Members of the Canadian Jewish community are anxiously awaiting a decision by the Federal Court of Canada regarding a tax appeal launched by a Jewish charity. The decision, expected in the next few weeks, could mean that the Canadian Magen David Adom for Israel (CMDA) loses its charitable status for financing activities beyond Israel's pre-1967 boundaries, in contravention of Canadian policy.

Jewish settlements in the West Bank, Gaza Strip and East Jerusalem are considered "contrary to international law and unhelpful to the peace process," according to the Canada Customs and Revenue Agency (CCRA). Canada's Department of External Affairs considers the settlements an obstacle to peace in the Middle East.

About two years ago, the CCRA notified the CMDA that its charity registration was being revoked for operating in the occupied territories. Canadian tax laws permit donors to claim a tax deduction for contributions to registered charities. Provisions of the Income Tax Act allow donors to write off part of their charitable contributions and thereby reduce their taxable income by as much as 20 percent.

The deduction provisions of the Income Tax Act, aimed at encouraging private contributions to charities, appear to have been used quite successfully by supporters of Israeli settlement activity, considered illegal under international law. According to the Israeli human rights group B'Tselem, the settler population in the West Bank (including East Jerusalem) numbers 380,000. In its report Land Grab, released earlier this year, the rights group also noted that, between 1993 and 2000, the number of settlers in the West Bank increased almost 100 percent.

Under Canadian law, it is not illegal to send money to Israeli settlements. It is unlawful, however, to claim a charitable tax deduction for the contribution, which is exactly what many CMDA contributors are doing. A 1997 investigative report by the Toronto Star revealed that a number of Jewish organizations were using their charitable status to issue receipts for such contributions. Despite the negative publicity raised by the story and promises by the government to act, the practice still appears to be widespread.

In 1997 the government revoked the charitable status of the Toronto Zionist Council after it was revealed that the Council channeled funds to the settlements. Unlike the Council, however, the CMDA appealed the CCRA decision to the Federal Court.

At a hearing in June of this year, government lawyers argued that ambulances donated by Canadians through the CMDA were operating in West Bank, Gaza and East Jerusalem settlements. The government also alleged that the ambulances were used for non-medical purposes as well. These "activities which lend support to Israeli settlements beyond its pre-1967 borders," the CCRA argued, undermine Canadian public policy regarding the Israeli-Palestinian conflict.

The CMDA is the Canadian branch of Magen David Adom (MDA), which was established in 1931 to collect and dispense blood and equipment to medical institutions and to operate ambulances. Although it is not recognized as such by the International Red Cross Societies, the MDA touts itself as Israel's equivalent of the Red Cross. The organization openly proclaims itself as a humanitarian group, yet unabashedly and wholeheartedly supports the Israel Defense Forces. Under "11 Excellent Reasons Why You Should Support Magen David Adom," for instance, the MDA's Web site proudly proclaims that its High Frequency FM Radio Network is available to the Israel Defense Forces. Moreover, the CMDA's own Web site provides a link to the Israel Defense Forces Web site, along with links to other humanitarian groups.

The Federal Court's decision could have serious consequences for Canadian charities raising money for Israel. Some Jewish leaders, in fact, are crying double standard and unfair targeting of the Jewish community. Interestingly, these were some of the same people calling for tougher anti-terrorist fund-raising laws a few months earlier, when the government passed a law which many observers believe unfairly targets Arab and Muslim fund-raising activities.

Canada's Jewish community contributes more on a per capita basis than even their American counterparts. "There's a cartel of Canadian millionaires who give massive amounts of money,' says David Drache, a prominent Canadian charities lawyer representing the CMDA. Claims Judy Grossman, overseas fund-raiser for the Hebron Fund in the West Bank, "Toronto Jews are one of our biggest supporters, they're tremendous." The Toronto-based Press Foundation, which has been linked with fund-raising activities for Jewish settlements, raises millions of dollars, though it is unclear how much of this goes to the settlements.

These are not the only Canadian groups breaking the law. Conservative estimates put the number of registered Canadian charities connected to Israel at more than 300. And, according to Drache, "there are hundreds of organizations that are supporting organizations directly or indirectly beyond the Green Line [in the West Bank]." These "are all technically in breach of this [Canadian government] policy," he added. Drache claims that the CCRA policy has no basis and that it was "invented" by tax officials in 1991. "Public policy is infinitely harder to establish than government policy; [it] is not a matter of law," he told the Canadian Jewish News.

Apparently Drache does not consider contributing to the continuation of illegal occupation in contravention of Canada's stated foreign policy a sufficient legal basis for government policy. Or perhaps he is forgetting that charities are not allowed to promote political activity.

Reaction from Muslim and Arab quarters is muted. The case has not attracted much attention in these communities. Most people approached for this story, in fact, had no comment, as they were not even aware of the case. Clearly, Canadians concerned about bringing peace to the region must pay close attention to the decision, expected before fall.

If the pattern of questioning is any indication, however, the panel of three judges appears to be buying Drache's arguments. Hopefully, the judges will eventually cut through the sophistry and recognize it for the political issue it is.

The author is a Toronto-based lawyer and a writer.