US sued over tax-exempt donations for illegal Israeli settlements

Seinfeld star Jason Alexander with Israeli Staff Sergeant Elle Shmuel, a combat soldier during Israel’s summer 2014 attack on Gaza. The pair were at a November 2014 fundraiser in Los Angeles hosted by Friends of the IDF, a US nonprofit organization named in a lawsuit against the US Treasury. (via Facebook)

A group of American citizens is suing the US Treasury because they say the agency is allowing billions of dollars of tax-exempt charitable donations to flow to the Israeli army and support the expansion of illegal Israeli settlements in the occupied West Bank and East Jerusalem.

The lawsuit, filed in federal court in Washington, DC, on 21 December, alleges that around 150 US nonprofit organizations send about $1 billion a year “to fund the forcible expulsion of all non-Jews” and expand settlements in the occupied Palestinian territories.

Martin McMahon, the lawyer for the plaintiffs, told The Electronic Intifada that he believes the organizations are violating eight federal criminal statutes and up to six Treasury regulations.

Criminal activities

The lawsuit seeks a court order to compel the Treasury to investigate the alleged criminal activities, revoke the tax-exempt status of the organizations and recover hundreds of millions of dollars in back taxes.

One of the three plaintiffs is Palestinian American author Susan Abulhawa. “I want a court, somewhere, somehow, to hold accountable those who have financed my pain of dispossession and exile; to hold accountable the financiers of Israel’s wholesale theft of another people’s historic, material, spiritual and emotional presence in the world,” Abulhawa says in a statement included in the complaint.

The exact amount that US charities send to settlements is unknown because tax regulations were amended in 2008 so that organizations no longer have to specify what country is receiving funds, only a general geographic region.

The US Internal Revenue Service has granted these organizations tax-exempt status, which allows US taxpayers to deduct donations they make to them from their taxable income. The organizations also do not have to pay taxes on the income they receive.


By law, tax-exempt status is granted only to organizations that engage in “charitable” activities.

These include the relief of poverty, the advancement of science, education and religion, lessening the burdens on government, “eliminating prejudice and discrimination” and “defending human and civil rights secured by law.”

The lawsuit accuses the Treasury, of which the Internal Revenue Service is a part, of “turning a blind eye” to the “rampant criminal activity” that US tax-exempt organizations are promoting overseas by funneling charitable contributions to Israeli settlements.

The Israeli settlement of Avnei Hefetz near the Palestinian village of Shufa in the occupied West Bank. A lawsuit is challenging the US government for allowing charitable funds to flow to such settlements that are built in violation of international law.

Ahmad Al-Bazz ActiveStills

Noting that the US government declared that the settlements were illegal under international law as far back as 1980, the lawsuit claims that the colonization effort would have been abandoned decades ago were it were it not for the subsidies from the US.

“For 30 years at least, the US taxpayer has been funding and/or subsidizing criminal activity overseas, i.e., murder, arson, malicious property destruction, assault and battery and ethnic cleansing,” the lawsuit states.

Military gear

The lawsuit names businessmen Sheldon Adelson and Irving Moskowitz, as well as Christians United for Israel founder John Hagee, as examples of donors who have sent millions of dollars in charitable funds to support settlements.

According to the complaint, their objective is the “wholesale ethnic cleansing of the Palestinian population and explosive settlement growth to accommodate the needs of the ever-growing settler population.”

“They don’t want to just fund settlements but they want the American taxpayers to subsidize their political agenda,” plaintiffs’ lawyer Martin McMahon told The Electronic Intifada.

The lawsuit claims that the organizations have helped demolish or confiscate 49,000 Palestinian homes over the last 30 years and forcibly expel 400,000 to 500,000 Palestinians since 1967.

The lawsuit says that the Israeli army received $60 million in a single month from the tax-exempt US charity Friends of the IDF.

Tax-exempt donations have been used to purchase military gear, including night-vision goggles, sniper scopes and guard dogs for Israeli settlers as well as to set up “sniper schools.”

Friends of the IDF holds fundraisers all over the United States, often with the endorsement of celebrities including singer Barbra Streisand, Seinfeld star Jason Alexander and film actor Antonio Banderas, or politicians such as US Senator Mark Kirk of Illinois.

Other tax-exempt entities identified in the complaint are the Jewish National Fund, the Falic Family Foundation, American Friends of Ariel, Gush Etzion Foundation, American Friends of Har Homa and the Hebron Fund – many organizations reflect the names of the settlements they finance.

The complaint also alleges that US tax-exempt organizations are funding the ongoing dispossession of Bedouins in the Naqab (Negev) region in the south of present-day Israel.

Several corporations hired by the tax-exempt organizations are also named in the lawsuit. They include multinational prison and security firm G4S, information technology company Hewlett Packard, real estate seller Re/MAX and settlement builder Africa Israel Investments.

Clear standards

The role of US charities in funding the illegal Israeli colonization of Palestinian land has come under increasing scrutiny in recent years. In 2013, a group of Palestinians tried to sue several US charities funding settlement activity under anti-terrorism laws, but the complaint was thrown out.

In early 2015, the group resubmitted a petition against five US-based organizations.

McMahon said the plaintiffs in this case chose to sue the US Treasury because the agency has clear standards in place to enforce.

He said that before pursuing litigation he wrote letters to the Treasury, asking them to investigate the organizations in question. His firm is working without fees on the lawsuit and is looking for more plaintiffs.

Since filing the complaint last month, he says more than 50 people have contacted him with an interest to join.

The US Treasury, which has not commented on the litigation, has 60 days to respond to the lawsuit.

The State Department affirmed in an email to Al Jazeera that the administration of President Barack Obama, “like every administration before it since 1967, views settlement activity as illegitimate and counterproductive to the cause of peace.”

The plaintiffs want the US government’s actions to match its words.

Editors Note: An earlier version of this article stated that the lawsuit alleges that charitable contributions were used to buy military gear for the Israeli army. In fact, the lawsuit alleges that the funds were used to buy military gear for settlers. It has been corrected accordingly.




Genius! It's insulting enough that the US government takes our hard earned tax dollars and sends billions and billions of it to the two greatest terrorist states in the world: Israel and Saudi Arabia. But to further advantage those who are financially supporting Israel's war crimes as charitable contributions is offensive. This lawsuit is a remarkable piece of work and I wish it well in the courts. It's time to stop the gifting of American dollars to terrorism.


Full agreement, Maggie. Wealthy Zionists have been waging lawfare against student groups, NGOs, and anyone else prepared to work on behalf of Palestinian rights. It's time to turn this situation around and use the law for, not against, the interests of justice. Stripping their tax deductible status from these outlaw "charities" and prosecuting their directors for war crimes is an entirely reasonable goal.


This is wonderful news. One must fervently hope that at long, long last one aspect at any rate of the West's crushing contempt of International Law can be punished. I have sought help from lawyers in my own country (the UK) to bring the UK government to court for condoning the Nakba (after all, how else can it call Israel a legitimate state?) but they seem too cowardly to do anything. But, whatever our country, we must all try to do something. It is not only the rights of the rightful owners of ex-Mandate Palestine or the rights of oppressed countries all over the world that have been pulverised by the machinations of the United States and its allies. It is also the rights of ourselves, of our children and of all future generations that are at stake. Good for you, Martin McMahon!


this is a great use of creative, proactive public law policy. i have long wondered about the two faced approach of our government's condemnation of the land grab settlers on the one hand, and on the other, turning a blind eye to the misuse of tax exempt donations. given that people ask to join the lawsuit, maybe a shame that it was not cast as a class action.


We already knew that Jason/George Costanza is a loser. Further proof.


US, please stop sending money and weapons to greatest terrorist state in the world ( Israel ). The money and weapons used to kill Palestinians and to destroy their lives and homes. I am with all actions which prevent sending weapons and money to Israel.


This is really courageous effort in the face of hypocrite government. What I don't understand is how much more money do these politicians need before they have enough to not have to be such low lives.


I think most members of the US Congress fear AIPAC will fund a candidate against them and cause their defeat if they do not do the bidding of AIPAC on behalf of Israel. Of course, some Members of Congress are Jewish, some are Christian zionists, and some are simply prejudiced against Arabs and Muslims. But I think the primary reason Members of the US Congress vote for and support Israel is because they fear AIPAC will cause their defeat in the next election. AIPAC has done that quite successfully in the past by funding an opponent in the election.


How much longer can the USA stand on the wrong side of history before reaping the repercussion of its extreme policies??????

Charlotte Silver

Charlotte Silver's picture

Charlotte Silver is an independent journalist and regular writer for The Electronic Intifada. She is based in Oakland, California and has reported from Palestine since 2010. Follow her on Twitter @CharESilver.