Thursday, November 25, 2010

Obama is Using the IRS to Attack Jewish Nonprofits That Support Israel

IRS to Jewish group Z-Street: 'Does your organization support the existence of the land of Israel?'
(Politico).Pennsylvania Jewish group Z-street has claimed the Internal Revenue Service is targeting pro-Israel groups introduced in federal court today a letter from an IRS agent to another, unnamed organization that tax experts said was likely outside the usual or appropriate scope of an IRS inquiry.

"Does your organization support the existence of the land of Israel?" IRS agent Tracy Dornette wrote the organization, according to this week's court filing, as part of its consideration of the organizations application for tax exempt status. "Describe your organization's religious belief sytem toward the land of Israel."

The document emerged in the course of a lawsuit filed in August by Z Street, a hawkish group that casts itself as the Zionist answer to the liberal J Street. Z Street claims that a different IRS agent reviewing its application for tax exempt status said the agency is "carefully scrutinizing organizations that are in any way connected with Israel" and that "a special unit" is determining whether its activities "contradict the Administration's public policies.'"


The IRS can deny tax exempt status to groups that work against "established public policy," a precedent established in its denial of a tax exemption to Bob Jones University over racial discrimination, and Z Street is suggesting that the IRS has begun applying some such policy to pro-Israel groups. The State Department has complained of tax exempt contributions to groups that fund weapons and equipment for West Bank settlers, which Z Street co-founder Lori Lowenthal Marcus said Z Street has never come close to doing.

"Given that we have fallen within this net, how big is the net?" she asked.

The agent's question was contained in correspondence with "a Jewish religious organization" with no stated position on Israel, Z Street says in its court filing. The group's tax adviser, Z Street says, shared the correspondence with Z Street. Z Street does not know the name of the group and may subpoena the tax adviser, who is no longer cooperating with them, for more information, Marcus said.

Several experts on non-profit tax law said the questions to the organization were unusual, at best, though they were also skeptical of the claim that the IRS is specifically targeting pro-Israel groups.

"The claims go far beyond what should be the IRS's role," said Paul Caron a University of Cincinnati law professor and the author of TaxProf Blog.

Ellen Aprill, a law professor at Loyola University in Los Angeles said the second question was "appropriate" in the context of an application seeking a tax exemption on religious grounds.

"The first one is not the way I would want any of my agents to do it," she said.

Former I.R.S. Commissioner Sheldon Cohen said he was skeptical of Z Street's motives in its high-profile lawsuit, rather than pursuing its concerns in tax court.

"They were hardly into the process when they screamed rape – nobody lifted the dress yet," he said, noting that 501(c)3 groups can't advocate for political positions.

But he called the specific questions "unusual."

"I've never seen that kind of inquiry," he said.

And Ofer Lion, a California tax lawyer, said he thought the question was probably the work of a misguided agent.

"People who work in the field and have done a lot of these applications have seen these bizarre questions shot back at them more than once," he said.

Z Street maintains, however, that the questions are more evidence of a broader policy targeting pro-Israel groups. The organization claims that the agency is "improperly considering the political viewpoint of applicants" and engaging in "clear viewpoint discrimination."

The IRS has sought to dismiss Z Street's claim on technical grounds. A spokesman said he couldn't immediately comment on the new filing; in August, a spokesman said he couldn't comment on an ongoing case.

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