According to The New York Times report, lenient American tax regulations allow funds to flow to settlement outposts that are illegal under Israel law as opposed to larger settlement blocks that receive money from the Israeli government, daily Haaretz reported Tuesday.

The result is that it is easier to fund outposts from the United States than from Israel, which over a decade ago outlawed tax breaks for contributions to groups devoted exclusively to settlement-building in the West Bank, Haaretz quoted The New York Times as saying. Findings could embarrass Obama as he seeks to persuade Netanyahu to extend a settlement building freeze.

U.S. Treasury tax breaks have helped West Bank settlers to receive $200 million in tax-free funding from American donors, according to a report published in the United States on Tuesday, Haaretz said.

Differences in U.S. and Israeli law mean it is easier to fund illegal outposts through donations from New York than from Jerusalem, according to an investigation by The New York Times.  

An examination of public records in the United States and Israel pinpointed at least 40 American groups that have raised over $200 million in tax-deductible gifts for Jewish settlers in the West Bank and East Jerusalem over the past decade, Haaretz said.