A 2005 report by the Congressional Research Service stated: "The United States stipulates that U.S. aid funds cannot be used in the occupied territories."
Now, in the first place, in the context of Ignatius' assertion that money donated to Jewish communities should not be tax-exempt, that is poorly worded as what it actually means is that US aid funds to the government of Israel cannot be used in the "occupied territories". That is clear from the next sentence:
Because U.S. economic aid is given to Israel as direct government-to-government budgetary support without any specific project accounting, and money is fungible, there is no way to tell how Israel uses U.S. aid.
I found the original document here.
In the second place, a lot of American taxpayers' money surely does go to the so-called "occupied territories", actually, "disputed", as well as private charitable contributions, without complaint by Ignatius.
It's just that the money officially goes to, well, Arabs.
In Gaza, they are getting (and that "they" could probably be Hamas) almost a billion US dollars a la Clinton. In other words, there seems to be a geographical discrimination criteria in place or advanced by Ignatius. What Ignatius seems to be promoting is that you can get tax-exemption for your donation if the money doesn't go to Jews? Or are there other areas around the globe where a similar thesis could be argued, that you can separate between peoples in the same territory? I once had Senator Jesse Helms get involved in this matter but the Israel Foreign Ministry shot down my project as they were scared.
So, what was Ignatius implying?
Money surely can be given - without doubt - to Jewish charitable enterprises in Judea and Samaria and there should be no implied criminal stain or hint of illegality Government policyt can change overnight. The way he phrased it was unethical journalism, the old sleight-of-the pen/keyboard trick.
Now, his father may be the president of the Washington Post but that shouldn't be a license to scare people, intimidate people and mislead them.