IRS Scandal–Linked Nonprofit Gets Exemption after 7 Years

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October 20, 2016; Politico

In its seminal article on the IRS scandal from May 2013, NPQ referred to the 2010 lawsuit against the IRS filed by Z Street, a conservative pro-Israel nonprofit group, alleging that its application for tax exemption was being delayed on “viewpoint discrimination” grounds. Last week, Z Street received notice that its application had finally been approved.

The journey to tax exemption was long and rocky. An IRS agent had told Z Street representatives that applications from a number of organizations similar to Z Street had been routed to “a special unit in the D.C. office to determine whether the organization’s activities contradict the administration’s public policies.” At one point in the litigation, “[t]he IRS even took the position that because Israel is a country ‘where terrorism happens,’ the service was justified in taking additional time to determine whether Z Street was involved with funding terrorism.” Z Street maintains that it is a purely educational organization and funds no programs, either in Israel or in the U.S.

One particularly stinging rebuke of the IRS’s approach to Z Street’s application for tax exemption came from an interesting source: U.S. Appeals Court Judge Merrick Garland, President Obama’s choice to succeed Antonin Scalia on the Supreme Court. As NPQ noted at the time in its nonprofit newswire, Garland believed the IRS’s view that pro-Israel nonprofit Z Street could not sue the IRS until a 270-day waiting period has expired was ridiculous.

You don’t really mean that, right? Because the next couple words would be the IRS is free to discriminate on the basis of viewpoint, religion, race [for 270 days]. You don’t actually think that?

Z Street was one of about 40 targeted groups included in a federal judge’s order to the IRS last week demanding that all remaining applications be processed by November 11 and that the IRS produce a plan to assure the court that there would be no further targeting and the groups previously targeted would suffer no stigma or ill effects from their previous treatment by the IRS.—Michael Wyland