Originally published 14 January 1997
in JTA News
BEHIND THE HEADLINES
YORK, Jan. 14 (JTA) -- U.S.-based charities raising money to purchase Arab-owned
land in Israel"s disputed areas could be scrutinized for possible violations
of U.S. tax laws.
Critics of these purchases charge that they are
a political and provocative act by those who seek to change the facts on
the ground and sabotage the peace process.
They say such ideological
activity cannot legally be financed with the help of U.S. dollars, through
charitable tax exemptions and deductions.
Both a current and former
official with the Internal Revenue Service said publicity of the issue, such
as a recent segment on the CBS "60 Minutes"" program, could trigger an audit
by federal tax authorities.
But the results of such an audit are far from certain.
experts say determining whether organizations are violating their tax-exempt
status is highly subjective and rendered on a case-by-case basis. They say
the complexity stems in part from IRS guidelines that are highly nuanced.
The charities in question, such as Ateret Cohanim, defend their tax-exempt
status as legitimate, saying that their mission is humanitarian or educational.
They say any related property acquisition fulfills the religious and Zionist
call to redeem the Land of Israel and that it is anti-Semitic to restrict
Jews from living in certain places, Israel most of all.
Some add that
by helping settlers, they are filling gaps caused by the United Jewish Appeal"s
policy of not allocating funds over the Green Line, or beyond Israel"s pre-1967
That UJA policy evolved in part in deference to the political
sensitivity of the U.S. government, which provides grants to the UJA"s system
for refugee rescue and resettlement.
The ideological back and forth
over the purchases by the charities could continue without resolution, but
for one claim by the critics: that the charities" tax-exempt status is illegal
if their raison d"etre is primarily political and ideological. And these
critics say they are intent on calling it to the attention of U.S. tax authorities.
tax-exempt, or 501(c)3 status, prohibits a U.S. organization from engaging
in "substantial"" lobbying or trying to influence the outcome of an election
in the United States.
But the parameters of permissible political
activity supported abroad is more murky, especially if it can be argued that
such activity is for educational or religious purposes, some tax experts
What is clear is that the imbroglio could have an impact beyond the organizations directly involved.
official from a mainstream Jewish philanthropy, who requested anonymity,
termed all the publicity surrounding the issue "unhelpful.""
pressure on U.S. bureaucrats"" to look at the fund-raising activity for Israel
"and it won"t be satisfied looking at one organization,"" he said. "It gives
the impression others are doing things beyond the guidelines.""
Cohen, a Washington, D.C., attorney and a former commissioner of the IRS,
reinforced the notion that the publicity could have a broader impact.
Jewish charities here seem to feel anything they do to benefit the State
of Israel is charity, but it isn"t so,"" he said. "The State of Israel is
a foreign country and they have to meet all the criteria here"" to be tax-exempt.
"60 Minutes"" broadcast focused on the wealthy Miami philanthropist, Dr.
Irving Moskowitz, and his projects in eastern Jerusalem it said were aimed
at ensuring Jewish control over all Jerusalem.
The money brought in
by people like Moskowitz, often through U.S. charities, "is like fuel added
on the fire that is threatening to engulf the entire city of Jerusalem,""
Meron Benvenisti, a former Jerusalem deputy mayor, said on the program.
purchases by private individuals and charities escalated in 1992 after an
independent Israeli inquiry culminated in the issue of the Klugman Report.
The report found that the previous government headed by Likud had funneled
millions of dollars illegally to purchase property for Jews in eastern Jerusalem.
highly publicized move by Cabinet Minister Ariel Sharon into the Muslim Quarter
was part of this broader campaign in the mid-1980s to "recover"" the area
for the Jews. When Labor took over, officials froze such funding.
recent reports of private land purchases in Hebron by foreign Jews, it is
eastern Jerusalem that has excited the most concern.
Today, the primary
"ideologically motivated"" player in Jerusalem real estate is Moskowitz,
according to Danny Seidmann, the legal adviser for Ir Shalem, a Jerusalem
development project of the dovish Peace Now.
One of Moskowitz"s projects,
a planned 130-unit Jewish housing complex in the Arab-populated section of
eastern Jerusalem called Ras al Amud, recently has drawn much attention,
even prompting emergency consultations by the United Nations Security Council.
project is now deadlocked, Israeli sources say, because it is a political
hot potato, especially for Jerusalem Mayor Ehud Olmert and Prime Minister
Benjamin Netanyahu, who enjoy the backing of Moskowitz. Moskowitz, much of
whose money comes from a foundation in his name in California, is a major
backer of Ateret Cohanim, a movement whose centerpiece is a yeshiva in the
Muslim Quarter of Jerusalem"s Old City.
The movement"s expansion through
the funding of its sister organization in the United States, Friends of Ateret
Cohanim, was highlighted in the "60 Minutes"" program.
Moskowitz could not be reached for comment.
Joseph Frager, the president of the Friends organization in New York, said
Ateret Cohanim is a "yeshiva like any other yeshiva."" He attacked the CBS
program as "false, misleading and defamatory"" and protested what he termed
its "exaggerations or distortions.""
"We believe in coexistence with
the Arabs and always have had an excellent relationship"" with the yeshiva"s
neighbors, he said. Frager said money raised in the United States is for
educational purposes. He said property purchases have been made solely to
house the yeshiva"s professors and 200 students and to provide other facilities
integral to any academic campus.
But its promotional material says much more.
Cohanim"s home page on its Web site says it is a "a national movement which
aspires to renew and bolster the Jewish presence in the heart of Jerusalem,
which was eradicated by Arab riots in the 1930s. The pioneering spirit is
still alive once again in the eternal capital of the Jewish people as stone
by stone, house by house, the Old City is restored to her rightful owners.""
Old City refers to the historically walled part of Jerusalem that was and
remains divided into four quarters: Jewish, Muslim, Armenian and Christian.
The home page also says Ateret Cohanim has a waiting list of "some 300 families seeking to relocate to the Old City.""
then it outlines its strategy: "Ateret Cohanim yeshiva students move into
the dwelling temporarily, and renovations are begun until prepared for yet
another Jewish family to become part of the growing community of the Kotel
Quarter,"" using the Hebrew term for the Temple"s Western Wall to refer to
the Muslim Quarter.
The solicitation calls for donations not for education
but so "we can continue our important work of reclaiming the Old City on
behalf of the Jewish people.""
Frager, in an interview, defended his organization"s rights and practices.
should be allowed to live anywhere in the Land of Israel just as they live
anywhere in America,"" he said. "To lose sight of this"" is "not only anti-Zionist,
But Cohen, the former IRS commissioner, said charities
do not have the right to enjoy tax-exempt status if they purchase land for
"U.S. deductions should not be used,"" he said, "for the purpose of pushing Arabs out"" of Jerusalem.
Based on the recent publicity, Cohen said the IRS probably would launch some sort of probe.
The IRS is prohibited from disclosing whether such an audit has been launched.
Fontenrose, an IRS tax lawyer in the tax-exempt division, stressed in an
interview that he was not addressing any specific case, but said: "One of
the ways we find out about problems"" is if "something gets prominent play""
in the media.
He said any audit would seek to determine whether a
charity is in compliance with its tax-exempt requirements by ascertaining
whether "its primary purpose"" is charitable. That includes a religious or
But the issue is complicated. He said an educational
purpose is largely understood as related to the "instruction of individuals.""
Helping individuals who are not low-income get housing may be more of a compensation issue than a charitable one.
the same time, however, he said it may be argued that housing them in one
area in "special circumstances"" may serve a religious purpose.
Such nuanced judgments would be a "headache"" for the IRS, Fontenrose said.
Zogby, president of the Arab American Institute, said he had joined with
dovish Jewish groups to explore bringing what he termed the "evasive maneuvers""
of these tax-exempt organizations to the attention of U.S. authorities for
Their purchase of "property in the Holy Land is not
for religious reasons,"" he said. "It is being done to deny Palestinians
property rights and establish a provocative presence in the midst of Palestinian-
populated areas to disrupt the peace process.""
But Yechiel Leiter,
the chairman of the tax-exempt U.S.-based One Israel Fund, which raises money
for humanitarian causes in the territories, said that if he were one of the
critics, he would be "reluctant to go to court for fear of opening a Pandora"s
Leiter, who lives in the West Bank settlement of Eli, said
it could lead to close scrutiny of left-wing organizations, such as Americans
for Peace Now, for the activity it sponsors in Israel, and some Arab- American
charities that have been reported to be fronts for "political as well as
terrorist activity."" Americans for Peace Now, for its part, said the money
it raises in the United States goes only to Peace Now"s educational fund.