Tax Deductible Contributions for Israel

The article below gives quite an insight into the Zionist fund-raising organisations – especially the United Israel Appeal (Keren Hayesod) and the JNF (Keren Kayemeth LeYisrael) and the Jewish National Fund [JNF] subsidiary  (Himnutah) that specializes in land theft by subterfuge in the occupied territories.

The books and papers mentioned in the notes might be worth following up on.

Ray Bergmann

Tax Deductible Contributions for Israel: Kareem Khalaf  et al. v. Donald Regan  et al.

In 1982, Charles Fischbein, executive director of the Jewish National Fund regional office in Washington, D.C., launched fundraising plans for the construction of a sheltered playground for Israeli children at the kibbutz of Kiryat Shimona in northern Israel, near the Lebanese border.[1]

That year, Fischbein obtained a number of large gifts and pledges. Among the contributors were Mr. and Mrs. Morton Cohen[2], prominent members of the Washington, D.C., Jewish community, who pledged $75,000, with approximately $20,000 donated immediately in cash.

The playground, it was decided, would be named after this couple. Other sizable gifts and pledges followed, and after 18 months, Fischbein had transferred more than $270,000 in funds earmarked for this project to the Jewish National Fund office in New York for transmittal to Israel.

In the spring of 1982, the Cohens told Fischbein that they would tour “their” playground during a visit to Israel in the summer. The previous winter, the JNF had given a dinner in their honor at which the playground project was officially dedicated to them. But when they arrived at Kiryat Shimona, the Cohens found no playground and no construction underway. Instead what they saw was an Israel Defense Force staging area littered with garbage and beer cans.

The Cohen’s story caused a storm of controversy at the JNF. Mr. Cohen suggested that the organization had acted fraudulently; another donor refused to complete his agreement. Subsequently, Fischbein learned that the money for the playground had gone into general use funds for Israel, and that there were no U.S. controls with regard to the use of monies raised in the U.S. for special projects.

Once the Cohens threatened to publicly expose the misuse of their contribution, the JNF in Israel dipped into other funds and began construction on the playground. But Fischbein’s disenchantment with the JNF did not end with the playground scandal. It merely deepened when he and other JNF leaders took a JNF-sponsored trip to southern Lebanon in the summer of 1982 to bolster U.S. Jewish support for Israel’s invasion of Lebanon.

The group was taken to areas in Lebanon occupied by the Israeli Army.

Accompanying them were Moshe Rivlin, director of the Jewish National Fund in Israel, and Dr. Samuel Cohen, JNF executive vice-president in the United States. During the trip. Dr.Cohen bragged that JNF bulldozers, as an integral part of the military effort, had preceded the invading troops. Further, he boasted that the JNF was “up to its ears” in the development of Jewish settlements in the West Bank.

The revelations that the JNF helped to destroy Lebanon, that it did not always build hospitals, schools or playgrounds, as promoted, but instead helped purchase weapons and build settlements, were blows to Fischbein’s dignity and sense of honesty. He resigned from the JNF in March 1984.

Shortly thereafter, Fischbein joined as a plaintiff in a lawsuit brought by Americans, Palestinians residing on the West Bank, and Israelis challenging the tax-exempt status of six United States-based Zionist organizations[3].

Included were the Jewish National Fund (JNF), the Jewish Agency American Section (JA), the World Zionist Organization American Section (WZO), the United Israel Appeal (UIA), the United Jewish Appeal (UJA), and a new, smaller organization, Americans for a Safe Israel. The latter group actively campaigned on Israel’s behalf in the United States, promoting the purchase of West Bank land to the American Jewish community.

Being granted a tax-exempt status by the Treasury Department pursuant to Title[4] Section 501 (c) (3) of the U.S. Code is the financial lifeline for many organizations. It not only exempts recipient organizations from paying taxes, it also allows private individuals to deduct the amount donated to such organizations from their yearly income taxes. The suit could have potentially reduced the millions of dollars transferred yearly to the State of Israel by American supporters. Attorneys for the plaintiffs estimated that the six organizations combined account for at least $750 million sent to Israel by Americans each year[5]. Total charitable transfers from the U.S. to Israel have been placed at $950 million to $1 billion for the last several years[6].

The International Monetary Fund estimated that Israel receives an annual $1 billion in private aid from Jewish organizations throughout the world. Israeli authorities guessed that more than 70 percent of that money originated in the U.S. “The principal sources,” of private funds to Israel, according to a study published by the Middle East Institute, “are the prominent national Jewish charities, such as the United Jewish Appeal, but significant sums also flow through many smaller channels, especially since any charity recognized under Israeli law automatically qualifies for tax-deductible status in the United States under the Internal Revenue Code, a privilege not generally accorded other foreign states.”[7]

At present, the Israeli Government annually spends $400 million on maintaining existing settlements and constructing new ones[8]. Israel can divert funds from needed projects inside Israel proper only because U.S. aid, including monies from tax-exempt U.S. charitable organizations, subsidizes the settlements. All the organizations except for Americans for a Safe Israel can be traced to Israel’s pre-state years and now in effect are components of the state.

The WZO, founded by Theodor Herzl at the First Zionist Congress in 1897, helped establish and develop the State of Israel for the Jewish people. It acts as an umbrella organization that directly or indirectly oversees Zionist operations throughout the world, including the Jewish Agency American Section which is the registered agent of the WZO. The United Jewish Appeal, established in 1939, is the major Zionist fundraising organization in the United States. The United Israel Appeal, founded in 1920, operates solely to finance the Zionist movement. The UJA transmits to Israel funds raised in the U.S. through the UIA.

The Jewish National Fund, although directed by the Zionist Executive of the WZO, fundraises exclusively for the “reclamation” and development of the land of Israel and the 1967 occupied territories. According to /Land and Life, /the JNF magazine, “the United Nations drew the boundaries of the proposed Jewish State almost entirely in accordance with the land holding of the Jewish National Fund.”

In 1961, Israel and the JNF signed a covenant making the two parties joint title owners of all the land of Israel. In this manner, the land of Israel is taken in the name of the JNF and “held as the inalienable right of the Jewish people.”

Most JNF land acquisitions on the West Bank are through the Hemnutah Company, a wholly owned subsidiary of the JNF.  According to its incorporation papers, the company’s objective is to buy, lease and cultivate “land and other real properties in the West Bank and the territories controlled by the Israel Defense Forces and under their administration.”

In 1976, JNF Director Shimon Ben-Shemesh admitted that in the past year the JNF had spent roughly $6.6 million to surreptitiously purchase West Bank land from Palestinians, including “buildings, public institutions and church property. Many of the Arab residents living on these lands are not yet aware that the lands are already owned by the JNF.”

The plaintiffs contended that the six pro-Israeli fundraising organizations were in violation of U.S. laws and regulations regarding charitable organizations and that the Department of the Treasury (DOT) had failed to revoke their tax-exempt status. The plaintiff’s complaint relied on three legal arguments.

First, they pointed to a Supreme Court case that denied a religious college tax-exempt status because it practiced racial discrimination.  The Treasury Department subsequently interpreted that case to mean that an organization’s tax-exempt status must “serve a public purpose” and “must not be contrary to public policy.”[9]

The plaintiffs argued that the confiscation of West Bank properties for the exclusive use of Israeli Jews, without due process or just compensation, was discriminatory, a violation of basic human rights and in violation of the fundamental public policy of the United States. Construction of settlements on the occupied territories, they also contended, was in direct opposition to U.S. policy and wrecked any hope of achieving a peaceful solution to the Israeli-Palestinian conflict.

Second, the plaintiffs relied on a Section 501 (c) (3) rule prohibiting tax-exempt organizations from “carrying on propaganda, or otherwise attempting to influence legislation,” participating in or intervening in (including the publishing or distributing of statements) “any political campaign on behalf of any candidate for public office.” The six organizations, argued the plaintiffs, violated this rule by their extensive and well organized grass-roots campaigning in support of pro-Israeli political candidates and their support or opposition to legislation affecting Israel.

Finally, the plaintiffs pointed to Treasury Department rules prohibiting a charitable deduction for a gift to a U.S.-based charitable organization which is a “conduit” of the gift proceeds to an organization in another country. A U.S. organization is not a conduit where it has “full control of the donated funds, and discretion as to their use.” The plaintiffs argued that the six organizations were merely funnels of U.S.-originated contributions to Israel and that they did not even attempt to control the use of the funds or exercise discretion over their use, as Fischbein had discovered.

The District Court of the District of Columbia, where the suit was filed, never addressed the merits of the complaint, but dismissed the case on a procedural technicality known as “standing.” That concept prohibits a plaintiff from going forward on a lawsuit unless he can first show that he has been “injured in fact, that the injury was caused by the defendant’s challenged action and that the relief requested by the plaintiffs would provide redress for the injuries suffered.” Unless a plaintiff can overcome the “standing” threshold, the suit will be thrown out of court[10].

It was Judge Jackson’s decision that few of the plaintiffs suffered a judicially recognizable injury directly attributable to the tax-exempt status of the six organizations. For those Palestinian landowners whose land had been confiscated, the judge held that revoking the tax-exempt status of the organizations would not redress their injuries; that the Israeli Government would have committed the wrongs regardless of the six U.S. organizations’ tax-exempt status.

Concluded Judge Jackson: it would be “more fanciful still to assume here that the government of Israel is so responsive to changes in U.S. tax laws that the withdrawal of benefits from U.S. contributors will work any alteration whatsoever in the character of its occupation of territory it now holds by force in the Middle East.”

Judge Jackson ruled conservatively on the issue of standing, refusing to push the definition of injury to include the harm complained of by the plaintiffs. Judicial recognition of injury remained narrow, reinforcing a national trend excluding third parties from seeking judicial relief.

Editors Note

The version above is part of the article “The Palestine-Israel Conflict In The U.S. Courtroom” by Rex B. Wingerter, published at Americans for Middle East Understanding, Inc. Vol. 18, No. 3, September 1985 and available at http://www.ameu.org/uploads/vol18_issue3_1985.pdf


[1] Discussion of Fischbeine experience with the JNF is drawn from his affidavit submitted in support of the lawsuit.

[2] Mr. and Mrs. Cohen are not their real names.

[3] In addition to Fischbein, the plaintiffs included: Karim Khalaf, Bassam Shaka’a, Ibrahim Tawil, Fahd Qawasmeh and Wahid Hamdallah, the elected mayors of Ramallah, Nablus, al-Bíreh, Hebron and Anabta, respectively, located on the Israeli occupied West Bank, who were dismissed from their offices by the Israeli military authorities; Mustafa Sbeih, the mukhtar of the West Bank village of Aqraba; Seif al-Rahman Moustafa, Jawdat Redu Hamad, Yousef Abed al-Karim Abdallah, and Abed al-Haq Mousah Hasa, land owners on the West Bank; Charlie Bation, Israeli Knesset member; Moshe Hirsh, Rabbi of Neturi Karta; John Davis, former Commissioner General of UNRWA; Edward L. Keenan, professor at UCLA; and Subhi Widdi, naturalized U.S. citizen whose family lost land in the West Bank to Israeli confiscation.

[4] The two parties involved in the tax-exempt agreement were the IRS and the six organizations. The plaintiffs became a third party when they intervened to challenge the IRS’s decision to continue to grant the 501 (c) (3) status to the six organizations.

[5] Plaintiff’s attorneys were Linda Huber and Mark Lane, 105 Second Street, N.E., Washington, D.C. 20002.

[6] Thomas Stauffer, /U.S. Aid to Israel:The Vital Link, /Middle East Problem Paper No. 24 (Washington, D.C: Middle East Institute, 1983).

[7] Ibid.

[8] Christian Science Monitor. /December 19. 1984.

[9] Synanon Church v. United States, CA No. 82-2303 (D.D.C.), Memorandum for the United States in Reply to Synanon’s Opposition to the Government’s Second Motion for Summary Judgement, p. 45, 47 (Dec. 15, 1983).

[10] The two parties involved in the tax-exempt agreement were the IRS and the six organizations. The plaintiffs became a third party when they intervened to challenge the IRS’s decision to continue to grant the 501 (c) (3) status to the six organizations.

2 thoughts on “Tax Deductible Contributions for Israel

  1. Ray Bergmann says:

    It is a very interesting article on many levels, revealing the strange structure of ownership of Israeli land and finance, as well as the difficult task even top lawyers would have in challenging this strange outpost of US imperialism in US courts.

    Also interesting are the reactions of the different Jewish players, Fishbein reacting by resigning from the JNF and even joining with Palestinians in challenging the Zionist special situation in US courts, after blind supporters of Israel-right-or-wrong brag to him about JNF’s contribution to the destruction of Lebanon without suspecting that Fishbein is actually appalled by what they are telling him.

    It is truly an interesting tale, although the refusal of the court to address all the issues brought up by the plaintiffs must have been so frustrating for them, and then to be dismissed by a technicality. It’s almost a morality play of sorts.

    I think it could be a good basis for a theatre piece!”

  2. I think the failure of the challenge by Charles Fishbein in the US Supreme Court should demostrate the difficulties of challenging Deductible Gift Recipient (DGR) status of Zionist groups here in Australia. I am not opposed to such an action but am skeptical of any action that looks to just masters to correct the wrongs of the Israeli occupation of Palestine. I’m for changing the opinion of ordinary people and not wasting time with a ruling class in Australia that has always supported Israel. But more than this, progresssives for a long time viewed the kibbutz movement as an exercise in social democracy rather than a project of occupation and dispossession.

    Relevant to such challenges is that Charles Fischbein actually had a legal interest in that he had raised the funds which were granted tax exemption by US Treasury. His challenge still did not get up.

    In Australia, the UNITED ISRAEL APPEAL REFUGEE RELIEF FUND LIMITED has Deductible Gift Recipient (DGR) status and is listed as a Charitable Institution. This gives it favourable tax exemptions from income tax, FBT, and GST as well as making any gift to it tax deductible.

    The UNITED ISRAEL APPEAL REFUGEE RELIEF FUND representative is Mark Leibler, as Australia’s foremost tax accountant, enjoys a close relationship with Federal Treasurers and ATO officials. They say he had a special door into Peter Costello’s office. Leibler is the current President of the Jewish National Fund and to overcome its ties with government would require some real structural changes in the way government operates in Australia.

    To attempt to challenge the tax status of this or other Zionist organisations would be very expensive. Arnold, Bloch, Leibler are listed as proud supporters of the UNITED ISRAEL APPEAL (UIA) and would fight it all the way to the High Court. Ironically they did this on behalf of the Yorta Yorta people and lost. Ironic because as head of various Zionist groups Leibler supports the dispossession of one people but acts pro bono on behalf of another.

    Neverheless my point is that it would be hard to challenge the tax status of pro-Israel groups becasue Israel enjoys more favour in the eyes of the political class and High Court judges than an aboriginal tribe from Echuca.

    The Rudd government has shown only too clearly that it is not prepared to make changes to its policy on Israel nor to make any structural changes in government.

    By contrast, the strategy of George Galloway to bypass the British Government and take an aid convoy to Gaza is a positive step.

    It also throws up all the contradictions in the positions of not only Britain and US but also that of the North African regimes.

    What an extraordinary system of dispossession of Palestinians is described in this case. The Jewish National Fund actually claims to be a joint title owner of all the land of Israel (together with the state of Israel).

    Examples of covert buying land from Palestinians is also given in the book The Lemon Tree by Sandy Tolan.

    Ian Curr
    Feb 2009

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