Tax Status of Kahane Chai Group Probed : Fund raising: A task force is trying to determine if the Jewish radicals outlawed by Israel can claim exempt status.

A federal task force is investigating the fund-raising practices of the radical Jewish group Kahane Chai, which praised Hebron mass killer Baruch Goldstein as a “true hero,” it was learned Friday.

The interagency task force composed of representatives of the State Department, Justice Department and Internal Revenue Service is trying to determine whether the group, which he supported, has violated U.S. tax laws and the Foreign Agents Registration Act in connection with its fund-raising efforts, officials told The Times.

Officials said that the principal question arising in the case is whether a group said by the Israelis to promote terrorism can legally set itself up in the United States as a tax-exempt organization by claiming that the money it raises is used for charitable purposes abroad.

In addition, both federal investigators and the state of New York are trying to determine whether several fund-raising organizations related to Kahane Chai have failed to register and report on their activities.

Kahane Chai was outlawed in Israel last month after the Feb. 25 massacre of about 30 Muslims at a mosque in the West Bank city of Hebron by Goldstein, a militant Jewish settler and follower of the late radical Rabbi Meir Kahane, for whom the group was named.

Kahane himself was assassinated in a Manhattan hotel in 1990. Federal prosecutors have charged that the killing was part of an Islamic conspiracy that included last year’s bombing of the World Trade Center in New York.

Kahane Chai leaders have called the United States their principal source of funds.

In addition to the federal investigation, New York State Atty. Gen. Oliver Koppel is investigating possible violations by at least four associated fund-raising groups that have failed to register with the state as tax-exempt entities.

Koppel aide Richard Baar said that the apparent infractions were called to his attention Friday by Jewish Week, a New York publication.

“We have not yet made our own determination,” Baar said. “But we plan to be in contact with these groups.”

Michael Guzofsky, head of Kahane Chai in the United States, said that, “to the best of my knowledge, we have not violated any tax laws or other laws.” He said that the organization is the victim of “an anti-democratic witch hunt” inspired by its enemies.

“No one in Kahane Chai was ever convicted of committing an act of terrorism,” Guzofsky added.

State Departmemt supervisor Michael Kraft said that the interagency group investigating Kahane Chai is being directed by the department’s Office of Counterterrorism. “Fund-raising by groups associated with terrorism is a complicated issue,” Kraft said. “It’s questionable whether you can prevent it unless there are violations of tax laws or the foreign agents act, which is being examined here. There are always First Amendment concerns in this country because people can contribute money to any cause.”

At the federal level, the foreign agents act generally requires groups or individuals representing a foreign country or “principal” to register with the Justice Department and file periodic reports of their activities. Kahane Chai once filed reports with the department but has abandoned the practice in recent years, officials said.

In a fund-raising ad published in New York, one group closely associated with Kahane Chai informed potential donors that their contributions would be “fully tax deductible.” However, the group known as American Friends of Yeshiva Harav Meir is not registered with either the IRS or New York state authorities as a tax-exempt organization, as required by law, according to Jewish Week.

Another recent ad on behalf of American Friends of the United Yishuv Movement carried the heading, “Give Arafat and Rabin a real bone to choke on: adopt a settlement.” It urged readers to give donations up to $100,000 to a settlement of Kahane Chai members on the West Bank.

Mark Owens, an IRS official who monitors tax-exempt organizations, said that he is prohibited from commenting on specific cases under review. But Owens said that “in past years we have revoked the tax-exempt status of organizations that have failed to file reports or to maintain records of substantial contributions sent overseas.”

Owens added that any organization claiming tax-exempt status “must be able to substantiate that money sent overseas was indeed used for an appropriate charitable purpose.”

Rabbi Binyamin Kahane, Kahane’s son and the current head of Kahane Chai, has made at least four speaking tours to the United States in the last 18 months. During a three-week visit last November, which included appearances in New York and Los Angeles, he raised an estimated $250,000, according to a report in Jewish Press, a Brooklyn-based weekly that focuses on the Orthodox Jewish community.