July 6, 2010
Present-Day Public Policy Doctrine: Should Charitable Donations Continue to Fund West Bank Settlements?
The New York Times reports that during the last 10 years a minimum of 40 U.S.-based charities have remitted more than $200 million in tax-deductible contributions to Jewish settlements in the West Bank and East Jerusalem. Although a majority of the contributions have been funneled to schools, synagogues, and other public centers, some contributions have funded housing developments, guard dogs, bulletproof vests and other commodities needed to secure the settlements. At a minimum, the latter funding is in direct conflict with a succession of United States policy, continued by the Obama administration, opposing the settlements. Specifically, the United States consistently restricts Israel from using American government aid in the settlements. Although the IRS has announced that it is working on a publication to address domestic nonprofits and international activities, including consideration of additional questions on Schedule F of the Form 990, it has not announced any concentrated effort to address such charitable contributions made in direct conflict with United States foreign policy.
As discussed in a previous article on Forward.com, the primary issue raised in using charitable contributions to support West Bank settlements is the public policy doctrine announced by the U.S. Supreme Court in Bob Jones University: an institution seeking tax-exempt status "must serve a public purpose and not be contrary to established public policy." Of course, what constitutes "established public policy" is subject to much conjecture by legal scholars. In Bob Jones University, the Supreme Court found that racial discrimination in education violated a fundamental national public policy rooted in judicial decisions, legislation (Civil Rights Act), and executive orders. Does the U.S. policy on West Bank settlements meet that same threshold? Or, is the succession of past administrations' policy opposing West Bank settlements sufficient? Even if violation of established public policy is found, as Professor Ellen Aprill stated in the Forward.com article, the IRS would be "loath" to revoke the exemption of the domestic charities that have violated such policy. Regardless of IRS action or inaction, the continued domestic charity support of the West Bank settlements arguably poses a present-day test of the public policy doctrine.
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Thanks to Nick for posting this with the appropriate question asked. As one of the team that urged the S Ct to its decision in Bob Jones, I am clear that this sort of support would not violate the public policy doctrine as it was enunciated. But these contributions to the actiivities of the settlers might be involving the US charities in political activities, and thus a sanction might apply that is short of loss of tax exempt status.
Posted by: Karla | Jul 7, 2010 8:53:26 AM