The U.S. is considering asking Israel to allocate some of the Palestinian tax revenues it has been withholding to a U.S.-backed effort to administer and rebuild Gaza, according to multiple people familiar with discussions. Several sources said Washington has not yet made a formal request to Israel.
Two sources who described themselves as Palestinian and knowledgeable about the talks said the proposal envisions splitting the withheld funds. Under that proposal, a portion would be directed to a transitional governing body for Gaza supported by the U.S., while other sums would be reinstated to the Palestinian Authority (PA) contingent on reforms.
Palestinian officials estimate the total amount Israel has withheld at $5 billion. Israel collects customs duties on imported goods destined for Palestinian areas and is supposed to transfer those revenues to the PA under a longstanding financial arrangement. In recent months Israel has retained those transfers as a response to disputes over Palestinian policy changes.
U.S. and Palestinian interlocutors point to reforms the PA announced in February 2025 aimed at altering the payment system for Palestinian prisoners and families of those killed by Israeli forces. U.S. officials judged those reforms insufficient, and Israel’s withholding of tax transfers has continued as a punitive measure, Palestinian officials said.
A representative of the Board of Peace, the organization linked to the U.S. administration’s Gaza blueprint, said that all parties had been asked to mobilize resources to support what the Board estimates will be a $70 billion reconstruction effort. "That includes the Palestinian Authority and Israel. There is no doubt that money held in a bank does nothing to further the President’s 20-Point Plan," the official said.
Under the administration’s plan for Gaza, a group of Palestinian technocrats, referred to as the National Committee for the Administration of Gaza, would assume control of the territory from Hamas as militants disarm. The Board of Peace’s envoy for Gaza, Nickolay Mladenov, said at a Jerusalem press conference that planning for reconstruction was in advanced stages.
The discussions reflect a U.S. strategy of leveraging financial flows and institutional changes to underpin a transition in Gaza, while conditioning some financial restoration to Palestinian governance reforms. Officials involved in the deliberations have not reached a decision on whether to press Israel for reallocation of the withheld tax receipts.