A Washington Free Beacon investigation has identified at least five pro-Israel organizations that have been audited by the IRS in the wake of a coordinated campaign by White House-allied activist groups in 2009 and 2010.
These organizations, some of which are too afraid of government reprisals to speak publicly, say in interviews with the Free Beacon that they now believe the IRS actions may have been coordinated by the Obama administration.
Many of the charities openly clashed with the Obama administration’s policy of opposing Israeli settlement construction over the so-called "Green Line," which marks the pre-1967 boundary between Israel and the West Bank and West and East Jerusalem.
After the Obama administration took up the Israeli-Palestinian peace process as one of its most prominent foreign policy priorities in early 2009, and made a cessation of Israeli settlement construction the cornerstone of its approach, the nonprofits were subjected to a string of unflattering media reports.
White House-allied lobbying groups joined the media criticism by challenged the nonprofits' tax-exempt status, arguing that they undercut President Barack Obama’s Middle East policies.
"Our concern at that time was that these articles weren’t just appearing by happenstance, but may have reflected an evolving policy shift in the Obama administration to scrutinize charitable giving by organizations on behalf of Jewish communities and institutions over the Green Line," said Jerusalem-based attorney Marc Zell, who convened a private meeting of pro-Israel groups in August 2009 to discuss these concerns.
Tax-exempt charities that support Israeli settlements have been the subject of controversy for years. But the issue came to a head after Obama made opposition to settlement construction a focus of his Middle East policy in 2009 and demanded Israeli Prime Minister Bibi Netanyahu halt all construction beyond the Green Line, including in the Israeli capital of Jerusalem.
While it is not illegal for these charities to contribute to groups and individuals across the Green Line, critics say that they should not receive tax-exempt status because they support communities the administration views as antagonistic to administration policy.
The media scrutiny began as early as March 26, 2009, when the Washington Post’s David Ignatius published a column questioning the groups' tax-exempt status.
The American-Arab Anti-Discrimination Committee (ADC) announced the next day that it would begin a campaign of filing legal complaints with the IRS and the Treasury Department to investigate groups "allegedly raising funds for the development of illegal settlements in the occupied West Bank."
ADC is closely tied to the Obama White House. The president recorded a video greeting to the group's annual conference and sent two senior administration officials to attend.
The ADC announced in October 2009 that it had expanded its legal campaign against pro-Israel charities and was "working with a number of coalition partners, both nationally and internationally, in conducting this ongoing campaign."
The chief negotiator for the Palestinian Authority raised the issue two days later during a meeting with U.S. Consul General Daniel Rubenstein, according to a State Department cable revealed by Wikileaks.
"[Palestinian negotiator Ahmad Quraya] gave the Consul General a copy of an article by Uri Blau and Nir Hasson, published in Israeli daily Haaretz newspaper on August 17, titled ‘American Non-profit Organization Raises Funds for Settlement,’ and asked the USG to review the situation with an eye toward eliminating organizations' tax exempt status if they are funding settlement activity," said the cable.
On July 5, 2010, the New York Times published its 5,000-word cover story on the groups, following up with a Room for Debate series two days later. The article quoted an unnamed senior State Department administration official calling such groups "a problem" and "unhelpful to the efforts that we’re trying to make." The story also quoted a senior Obama Middle East adviser, Daniel Kurtzer, saying the groups "drove us crazy."
J Street, a pro-Palestinian lobbying group that was closely aligned with the White House in 2009 and 2010, called the following week for an investigation into U.S. charities that contribute to settlements.
One pro-Israel targets was HaYovel, which was featured prominently in the New York Times article. Six months after the article was published, the IRS audited the Nashville-based charity, which sends volunteers to work in vineyards across the Green Line.
"We bookend that [New York Times] story. We were the first [group mentioned]. They really kind of focused on us," said HaYovel’s founder Tommy Waller. "Then six months later we had an audit."
Shari Waller, who cofounded HaYovel with her husband, said the couple received a phone call from the IRS in December 2010. She said she was not aware of anything in their tax documents that may have prompted the audit, and added that the additional scrutiny came during the group’s first five years of existence when audits tend to be rare.
"They contacted us the week of Christmas and told us they wanted to audit us, right now," she said. "The most unusual thing to me was they contacted us at a time [that] for most people is a very hectic time, and we had just returned from Israel. To think about taking calls for an audit on the telephone—official business is usually conducted through the mail."
Tommy Waller said he found the timing of the audit "suspicious" and believes it may have been politically motivated.
"We 100-percent support Judea and Samaria, and Jewish sovereignty in that area, and the current administration is 100 percent opposed to Jewish sovereignty in that area of Israel," he said. "That’s why we suspected that we would have to deal with [an audit]."
Two other organizations—the American arm of an educational institution that operates across the Green Line and the American arm of a well-known Israeli charity that was mentioned in the New York Times article—say they were also audited.
Another organization that was criticized in multiple articles during 2009 and 2010 was audited last year. The organization, like many of the groups with whom the Free Beacon spoke, asked to remain anonymous out of fear of political retaliation and concern that exposure would harm fundraising efforts.
"The IRS carried out an examination of our organization, reviewing all of our accounting records, tax returns, bylaws, bank records, grant awards, etc, for the relevant period," said a senior official of this organization.
"There was no vindictiveness in the audit itself and it was completed within a matter of months. Our feeling at the time was that this order must have come from above. The IRS seemed to be responding to a request or a complaint from higher up."
Concerns that the IRS was targeting pro-Israel groups were first raised publicly by Z Street, a pro-Israel organization run by Lori Lowenthal Marcus.
Z Street filed a lawsuit against the IRS in 2010, alleging its application for tax-exempt status was delayed because it disagreed with the Obama administration’s Israel policy.
According to the suit, Marcus’s attorney was informed by IRS official Diane Gentry that Z Street’s "application for tax-exempt status has been at least delayed, and may be denied because of a special IRS policy in place regarding organizations in any way connected with Israel, and further that the applications of many such Israel-related organizations have been assigned to "a special unit in the D.C. office."
Neither the IRS nor Gentry responded to a request for comment.
Marcus said Z Street has not funded anyone or any groups in the settlements. But, she added, the problems her organization faced could be related to the administration’s concerns over settlement-supporting groups.
Z Street's application for tax-exempt status first ran into trouble with the IRS on July 19, 2010, two weeks after the lengthy New York Times article was published.
"Even if that is the case, that’s an explanation, but it’s not an answer. It’s not an adequate reason," said Marcus. "It’s totally inappropriate."
Zell told the Free Beacon he has not personally witnessed a shift in IRS policy since the 2009 meeting suggesting settlement-supporting nonprofits have been targeted.
However, he said it is a "yellow flag" that at least five of these organizations have been audited since 2009, considering the recent finding by the IRS inspector general that the agency targeted conservative groups.
"Now with the revelations of the IRS abuses vis-a-vis U.S. right-wing organizations, that have been published of late, there is renewed concerned that these kinds of policies, same kinds of policies and procedures, may have been targeted at these organizations [that support settlements]," he said.