Z Street, established in 2009 as a non-profit educational group, has
sued the IRS for refusing an application for tax exemption, Middle East Newsline reported. Z Street,
quoting an IRS agent, said the refusal was based on the group's advocacy of
Israel that differed with administration policy.
Lobbyists said this marked the first time since the 1950s that
pro-Israeli non-profit organizations were being threatened with denial of
their tax-exempt status for their political positions. Neither the IRS nor
the White House has acknowledged the existence of the special unit.
"We don't know if there are other organizations that have received the
same treatment or even if this is a new policy," Z Street president Lori
Lowenthal Marcus said. "People don't talk about this. But I can guarantee
you that they didn't establish this unit just for Z Street."
The suit, filed on Aug. 25 and which lists IRS commissioner Douglas
Shulman as defendant, has demanded tax-exempt status as well as full public
disclosure of what Z Street termed "the application of Israel special
policy." Z Street, established in 2009, said it was a non-profit
organization that supported Israel's right to refuse to "negotiate with,
make concessions to, or appease terrorists."
"These statements by an IRS official that the IRS maintains special
policies governing applications for tax-exempt status by organizations which
deal with Israel, and which requires particularly intense scrutiny of such
applications and an enhanced risk of denial if made by organizations which
espouse or support positions inconsistent with the Obama administration's
Israel policies, constitute an explicit admission of the crudest form of
viewpoint discrimination, and one which is both totally un-American and
flatly unconstitutional under the First Amendment," the suit said.
In January 2010, Z Street applied to the IRS for tax-exempt status,
granted to non-profit organizations that engage in educational activities.
Five months later, the suit said, IRS agent Diane Gentry requested
additional information on Z Street, including personal information on each
board member. Z Street said Ms. Gentry refused to respond to several
inquiries regarding the group's application.
"On July 19, 2010, Z Street's corporate counsel called again, and this
time spoke with IRS agent Gentry who advised Z Street's counsel that she had
two concerns regarding the application," the suit said. "One: the advocacy
activities in general; and 2. the IRS's special concern about applications
from organizations whose activities are related to Israel, and that are
organizations whose positions contradict the U.S. administration's Israeli
IRS said Z Street could be termed an "action organization" dedicated to
lobbying rather than education, the suit said. The suit quoted Ms. Gentry as
saying that IRS would examine "the method used by the organization to
develop and present its views."
"Agent Gentry also informed Z Street's counsel that the IRS is carefully
scrutinizing organizations that are in any way connected with Israel," the
Z Street, which acknowledges that its positions on Israel have differed
from the administration, said other organizations that agree with the White
House were quickly granted tax-exempt status. The suit did not identify the
organizations but a leading Washington-based consultant, Lenny Ben-David,
cited J Street, which has been invited to the White House for consultations
"Plaintiff [Z Street] further seeks injunctive relief mandating complete
disclosure to the public regarding the origin, development, approval,
substance and application of the special policy," the suit said.