Paul L. Caron
Dean




Friday, March 9, 2012

How U.S. Tax Law Undermines Middle East Peace

Z StreetAmanda Berman (J.D. 2012, Cardozo), Note, Isn't It Ironic? The Undermining of American Public Policy by American Tax Law, and the Ramifications on Middle East Peace, 10 Cardozo Pub. L. Pol'y & Ethics J. 81 (2011):

As this Note will explore in depth, the definitions of “charitable” and “educational” are so broad as to essentially allow any group acting legally and able to describe any organizational actions as socially beneficial to request, and receive, charitable status. The lax application of the vague guidelines means that groups have incorporated as nonprofit organizations, and continue to do so, while simultaneously subverting the public policy of the United States and pursuing objectives that, plainly, do not contribute to social betterment in any way. Even more disturbing, some of these organizations operate to subvert the public policies of foreign sovereign states who are in alliance with the United States and to critically impair these states' ability to pursue their sovereign prerogatives.

One blatant and very troubling illustration of this problem is the existence of domestic charitable organizations, exempt from taxation and to which contributions are tax-deductible for the contributing individual, which funnel money directly to organizations in Israel which advocate a hard-right position against a two-state solution to the Israeli-Palestinian peace process. The peace process is obviously highly controversial, and hard-line positions remain polarizing on both sides of the debate. However, the established public policy of the State of Israel--as understood through the media, the statements of government leaders, and the actions of departments within the Israeli government--is to freeze settlement-building in disputed territories for purposes of the possible conclusion of a peace treaty. This position is considered necessary in order to keep Palestinian leaders at the bargaining table, as construction in certain West Bank locations is seen as an attempt by Israel to unilaterally predetermine complex questions regarding the delineation of the borders of a future Palestinian state. The funds being disbursed to settlers acting directly in contravention of this established policy, building settlements and outposts in some of the most disputed territories in the entire Middle East region, have the stamp of American approval as a result of the tax-exempt process through which these funds are acquired and these organizations maintained. With a salient definition of “charitable” in the IRC, an applicable public policy exception, or more engaged, consistent oversight by the IRS, organizations acting so ignominiously would face almost certain revocation of their tax-exempt status. Without these critical safeguards on the charitable system, however, the government continues to both sanction and subsidize these activities. ...

The Z STREET example serves to highlight the perilous inconsistencies that can so easily result from the failures of the current system of charitable exemption; to illuminate the stark contrast between those activities that should and should not be designated as “charitable” for purposes of United States government endorsement and financial assistance; and to demonstrate the urgent necessity for changes in each branch of government in order to address this escalating danger.

Prior TaxProf Blog coverage:

https://taxprof.typepad.com/taxprof_blog/2012/03/how-us-tax-law.html

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Comments

Apparently, in writing off my note as "worthless" Mr. Fuld did not actually read it - which of course makes him particularly credible and relevant as a critic. The note does not purport to asess the willingness of the Palestinian leadership to come to the table nor the likelihood that the settlements being funded by American groups make or break the peace process. As the title pronounces, the "basic premise" of the note is to illustrate the ironic inconsistencies in American tax law, since American public policy under half a dozen administrations has been in direct opposition to settlement construction, as has Israeli public policy under even the most right-wing governments (and this seems to be a fact that Mr. Fuld acknowledges), but the American government nonetheless directly subsidizes groups that act in direct contravention of these policies in the form of tax-deductibility and tax-exemption. There was no suggestion anywhere in the piece that the families moving into the settlements themselves undermine American foreign policy. The note's conclusion is that American tax law undermines American public policy by allowing domestically incorporated nonprofit groups to send funds to overseas projects without any effective oversight of either the domestic groups or the projects they are funding abroad. To allege the former - and to ridicule a hardworking student with a very complex understanding of these issues - is entirely unprofessional, but more importantly, it demonstrates Mr. Fuld's total inability to comprehend the note or its conclusions. Finally, even if the author intended to suggest that her personal opinion is that there would be peace without West Bank settlement construction - which it most certainly is not, as evidenced in Footnote 189, which states that "It would be extraordinarily naïve to assert that settlement construction is the only barrier to an agreement by both parties to sit down at the bargaining table. Prime Minister Netanyahu has continually pushed for direct talks without preconditions, leaving the West Bank question to a final status territorial delineation. Jonathan Peled, Letter to the Editor, An Israeli View on the Talks, N.Y. Times, Nov. 17, 2010, http:// www.nytimes.com/2010/11/18/opinion/l18israel.html?scp=2&sq=jonathan% 20peled&st=cse (letter from Israel Embassy Spokesman). And Erekat's “complaint comes off as a little disingenuous, a convenient way to shift blame and avoid discussing difficult issues like Jerusalem, security and refugees.” - the author would be in the company of dozens of experts, international figures and heads of state (including Israelis) who do espouse that opinion. Mr. Fuld disagrees with the opinion held by many around the world, and in fact on that point he and the author agree; however, his personal opinion about the underlying reasons for the success or failure of peace talks between the Israelis and Palestinians is entirely irrelevant to either the purpose nor the very accurate factual history upon which the note is based. His condescending arrogance is surprising considering his incredibly rudimentary understanding of the world's most complex region. Mr. Fuld's politically motivated commentary has no place in respectful scholarly debate.

To reduce a 41-page scholarly work on AMERICAN public policy to the question of Palestinian willingness to negotiate a two-state solution - a question not addressed in depth anywhere in the 41 pages - is a profound injustice to my hard work. Further, as a very proud and very active pro-Israel advocate for many years, I would suggest to Mr. Fuld that he read (until he understands) the note in its entirety before making such ridiculous allegations about my intelligence, my personal opinions, or most importantly, the note's conclusions.

Posted by: Amanda Berman | Apr 25, 2012 8:23:54 AM

I find the author's specific focus on Israel's internal policies to be disingenuous and misguided, and she would be better off doing some actual research and creative thinking on issues more within her realm of knowledge, be it tax law or local politics, but she clearly knows nothing about the issues in the Middle-East or suffers from extreme naivety if she thinks that directing some funding to settlers in Israel is undermining the US peace process. The Palestinian leadership showed zero interest in pursuing peace when the Israeli government imposed a rigid and absolute freeze on any expansion or building in controversial areas, including Judea and Samaria, so to suggest that handful of families moving into temporary housing on hilltops is undermining American foreign policy is ludicrous. The author’s basic premise is patently false, lacking any foundation on the historical facts, past or present, which by default, logically reduces the rest of her paper to worthlessness. Sad, if this is the best that a law school student can produce.

Posted by: Len Fuld | Mar 12, 2012 5:42:36 AM