https://www.wrmea.org/israel-palestine/the-israel-exception-from-u.s.-laws.html

The Israel Exception From U.S. Laws

: Bruce Fein; Posted On January 10, 2025

A person holds a brochure for land for sale in Israel and the occupied West Bank while draped in an Israeli flag on Sept. 15, 2024, in Cedarhurst, New York. The Israeli real estate expo held at a local synagogue, Young Israel of Lawrence-Cedarhurst, encouraged Jews to buy land in Jerusalem and Israeli settlements in the occupied West Bank, and brought out demonstrators on both sides of the issue. (STEPHANIE KEITH/GETTY IMAGES)

Washington Report on Middle East Affairs, March/April 2025, pp. 49-51

Special Report

By Bruce Fein

THE LIFE OF THE LAW is neither logic nor justice. Raw power is paramount whether in lawmaking, interpretation or application. French poet and journalist Anatole France captured the idea in this quip: “The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread.”

Israel occupies the apex of power in the United States. Notwithstanding his ongoing criminal trial in Israel for breach of trust, bribery and fraud and the arrest warrant by the International Criminal Court for war crimes and crimes against humanity, Prime Minister Binyamin Netanyahu received 55 standing ovations in addressing a joint session of Congress on July 24, 2024, a high-water mark of legislative exuberance. Congressman Thomas Massie (R-KY) related to Tucker Carlson that he is the only Republican in Congress not to have an American Israel Public Affairs Committee (AIPAC) minder. AIPAC is notorious for brandishing its financial clout to crush political opposition, as it did in 2024 with former House members Cori Bush (D-MO) and Jamaal Bowman (D-NY).

U.S. LAWS WITH DE FACTO ISRAEL EXCEPTIONS

It is no surprise, therefore, that the law is routinely warped to cosset or shield Israel. One prominent example is the Leahy Law of 1997, which prohibits security assistance to any security unit of a foreign country credibly accused of a gross violation of human rights, such as extrajudicial killing, torture or prolonged arbitrary detention. The State Department has de facto carved out an Israel exception to the Leahy Law. No Israeli security unit has ever been disqualified from U.S. security assistance despite what all the world knows and can see in Gaza, the West Bank, Lebanon and elsewhere in the Middle East.

Author James Bamford, in his meticulously documented book Spyfail, confirms AIPAC is an unregistered “foreign agent” of Israel under the Foreign Agents Registration Act that the U.S. Department of Justice ignores. Registration is required of an entity that, among other things, acts at the “request” of a foreign principal to influence the public policy of the United States. To believe Prime Minister Netanyahu has never “requested” AIPAC in body language or clues to influence Congress and public opinion to support Israel after Oct. 7, 2023, takes fantasy to a new level. AIPAC worked hand in hand with the Israeli government to oppose the sale of AWACs to Saudi Arabia in 1981. Did the left hand not know what the right hand was doing? Think of an analogy. When King Henry II, during a Christmas dinner with four knights in 1170, rhetorically asked, “Will no one rid me of this turbulent priest?” the words were understood as a request to murder Thomas Becket, Archbishop of Canterbury, which promptly ensued.

Predictably, the Internal Revenue Code has also been warped to benefit the Israel war machine. The Internal Revenue Service (IRS) is instructed to disregard form over substance in administering the tax code. Section 7701 (o) (5) (A) of Title 26, for instance, disregards transactions without any valid material business purpose. The doctrine of substance over form logically applies to the operations of tax-exempt charities under section 501 (c) (3) of the code.

Treasury regulations underscore that a tax-exempt entity must operate exclusively to advance charitable purposes, which exclude supporting or subsidizing military objectives. A tax-exempt organization must align with established public policy according to the 1983 ruling of the United States Supreme Court in Bob Jones University v. United States: “[E]ntitlement to tax exemption depends on meeting certain common law standards of charity—namely, that an institution seeking tax-exempt status must serve a public purpose and not be contrary to established public policy.” Supporting a foreign government is not a recognized charitable purpose.

Based on these background tax exemption principles, an indeterminate number of 501 (c) (3) organizations with an Israel nexus seem in violation of their tax-exempt status. One Israel Fund’s stated mission is “fostering the flourishing of Jewish life in all areas of our Biblical Heartland, as well as other regions throughout Israel.” Among other things, the fund is raising donations to equip West Bank settlers with military equipment and infrastructure. That includes “dozens of command and dispatch centers throughout West Bank settlements and roughly $250,000 to add searchlights, PA systems and Israeli military communications systems to vehicles the military has purchased for settler security teams.”

One Israel Fund is performing an Israeli government function in the West Bank, which is a disqualifying, non-charitable purpose. Further, the International Court of Justice has issued an advisory opinion to the United Nations General Assembly declaring the West Bank settlements illegal. The United States professes support for international law, and thus One Israel Fund’s support for West Bank settlements would misalign with U.S. public policy, disqualifying it from tax-exempt status.

The tax-exempt Jewish National Fund has donated millions of dollars to support Israeli West Bank settlers and settlement expansion. Hebron Fund is raising donations for surveillance equipment for Israeli settlements in Hebron. American Friends of Ateret Cohanim provides military equipment to Jerusalem settlers. HaYovel is raising funds for the purchase and distribution of security items for settlers, such as night vision binoculars, protective vests, aerial surveillance drones, helmets and flashlights. American Friends of Sar El places American volunteers on Israeli military bases across the West Bank and Israel. All these organizations seem in violation of their section 501 (c) (3) status because these activities are misaligned with U.S. policy regarding international law and are substitutes for functions of the government of Israel. The tax-exempt status of the Ari Fuld Project seems equally dubious. Its stated objective is to help “[Israel Defense Forces] units around the country gear-up for fighting.”

It is likely that the foregoing examples are but the tip of the iceberg of synagogues or other Jewish entities raising funds to provide security equipment to armed militias in the West Bank or Gaza, especially after Oct. 7, 2003.

The IRS predictably has not lifted a finger to investigate these tax-exempt organizations. It marches to the Israel lobby, not the law, just like the Justice Department has done nothing to enforce the Foreign Agents Registration Act. That leaves the judicial branch as the last best hope for enforcing U.S. law.

CHALLENGING THE ISRAEL EXCEPTION: THE QUESTION OF STANDING

In theory, a private party or organization like the American-Arab Anti-Discrimination Committee (ADC) could sue the IRS to revoke the tax-exempt status of organizations that are directly or indirectly acting as surrogates for the Israeli government or providing funds or equipment to support military or illegal settler ambitions. The constitutional doctrine of Article III “standing,” however, is a Gordian knot that would need to be cut at the outset.

Standing requires a plaintiff to credibly allege an imminent or actual concrete injury that is proximately caused by the alleged illegal conduct and would reasonably be likely to be remedied by a judgment in the plaintiff’s favor. The alleged section 501 (c) (3) violations predominantly threaten West Bank Palestinians with actual or imminent death, physical or mental harm, displacement or destruction of property. Finding such plaintiffs, however, would be challenging. Moreover, standing might still fail because the West Bank Palestinians would not seem to fall within the “zone of interests” protected by the statutory limitations on the operations of section 501 (c) (3) organizations.

Proximate cause is also a problem. A plaintiff would need plausibly to allege that military assistance provided by the section 501 (c) (3) entity is a substantial cause of the imminent fear of death, injury, displacement or destruction of property by the IDF or settler militias. That nexus seems dubious because the volume of security assistance provided by a single section 501 (c) (3) entity is probably relatively small compared with all the militarily useful resources available to the IDF or private militias. And even if the tax-exempt status of a scofflaw organization were revoked, it might continue to provide the disqualifying military-related assistance as a non-exempt organization; or the IDF or militias might find substitute recourses elsewhere, leaving the imminent threat to the plaintiff undiminished.

As an organization, the ADC could not claim standing simply because its ideological mission in whole or in part is to lessen violence or threats against Palestinians in the West Bank or Gaza. Ideological injury does not satisfy Article III standing according to the 1976 Supreme Court decision in Simon v. EKWRO. The ADC would need a member who independently would qualify as a plaintiff to have standing. That is unlikely for the reasons elaborated above. Federal courts in general have been extremely unfriendly to private parties who claim to have standing to challenge the tax-exempt status of section 501 (c) (3) entities; the 1989 decision in In re U.S. Catholic Conference is one of many examples of judicial hostility to such arguments.

A MARATHON, NOT A SPRINT

Federal courts may be unfriendly, but this does not mean that they are incapable of change. The law must be courted, not taken by storm. Decades are often required to upend ill-conceived precedents. It took 58 years to overturn the benighted separate-but-equal doctrine of the 1896 case Plessy v. Ferguson with the color-blind mandate of the 1954 landmark ruling in Brown v. Board of Education.

The time to start challenging Israel’s privileged status under the law is now. President John F. Kennedy was wont to relate the story of French marshal and statesman Hubert Lyautey’s instruction to his gardener to plant a tree. When told that it might take a century to mature, Lyautey memorably retorted, “In that case, plant it this afternoon.”