A non-profit organization based outside Philadelphia is suing the Internal Revenue Service alleging that its application for 501(c)(3) tax-exempt status is being delayed and may be denied due to an alleged special policy regarding organizations that have stances regarding Israel that are contrary to Obama Administration policy. Click here to read the federal court complaint.
The plaintiff is an organization called Z Street. The basis of the action is summarized in the complaint in the case of Z Street v. Shuman, Commissioner of Internal Revenue:
The plaintiff in this case, Z STREET, is a nonprofit organization devoted to educating the public about the facts relating to the Middle East, and that relate to the existence of Israel as a Jewish State, and Israel's right to refuse to negotiate with, make concessions to, or appease terrorists. The case is brought because, through its corporate counsel, Z STREET was informed explicitly by an IRS Agent on July 19, 2010, that approval of Z STREET's application for tax-exempt status has been at least delayed, and may be denied because of a special IRS policy in place regarding organizations in any way connected with Israel, and further that the applications of many such Israel-related organizations have been assigned to "a special unit in the D.C. office to determine whether the organization's activities contradict the Administration's public policies." These statements by an IRS official that the IRS maintains special policies (hereinafter the "Israel Special Policy") 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.
Z STREET brings this case seeking a Declaratory Judgment that the Israel Special Policy violates the First Amendment to the United States Constitution; and for injunctive relief barring application of the Israel Special Policy to Z STREET's application for tax-exempt status or to similar applications by any other organization; and to compel full public disclosure regarding the origin, development, approval, substance and application of the Israel Special Policy.
In the interest of full disclosure, I will note that the attorney for the plaintiff, Z Street, Jerome Marcus and the President of Z Street, Lori Lowenthal Marcus, are longtime friends of mine. Jerome is an experienced class action litigator and Lori has extensive experience in First Amendment litigation. Even setting aside my friendship and deep respect for the Marcuses, the allegations stated in this complaint against the IRS are alarming. The regulations pertaining to tax exempt status are to be applied fairly and uniformly regardless of the political viewpoint of organizations or their leaders. More to come on this case.