Tuesday, August 26, 2008

JERUSALEM, Aug 25 (Reuters) - The United States says Jewish settlements in the occupied West Bank threaten any peace between Israel and the Palestinians -- yet it also encourages Americans to help support settlers by offering tax breaks on donations.

As Condoleezza Rice flew in on Monday for another round of peace talks, Israeli and American supporters of settlements defended the tax incentives, which benefit West Bank enclaves deemed illegal by the World Court and which the U.S. secretary of state has said are an obstacle to Palestinian statehood.

Pro-settler groups say they are entitled to the tax breaks because their work is "humanitarian", not political, and reject any comparison to Palestinian charities, some of which face U.S. sanctions over suspected links to Islamist groups like Hamas.

The full extent of tax-exempt U.S. funding for settlements is unclear because so many groups are involved and their spending practices are not always transparent.

But a review by Reuters of U.S. tax records found 13 tax-exempt organisations openly linked to settlements that have raised more than $35 million in the last five years alone.

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