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Source: https://www.lawfareblog.com/waiving-jerusalem-embassy-act-or-not
The U.S. Embassy and Jerusalem's Status
(Lawfare) Scott R. Anderson and Yishai Schwartz - U.S. policy does not recognize Israel or any other state as having sovereignty over Jerusalem. In 1947, the UN General Assembly adopted a plan to partition the mandatory territory into separate Arab and Jewish states with Jerusalem as a separate entity under UN administration, but this plan was never implemented. The U.S. described its position in a 2014 court brief: "U.S. Presidents have consistently endeavored to maintain a strict policy of not prejudging the Jerusalem status issue and thus not engaging in official actions that would recognize, or might be perceived as constituting recognition," of Jerusalem as "a city located within the sovereign territory of Israel," which would be "damaging to the cause of peace and...therefore not...in the interest of the United States." The Palestinian Authority and many Arab states maintain that all of Jerusalem should be subject to permanent status negotiations and that east Jerusalem should be the capital of any future Palestinian state.