Elad only operates in Silwan. In this historic area, the Israeli government has given Elad control over the City of David National Park, making it "the only case in which the administration of a national park was delegated to a private political body."⁸ As operators of the park, Elad pursues its mission of strengthening Israel's control of Jerusalem by reducing the accessibility to public spaces of the residents of Silwan and marginalizing the Arab, Islamic and Christian connections to Jerusalem in the park's narratives and tours.⁹ The archaeological excavations that Elad is funding have been criticized for focusing on the biblical period, ignoring other periods making up the 5,000 years of settlement in the area, and for failing to meet international professional standards because of its history of discarding and destroying material from the Islamic period.¹⁰ These excavations are also impacting the demography of Silwan by undermining the foundations of Palestinian homes, causing the owners and their families to leave the area.¹¹ Elad plans to develop this land by constructing apartment buildings, a parking lot, a synagogue, a kindergarten and roads¹² that will alter the demography of Silwan by evicting Palestinians and transferring Jews into the vacated properties.¹³ Elad has also acquired Palestinian property through a process of expropriation involving the Israeli government and the Jewish National Fund, and has purchased Palestinian property through deception, threats and intimidation.

The source of Elad's funding is shrouded in secrecy. In 2005, it identified support from five major donors that included Greek casino operators and Russian oligarchs. However, Elad refused to identify the other donors who contributed 75% of the organization's revenue in 2005.^14,15 From its filings to the IRS, it is clear that one of Elad's major sources of funding is the Friends of Ir David. At the center of a complex of supporters that includes at least 13 foundations, the Friends of Ir David raised more than $24.3 million during the seven years between 2002 and 2008.¹⁶

Incorporated in the U.S. as a tax-exempt organization by David Be'eri in 1986, the same year he also formed Elad in Israel, Friends of Ir David has the same intermediary position that the New Israel Fund occupies in helping individuals and foundations support projects in Israel. But unlike the New Israel Fund, which discloses its donors and recipients, Friends of Ir David hides the names of its recipients, and like its twin, Elad, hides the names of its donors. The most recent annual filing by the Friends of Ir David was also incomplete in failing to identify the geographic region where its recipients are located and to provide the number of recipients who can legally receive funds in the host country.

The most exotic use of the U.S. tax code to fund settlement activity is done by Irving Moskowitz. His Irving Moskowitz Foundation which, in point of fact, is but a tax-exempt organization, operates a non-profit casino and bingo parlor in the low-income community of Hawaiian Gardens, California. Net income is funneled through the Irving Moskowitz Foundation to various other tax-exempt organizations such as Friends of Ir David ($500,000 in 2006, $450,000 in 2007 and $500,000 in 2008) and the American Friends of Ateret Cohanim ($50,000 in 2007 and $136,000 in 2008). But he also launders money through a foundation he controls and at least one unnamed subsidiary. With the same directors as the Irving Moskowitz Foundation, the American Friends of the Everest Foundation is a front by which Irving Moskowitz uses tax-exempt money to purchase property, which is not a taxexempt activity. Although it listed that it owned five properties in its 2008 tax returns - two in Silwan and three in the Muslim Quarter (one is the Ohel Yitzhak Synagogue¹⁷) of the Old City - the American Friends of the Everest Foundation probably owns more properties through its investment of over $4 million in an unidentified subsidiary and more than $3,333,000 in unidentified assets. These purchases are only part of Moskowitz's other properties in East Jerusalem, such as the Shepherd Hotel, which he acquired through his company, C & M Development.

Is there anything that can be done about the tax-exempt funding of settlement activity? The Israeli Gush Shalom movement has urged that taxexempt status be revoked because the organizations are not charities but engaged in activities that are "of a clearly political character" to which the U.S. government has "expressed its opposition in the clearest and strongest terms, and at the highest level."¹⁸ The American-Arab Anti-Discrimination Committee has filed administrative complaints to the Treasury Department and the IRS, alleging that these groups have raised money in violation of the organizations' stated mission, supported activities that are in violation of international law, are contrary to U.S. "established public policy," and have funded the purchase of military equipment and supported terrorist activities.¹⁹ The status of these complaints has not been reported.

Yousef Munayyer, executive director of the Washington-based Jerusalem Fund for Education and Community Development, proposed that the president issue an executive order that finds activities that "disrupt the Middle East peace process constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States" and therefore are illegal and prohibited. He also proposed legislation that would allow the State Department to maintain a list of settlement organizations which banks and charities could not legally deal with. Finally, he proposed that the Financial Crimes Enforcement Network, which deals with money laundering and terror organizations, have the authority to "crack down on organizations in the United States which direct U.S. tax dollars to settlements."²⁰ Though Munayyer's proposal may be conceptually sound, it is politically a non-starter.

Something more limited is probably the most that can be expected. Because of the damaging impact that foundations and tax-exempt organizations providing material support to the settlement enterprise have on U.S. foreign policy, they should be closely monitored by the IRS. Annual reports should be carefully scrutinized to ensure they are complete in all respects, that the foundations and organizations did their due diligence and have the documentation that recipients are in compliance with all legal requirements under the tax code. And, finally, the IRS should have a list of organizations funding activities in the OPT and require that they accurately state that their funds are supporting projects in the OPT rather than in Israel.