Tax-Exempt Funds Aid Settlements in West Bank

===================================================

.HAR BRACHA, West Bank

— Twice a year, American evangelicals show up at a winery in this Jewish settlement in the hills of ancient Samaria to play a direct role in biblical prophecy, picking grapes and pruning vines.

Believing that Christian help for Jewish winemakers here in the occupied West Bank foretells Christ’s second coming, they are recruited by a Tennessee-based charity called HaYovel that invites volunteers “to labor side by side with the people of Israel” and “to share with them a passion for the soon coming jubilee in Yeshua, messiah.”

But during their visit in February the volunteers found themselves in the middle of the fight for land that defines daily life here. When the evangelicals headed into the vineyards, they were pelted with rocks by Palestinians who say the settlers have planted creeping grape vines on their land to claim it as their own. Two volunteers were hurt. In the ensuing scuffle, a settler guard shot a 17-year-old Palestinian shepherd in the leg.

“These people are filled with ideas that this is the Promised Land and their duty is to help the Jews,” said Izdat Said Qadoos of the neighboring Palestinian village. “It is not the Promised Land. It is our land.”

HaYovel is one of many groups in the United States using tax-exempt donations to help Jews establish permanence in the Israeli-occupied territories — effectively obstructing the creation of a Palestinian state, widely seen as a necessary condition for Middle East peace.

The result is a surprising juxtaposition: 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.

A New York Times examination of public records in the United States and Israel identified at least 40 American groups that have collected more than $200 million in tax-deductible gifts for Jewish settlement in the West Bank and East Jerusalem over the last decade. The money goes mostly to schools, synagogues, recreation centers and the like, legitimate expenditures under the tax law. But it has also paid for more legally questionable commodities: housing as well as guard dogs, bulletproof vests, rifle scopes and vehicles to secure outposts deep in occupied areas.

In some ways, American tax law is more lenient than Israel’s. The outposts receiving tax-deductible donations — distinct from established settlements financed by Israel’s government — are illegal under Israeli law. And a decade ago, Israel ended tax breaks for contributions to groups devoted exclusively to settlement-building in the West Bank.

Now controversy over the settlements is sharpening, and the issue is sure to be high on the agenda when President Obama and the Israeli prime minister, Benjamin Netanyahu, meet in Washington on Tuesday.

While a succession of American administrations have opposed the settlements here, Mr. Obama has particularly focused on them as obstacles to peace. A two-state solution in the Middle East, he says, is vital to defusing Muslim anger at the West. Under American pressure, Mr. Netanyahu has temporarily frozen new construction to get peace talks going. The freeze and negotiations, in turn, have injected new urgency into the settlers’ cause — and into fund-raising for it.

The use of charities to promote a foreign policy goal is neither new nor unique — Americans also take tax breaks in giving to pro-Palestinian groups. But the donations to the settler movement stand out because of the centrality of the settlement issue in the current talks and the fact that Washington has consistently refused to allow Israel to spend American government aid in the settlements. Tax breaks for the donations remain largely unchallenged, and unexamined by the American government. The Internal Revenue Service declined to discuss donations for West Bank settlements. State Department officials would comment only generally, and on condition of anonymity.

“It’s a problem,” a senior State Department official said, adding, “It’s unhelpful to the efforts that we’re trying to make.”

Daniel C. Kurtzer, the United States ambassador to Israel from 2001 to 2005, called the issue politically delicate. “It drove us crazy,” he said. But “it was a thing you didn’t talk about in polite company.”

He added that while the private donations could not sustain the settler enterprise on their own, “a couple of hundred million dollars makes a huge difference,” and if carefully focused, “creates a new reality on the ground.”

Most contributions go to large, established settlements close to the boundary with Israel that would very likely be annexed in any peace deal, in exchange for land elsewhere. So those donations produce less concern than money for struggling outposts and isolated settlements inhabited by militant settlers. Even small donations add to their permanence.

For example, when Israeli authorities suspended plans for permanent homes in Maskiot, a tiny settlement near Jordan, in 2007, two American nonprofits — the One Israel Fund and Christian Friends of Israeli Communities —raised tens of thousands of dollars to help erect temporary structures, keeping the community going until officials lifted the building ban.

Israeli security officials express frustration over donations to the illegal or more defiant communities.