Hidden In Plain Sight: US Nonprofits As Drivers of Illegal Israeli Settlements

What U.S. tax law can and should do about it

Concerns about the mass expulsion of Palestinians by Israeli authorities are on the rise following a recent High Court of Justice decision ratifying the forced displacement of around 1,200 Palestinian residents of Msafer Yatta, in the South Hebron Hills. This could be the largest mass displacement of Palestinians since 1967. These developments follow global attention in light of strong evidence of the Israeli military’s targeted killing of Palestinian journalist Shireen Abu Aqleh and the Israeli police’s attacks on Palestinian pallbearers and mourners at her funeral, two days later.

Settlements – which, as I explain below, are clearly illegal – have become central to the architecture of the Israeli occupation, a system of domination which human rights organizations Amnesty International and Human Rights Watch, as well as former Israeli officials, now characterize as the crime against humanity of apartheid.

What’s less well known is how U.S. nonprofits play an integral role in facilitating Israeli settler organizations’ violations of international humanitarian law (IHL). But this assistance is not only a matter of international law. Since the United States has ratified the Geneva Conventions and incorporated them into domestic law, aiding and abetting serious violations of IHL may generate liability under U.S. domestic law as well. There are also ways in which support for settlements may violate U.S. laws prohibiting discrimination – this article focuses narrowly on possibilities connected to IHL.

So far, U.S. nonprofits that are responsible for funneling hundreds of millions of dollars to sustain and expand illegal Israeli settlements have largely escaped scrutiny. Indeed, these organizations maintain 501(c)(3) nonprofit status, providing them access to substantial tax breaks. While these nonprofits have so far evaded legal or other material consequences, their activity has been a source of longstanding efforts to seek redress against them.

U.S. tax law is a promising and largely untapped source of accountability.

An executive of one of these U.S. nonprofits has apparently admitted that their representations to the IRS do not, in effect, reflect reality. The U.S. nonprofit American Friends of Ateret Cohanim (AFAC), has stated on its tax returns that its purpose is to support the Israeli settler organization Ateret Cohanim, whose purpose it describes as promoting the “study and observance of Jewish religious traditions and culture” and children’s activities, as well as funding security equipment for “community residents,” housing renovations, and repairs for “needy families.” Nowhere does it mention support for Israeli settlements or settlers. Ateret Cohanim’s Executive Director Daniel Luria has publicly stated that the organization’s description of its “primary” purpose on tax documents – to “provide funding for higher educational institutes in Israel” – is “because of the tax issue.” Luria stated in the same interview that AFAC’s U.S. fundraising “goes solely toward land redemption,” a euphemism used by Israeli settlement enterprise actors for a process of illegal expropriation and dispossession of Palestinians. These statements point toward the prospect of both material misrepresentations on tax documents and aiding and abetting of settlement activity that is illegal under international and arguably U.S. law. Both issues – material misrepresentation and illegal activity – must be investigated by the U.S. government with urgency, and tax authorities must enforce the tax laws as the case demands..

Applicable International Humanitarian Law Provisions

Israeli settlements are unequivocally illegal under international humanitarian law. The Fourth Hague Convention of 1907 and the Fourth Geneva Convention of 1949 together provide the legal standards for military occupations (and reflect jus cogens obligations, a body of law from which no derogation is legally available). These instruments prohibit the forced displacement of a population under occupation, as well as the transfer of an occupying power’s civilian population into an occupied territory (Geneva Convention IV Article 49). They similarly bar the confiscation or destruction of property of a population under occupation except in circumstances of absolute military necessity (Geneva Convention IV Article 53 and Hague Convention IV Article 53) and categorically prohibit pillage and reprisals against protected persons and their property (Geneva Convention IV Article 33).

War crimes are defined by Article 8 of the Rome Statute as grave breaches of the Geneva Conventions and other provisions of international humanitarian law. Crimes against humanity are defined by Article 7 of the Rome Statute and include forcible population transfer, persecution, and apartheid. Non-state actors are subject to liability for violations of international humanitarian law, including war crimes and some crimes against humanity. This includes private individuals, individuals acting as members of organizations, and potentially also legal persons (corporations and nonprofits). Aiding and abetting liability may also be available against these actors, including legal persons. As a matter of customary international law, aiding and abetting liability requires “substantial assistance” and knowledge rather than intent.

Critically, the United States has ratified the Geneva Conventions and incorporated them as a part of domestic law, through the War Crimes Act of 1996, in which Congress made it a crime for U.S. nationals to engage in grave breaches of the Geneva Conventions:

Whoever, whether inside or outside the United States, commits a grave breach of the Geneva Conventions, in any of the circumstances described in subsection (b) [the person committing such breach or the victim is a member of the Armed Forces or a U.S. national], shall be fined under this title or imprisoned for life or any term of years, or both, and if death results to the victim, shall also be subject to the penalty of death.

A year later, Congress amended the statute, now codified at 18 U.S.C. § 2441, to extend criminal liability to include other war crimes, in addition to grave breaches of the Geneva Conventions. U.S. law does not include a federal criminal provision for crimes against humanity.

Israeli Settlements are Illegal Under International Humanitarian Law

In a 2004 advisory opinion, the International Court of Justice “conclude[d] that the Israeli settlements in the Occupied Palestinian Territory (including East Jerusalem) have been established in breach of international law,” under the Fourth Geneva Convention and the Hague Convention. The U.N. Security Council has passed over thirty resolutions confirming the illegality of Israeli settlements, including Security Resolution 2334 (2016), which reaffirms that Israeli settlements in occupied Palestine have “no legal validity and constitute[] a flagrant violation under international law.” Similarly, U.N. General Assembly Resolution 72/86 affirms that Israeli settlements are illegal and urges all States “not to render aid or assistance in maintaining the situation created by illegal settlement activities.” In his 2021 report to the General Assembly, Michael Lynk, Special Rapporteur on Palestine, stated that Israeli “settlements . . . are a presumptive war crime under the Rome Statute.”

Israeli settler organizations are a key part of the Israeli settlement enterprise, a term that refers to the constellation of actors and institutions that collectively establish, sustain, expand, and legitimize illegal Israeli settlements in the Occupied Palestinian Territory and the Golan Heights. These settler organizations are united by a common goal: transferring land from Palestinian possession to exclusively Jewish possession, referred to as land “redemption” by settlement enterprise actors. They coordinate unlawful expropriations; prevent Palestinians from accessing properties and agricultural land; expand existing settlements and develop new ones; and facilitate population transfers of settlers into Israeli settlements. As such, Israeli settler organizations are involved in the commission of grave breaches of the Fourth Geneva Convention and the Fourth Hague Convention.

Scale and Scope of Israeli Settlement Enterprise

Although the methods have evolved over time, every Israeli government since 1967 has promoted and expanded the settlement enterprise. Israel has established over 280 settlements in the West Bank since 1967. According to Amnesty International, at the end of 2020 there were at least 666,778 settlers in the West Bank, including 225,178 in occupied East Jerusalem (which Israel unilaterally annexed in 1967 and considers part of its sovereign territory). All told, the settlement enterprise has illegally expropriated a third of the West Bank.

To understand the Israeli settlement enterprise and its impact on Palestinian individuals, families, and communities, it is important to place practices that may be more immediately or visibly connected—such as home expulsions of Palestinians and construction and expansion of illegal Israeli settlements—in the context of the broader matrix of laws and practices that function together to dispossess Palestinians. The settlement project also encompasses constructing the separation wall, deemed illegal by the International Court of Justice, and over 1,000 miles of Israeli-only bypass roads; maintaining a 15-year land, air, and sea blockade on Gaza; demolishing Palestinians’ homes; restricting their access to water; preventing them from burying bodies and mourning loved ones killed by Israeli state forces; and limiting Palestinians’ freedom of movement through over 500 military checkpoints and other barriers.

U.S. Nonprofits As Key Settlement Enterprise Actor

Advocates for Palestinian rights have often focused on U.S. military and diplomatic aid to Israel, identifying it as a major driver of Palestinian rights violations. But the central role U.S. nonprofits play in furthering war crimes and crimes against humanity has gone comparatively unnoticed. As the U.N. Special Rapporteur Lynk has explained, “charitable organisations have been allowed to maintain their status and have been able to use tax laws to be able to raise money to be able to further the Israeli settlement project.” The Israeli settlement enterprise depends on the financial support of U.S. nonprofits, which direct hundreds of millions of dollars to settler organizations. Hagit Ofran, former head of the Settlement Watch team at Peace Now, an Israeli human rights organization, has emphasized: “Without the [U.S. nonprofit] donations, [Israeli settler organizations] don’t exist.”

Between 2007 and 2013, U.S. nonprofits sent an estimated $220 million to settler organizations. One U.S.-registered nonprofit, the Central Fund for Israel (CFI), has sent at least $75 million to grantees (primarily settler organizations) since 2015. Financial support from U.S. nonprofits often makes up a substantial part of settler organizations’ budgets. For example, according to The Intercept, which reviewed regulatory documents filed with Israeli authorities, CFI provided over 99 percent of the Israel Land Fund (ILF)’s total budget in 2017. CFI and AFAC are only two of many U.S.-based nonprofits funding Israeli settler organizations. The Hebron Fund, Friends of Ir David, Jewish National Fund-USA, and the Irving and Cherna Moskowitz Foundations all engage in the same kind of conduct: maintaining 501(c)(3) status while funding Israeli settler organizations that are committing grave violations of international and domestic U.S. law.

The ILF’s mission is to “redeem and purchase land throughout Eretz Yisrael [includes the West Bank, Gaza, and the Golan Heights] and for the Jewish people.” Its website states: “House after house, plot after plot, the Israel Land Fund guarantees that the Land of Israel will remain in the hands of the Jewish people forever. You too can take part in this effort.” Ateret Cohanim is another Israeli settler organization backed by U.S. nonprofits, including its U.S.-based fundraising arm, AFAC. Ateret Cohanim self-identifies as “the leading urban land reclamation organization in Jerusalem, [which] has been working for over 40 years to restore Jewish life in the heart of ancient Jerusalem.”

The Israeli settler organizations funded by U.S. nonprofits are involved in multiple grave breaches of the Geneva Conventions, implicating their U.S. financiers as aiders and abettors under U.S. domestic law. First, these organizations, including the ILF, are funding legal battles in Israeli courts to obtain eviction orders allowing the forced expulsion of Palestinians, which, as explained above, is illegal under occupation law. For instance, the ILF funded a protracted eviction lawsuit against the Shamasneh family, resulting in their forced expulsion from their home in Sheikh Jarrah in 2017. Of course, in different systems around the world, providing legal support funds would generally not itself constitute illegal or illegitimate conduct. However, the legal architecture of the settlements and evictions is a patent grave breach of the Geneva Conventions, and legal support funds to effectuate evictions through that structure should bear culpability.

Second, Israeli settler organizations participate in the unlawful transfer of Israeli settlers into occupied Palestinian territory. For example, Ateret Cohanim has coordinated takeovers of Palestinian homes by Israeli settlers. Israeli settler organizations have also advertised Palestinians’ property and facilitated coercive property transfers. The ILF website has advertised land owned by Palestinians, including, as recently as May 2021, multiple listings in occupied East Jerusalem designated as “Ideology Property.” A current listing advertises the sale of Palestinians’ land in Sheikh Jarrah, noting that it is in a “very strategic location.” Moreover, these organizations have sponsored settlement construction proposals at the municipal level, including a proposal introduced and backed by Ateret Cohanim that would enable it to build 250 housing units in Sheikh Jarrah.

While U.S. charities funding these Israeli settler organizations may also be subject to civil liability for their role in facilitating settler organizations’ violations, there is also another path to accountability: U.S. tax law.

U.S. charities supporting the settlement enterprise are exploiting U.S. tax laws in two important ways. First, their tax-exempt status has enabled U.S.-based nonprofits themselves to avoid paying any taxes on the donations they receive. Second, it rewards donors by making their contributions tax-deductible, despite the donations being used for purposes (land “redemption”) that violate international humanitarian law. These organizations are abusing the United States’ nonprofit system and increasing the tax burden on the general public in the process.

Paths Forward for Increased Accountability

U.S. tax law offers several tools for accountability. The U.S. tax structure extends financial benefits to U.S.-based organizations that serve the public interest, often meeting needs that neither the state nor the private sector can cover. To qualify for 501(c)(3) status, an organization must exist for one or more exclusively charitable purposes.

The Internal Revenue Service (IRS) is responsible for enforcing these regulations, including through compliance checks, investigations, revocations of nonprofit status, and fines. Organizations whose activities or purpose is illegal or against public policy do not qualify for tax-exempt status. According to IRS guidance, “violations of law are the antithesis of the public good . . . [and] may be a bar to exemption.” The presence of a substantial non-charitable activity will also destroy an organization’s exemption, “regardless of the number or importance of truly charitable purposes.” Moreover, where a nonprofit has “omitted or misstated material information” or “operated in a manner materially different from that originally represented” the IRS can revoke its nonprofit status, retroactive to when the violation began.

Grassroots organizations have previously challenged nonprofits in other contexts for their illegal activities and/or for conducting substantial non-charitable activities. In 2012, a coalition including Common Cause and Color of Change challenged the nonprofit status of the American Legislative Exchange Council (ALEC), a domestic lobbying group that drafts and circulates conservative bill proposals in state legislatures, for its “massive underreporting” of its lobbying activity. More recently, Senator Ron Wyden has called on the IRS to investigate nonprofits related to the January 6th attack on the Capitol and “to the greatest extent of the law, revoke the exempt status of those organizations that played a role in inciting or committing violence and other illegal acts.” In parallel, the New York Attorney General has investigated the Trump Foundation and taken legal action against the National Rifle Association for violations of state law related to their nonprofit status.

If U.S.-based nonprofits are facilitating or aiding and abetting Israeli settler organizations’ violations of international humanitarian law, and, by extension, U.S. domestic law under the War Crimes Act as discussed above, these organizations should not qualify for 501(c)(3) status. Regardless of any “truly charitable purposes” that U.S. based financiers might possess, their involvement in grave human rights violations is “substantial” and should render them ineligible for tax-exempt status.

These organizations may be subject to IRS revocation of their tax exempt status on the basis of substantial noncharitable purpose and activities—as well as for having “omitted or misstated material information” or “operated in a manner materially different from that originally represented.” As noted above, at least one of these nonprofits have apparently admitted to relevant misrepresentations.

In response to these abuses of U.S. tax laws, the IRS could initiate investigations into U.S. nonprofits that fund illegal Israeli settlements; revoke the nonprofit status of organizations found to support human rights and humanitarian law violations in these settlements or in any occupied territory; and/or issue fines against these organizations. State attorneys general are also responsible for ensuring compliance and have the power to investigate and take legal action against charities that are abusing their nonprofit status. Finally, the IRS, along with the Treasury Department and other state attorneys general, could regularly publish a comprehensive, publicly available list of U.S. charities determined to be funding or otherwise facilitating international human rights and humanitarian law violations. These tools have the potential to stem the flow of money from U.S. nonprofits to the Israeli settlement enterprise and to secure meaningful accountability for nonprofits engaged in violating human rights and humanitarian law in other contexts.

• Armed / ethnic conflict
• Demographic manipulation
• Destruction of habitat
• Displacement
• Dispossession
• Extraterritorial obligations
• Human rights
• International
• Land rights
• People under occupation