Tax-Exempt U.S. Funding of West Bank Settlements

Summary

For decades, American tax-exempt charities have channeled hundreds of millions of tax-deductible dollars to Jewish settlements in the occupied West Bank — settlements that every U.S. administration has formally opposed as an obstacle to peace. A 2010 New York Times investigation identified at least 40 American groups that had collected more than $200 million in tax-deductible gifts for West Bank and East Jerusalem settlement over the preceding decade. A subsequent 2015 Haaretz investigation, conducted with the Pulitzer Center, found that a network of roughly 50 U.S. nonprofits funneled more than $220 million to settlements in the 2009–2013 period alone. Because these donations are tax-deductible, the U.S. Treasury forgoes revenue on them — meaning the American taxpayer indirectly subsidizes a settlement enterprise that official U.S. policy condemns. This article documents that contradiction from mainstream investigative reporting.

Background

Since 1967, the United States has maintained — across administrations of both parties — that Israeli settlement of the occupied West Bank is an obstacle to a negotiated peace. The settlements are widely regarded as illegal under international law, a position reflected in United Nations Security Council Resolution 2334 (2016), which the United States allowed to pass. Successive administrations have formally opposed settlement expansion for the entire period this article covers.

Simultaneously, U.S. tax law grants 501(c)(3) charitable status to organizations that raise money for those same settlements. Donations to such charities are tax-deductible, which means the federal government forgoes tax revenue it would otherwise collect — a structure that economists and the reporting describe as an indirect public subsidy. The result is a direct contradiction between two arms of the U.S. government: the State Department opposes the settlements while the Treasury, through the tax code, helps finance them.

What the Investigations Found

The New York Times (2010). The foundational documentation is a New York Times examination of public records in the United States and Israel, which identified at least 40 American groups that had collected more than $200 million in tax-deductible gifts for Jewish settlement in the West Bank and East Jerusalem over the previous decade. The Times framed the core finding directly: “As the American government seeks to end the four-decade Jewish settlement enterprise and foster a Palestinian state in the West Bank, the American Treasury helps sustain the settlements through tax breaks on donations to support them.”

Most of the money, the Times found, went to ordinary-seeming purposes — schools, synagogues, recreation centers — which are legitimate expenditures under tax law. But some of it paid for considerably more legally questionable items: housing in occupied areas, and security equipment including guard dogs, bulletproof vests, rifle scopes, and vehicles to secure outposts deep in occupied territory. The Times noted that the donations even flowed to settlement outposts that are illegal under Israeli law, not merely under international law — meaning American tax-deductible money was supporting construction that the Israeli government itself had not authorized.

Haaretz / Pulitzer Center (2015). Five years later, Israeli journalist Uri Blau, working with the Pulitzer Center, conducted a deeper investigation published in Haaretz. It found that private U.S. donors had funneled more than $220 million to West Bank settlements through a network of roughly 50 tax-exempt nonprofits in the 2009–2013 period alone. The uses ranged from mundane (air conditioners) to inflammatory — including, the investigation found, support for the families of convicted Jewish terrorists and legal aid for Jewish extremists.

Blau’s investigation highlighted a documented double standard within Israeli politics: while the Israeli right frequently criticizes left-wing and human-rights NGOs for receiving foreign government funding and has pushed legislation to curtail it, the settlement-supporting groups — funded through American private donations — face no comparable scrutiny. The named conduits include organizations such as the Central Fund of Israel, the Hebron Fund, Friends of Ir David, and Shuva Israel.

The Transparency Problem

A recurring theme in both investigations is opacity. Low transparency requirements in both the United States and Israel make it difficult to assemble a comprehensive picture of who is giving and where exactly the money goes. While left-wing Israeli NGOs receive traceable donations from foreign governments and institutions, the settlement groups are funded largely by private individuals donating through U.S. nonprofits — a structure that obscures the donors’ identities. Some of the known benefactors, the reporting notes, are also major donors to Israeli Prime Minister Benjamin Netanyahu and to the U.S. Republican Party.

Key Figures

• The New York Times investigation (2010) — by Jim Rutenberg, Mike McIntire, and Ethan Bronner; first comprehensive mainstream documentation of the tax-exempt funding contradiction.
• Uri Blau / Haaretz / Pulitzer Center (2015) — “From the U.S. to Israel: Follow the Money”; documented the ~$220 million / ~50-nonprofit network for 2009–2013.
• Central Fund of Israel, Hebron Fund, Friends of Ir David, Shuva Israel — among the U.S. 501(c)(3) conduits identified in the reporting.
• UN Security Council Resolution 2334 (2016) — affirmed settlements’ illegality under international law; the U.S. abstained, allowing passage.
• “Not on Our Dime” Act (New York, 2023) — state legislation proposed by Assemblyman Zohran Mamdani to bar New York tax-exempt charities from funding settlements.

Official Position

The U.S. government’s position is internally contradictory by design rather than by stated intent. The executive branch’s foreign-policy arm opposes settlements; the IRS, applying neutral charitable-status criteria, grants and maintains tax exemptions for organizations that fund them. The IRS has broad authority to revoke tax-exempt status on public-policy grounds — it did so famously in Bob Jones University v. United States (1983), stripping a school’s exemption over racial discrimination — but it has not applied that authority to settlement-funding charities. Defenders of the current arrangement argue that the charities fund schools, religious institutions, and community services that qualify under neutral tax criteria, and that denying them status based on the political controversy of their location would be viewpoint discrimination.

Critics — including legal scholars, the Center for Constitutional Rights, and Palestinian-rights advocates — argue that funding activity deemed illegal under international law, and contrary to stated U.S. foreign policy, violates the public-policy principles underlying charitable status, and that the security-equipment expenditures documented by the Times fall outside any legitimate charitable purpose.

Consequences

The funding has continued and, by available accounting, grown across the decade-plus since the New York Times first documented it. No administration has moved to revoke the tax-exempt status of settlement-funding charities. The contradiction the Times identified in 2010 — the Treasury subsidizing what the State Department opposes — remains fully in place.

The issue has, however, entered legislative debate. New York’s proposed “Not on Our Dime” Act would bar state tax-exempt charities from supporting settlements and allow Palestinians harmed by settler activity to sue pro-settlement charities in New York courts. Such measures face significant political opposition and, as of 2026, have not been enacted. The structural subsidy continues.

Significance

The tax-exempt funding of settlements is among the most quietly remarkable contradictions this archive documents, because it requires no allegation of conspiracy or hidden influence — it is simply two arms of the U.S. government working at cross purposes, in public, for decades. Every administration since 1967 has opposed Israeli settlement of the West Bank as an obstacle to peace. And throughout that same period, the U.S. tax code has granted charitable status to organizations raising hundreds of millions of dollars to build and secure those settlements — down to the security equipment the New York Times documented, and even outposts illegal under Israel’s own law. Because the donations are tax-deductible, the American taxpayer underwrites the subsidy whether they support the settlements or not. The significance is in the durability of the contradiction: the IRS has the documented authority to revoke charitable status on public-policy grounds and has used it before, but has never applied it here, and no administration has asked it to. The result is a settlement enterprise that official U.S. policy calls an obstacle to peace, partly financed through a tax subsidy that official U.S. policy continues to extend — a contradiction documented not by critics or activists in the first instance, but by the New York Times, working from public records.

Sources

• The New York Times, “Tax-Exempt Funds Aid Settlements in West Bank,” Jim Rutenberg, Mike McIntire, and Ethan Bronner, July 5, 2010 — the foundational investigation documenting 40+ groups and $200M+, including security-equipment expenditures
• Haaretz / Pulitzer Center, “U.S. Donors Gave Settlements More Than $220 Million in Tax-exempt Funds Over Five Years,” Uri Blau, December 7, 2015
• Pulitzer Center, “From the U.S. to Israel: Follow the Money” investigative series
• The Intercept, “Tax-Exempt U.S. Nonprofits Fuel Israeli Settler Push to Evict Palestinians,” May 14, 2021 — documents specific conduits (Friends of Ir David, $36M to one Israeli group 2006–2013)
• New Lines Magazine, “A Fanatical Israeli Settlement Is Funded by New York Suburbanites,” February 2024
• UN Security Council Resolution 2334 (2016)
• Bob Jones University v. United States, 461 U.S. 574 (1983) — precedent for revoking tax-exempt status on public-policy grounds