IRS digs itself deeper in Z Street case

When you're in a hole, stop digging

When you're in a hole, stop digging

A few weeks ago I wrote about the incredible behavior of the IRS in seeking to deny tax-exempt status to the pro-Israel organization Z Street (see “Obama and Nixon would agree on this“).

Z Street sued the IRS, claiming in part that

21.   Agent [Diane] Gentry also informed Z STREET’s counsel that the IRS is carefully scrutinizing organizations that are in any way connected with Israel.

22.   Agent Gentry further stated to counsel for Z STREET: “these cases are being sent to a special unit in the D.C. office to determine whether the organization’s activities contradict the Administration’s public policies.”

Now the IRS has responded, and their response is even more incredible. Here’s an excerpt:

a. The application indicated that Z Street could be providing resources to organizations within Israel or facilitating the provision of resources to organizations within the state of Israel;
b. Israel is one of many Middle Eastern countries that have a “higher risk of  terrorism.” (LR.M. See also; and
c. A referral to TAG is appropriate whenever an application mentions providing resources to organizations in a country with a higher risk of terrorism.

Just to put this into perspective, I wrote that

…some other organizations which had received 501(c)(3) status from the IRS, [include] unindicted co-conspirators in the Holy Land Foundation terror financing case CAIR and ISNA, as well as Codepink, a group which regularly accuses the US of war crimes and has called for support of the ‘Iraqi resistance’ and US military deserters.

But the IRS chose to “scrutinize” an organization that supports the world’s biggest target of terrorism, Israel! Anyway, Z Street’s original application clearly stated that it did not ‘provide resources’ to anyone outside of the US, but was only concerned with pro-Israel advocacy within the US.

And there is also an affidavit from agent Diane Gentry in which she says “I never said that stuff”:

7. Although I had telephone conversations with [Z Street attorney] Bullock on July 19, 2010 and July 27, 2010, I never told her that the IRS had a special concern about organizations whose positions contradict the Obama Administration’s Israel policy or that cases are sent to a special unit in the Washington, D.C. office to determine whether an organization’s activities contradict the Administration’s  public policies.

8. I never told Ms. Bullock that the IRS has an “Israel Special Policy” governing the processing of applications for tax exemption by organizations that are believed to be operated by persons holding political views inconsistent with those espoused by the Obama administration.

Z Street points out that they never said “Obama” and did not use the words “Israel Special Policy”, so Ms. Gentry’s statement is technically true. But they stand by their original filing.

Z Street’s suit calls for

A. Barring application of the Special Policy to its pending application for tax-exempt status pursuant to §501(c)(3) of the Code;
B. Requiring that Defendant adjudicate Plaintiff’s application for tax-exempt status expeditiously and fairly and without any consideration of whether the positions espoused by the Plaintiff or its officers are or are not consistent or inconsistent with the policy positions taken by the Obama administration;
C. Mandating complete disclosure to the public regarding the origin, development, approval, substance and application of the Special Policy.
D. Awarding to Plaintiff of its attorney’s fees and costs pursuant to 28 U.S.C. §2412; and
E. Such other and further relief as the Court may deem proper.

The embarrassed government (at least I hope they are embarrassed) wants the case to be dismissed on technical grounds, saying that Z Street has an “adequate remedy at law” to get their exemption. But that would not accomplish item C above, which is to expose the cynical use of the IRS by the administration to punish its ideological opponents.

Although the case has been heavily discussed in blogs and Jewish media, it’s interesting that the ‘regular’ media has almost entirely ignored it, despite its constitutional implications. Archival searches of the Washington Post, NPR and the NY Times — which not so long ago published a long article viewing with alarm the possible use of charitable donations to support settlements — show ZERO relevant hits.

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