Z Street: The Case Which Could Blow Open The IRS Scandal

In August of 2010, almost three years before Lois Lerner announced at a law conference that the IRS had indeed targeted certain groups, Z Street filed a lawsuit contending they were being targeted by the IRS because they disagreed with the President’s policy on Israel. In fact Z Street filed their suit against the IRS after an agent allegedly told them his direction was to “give special scrutiny to organizations connected to Israel,” and that the files of some of those “organizations were sent to a special unit in Washington, D.C. to determine whether the activities of the organization contradicted the public policies of the administration.”

Z Street was created as a non-profit organization with the purpose of “educating the public about Zionism; about the facts relating to the Middle East and to the existence of Israel as a Jewish State; and about Israel’s right to refuse to negotiate with, make concessions to, or appease terrorists.”

In its lawsuit against the IRS, Z Street alleges that the IRS violated the First Amendment when it implemented a policy that subjected Israel-related organizations applying for tax-exempt status to more rigorous review procedures than other organizations applying for that same status. They call this viewpoint discrimination.

Ironically Z Street’s case received a boost last summer when Democrats tried to defend the administration and prove the IRS was not just engaging in viewpoint discrimination against politically conservative groups. As part of its defense, the Democrats on the House Ways and Means Committee and Senator Sander Levin (D-MI)​ released 14 IRS documents indicating the IRS created a category for review it labeled “progressive.”

Within that “progressive category” there was a subset labeled “occupied territory advocacy” (page 12 of linked document) That particular subset contained only one organization: Z Street. According to the documents, a notice to IRS inspectors to “be on the look out” (BOLO) for groups under this category was sent on August 6, 2010, just days after Z Street’s file was reviewed.

In other words, the IRS was indeed singling out applications for tax exempt status on the basis of a particular political viewpoint, advocating for the “occupied territories” which is inconsistent with this administration’s.

The Manager of the IRS Touch and Go (“TAG”) Group stated under oath, after Z Street brought its lawsuit against the IRS for viewpoint discrimination, that he concluded, based upon Z Street’s application for tax exempt status and other submissions that Z Street’s file should be sent to the TAG Group, #7830.

The TAG Group manager based his decision upon his view that Z Street might be engaged in the funding of terrorism because “there is a higher risk of terrorism in Israel.”

However after taking a look at the 14 documents related to the case released by Rep Levin:

• Nowhere in any of the 14 documents is any organization’s application referred to any group for anything related to the potential funding of terrorism.

• Nowhere in any of the 14 documents is there even any mention of terrorism. 

• The 14 IRS documents released by the House Ways and Means Committee contained a category, created by IRS employees, entitled “Occupied Territory Advocacy.” 

• The category for “Occupied Territory Advocacy” had only one organization referred to it, and the notice to IRS inspectors to “Be on the Look Out” for groups under this category was sent on August 10, 2010, just days after Z Street’s file was reviewed, and a determination was made to send the file to the TAG Group, according to IRS statements. 

• The sole entity in the “Occupied Territory Advocacy” category was referred to TAG Group #7830, which is where Z Street’s file was sent, according to IRS statements. 

• The “Occupied Territory Advocacy” category appeared on the August 12, 2010, the November 9, 2010 and the November 16, 2010 IRS documents released on June 24, but it was not present in the next document, dated February 2, 2011, or any of the subsequent 10 IRS documents. 

• Z Street’s application was “put on hold” by the IRS because it brought its lawsuit against the Service, as the IRS explained in a court filing in January, 2011. Once Z STREET’s application was no longer under consideration, the category disappeared.

In other words take one wild guess who the one group filed under “Occupied Territory Advocacy was? Z Street!

The IRS has defended itself in the Z Street lawsuit on several different grounds, including the absurd notion that the government is immune from such a lawsuit. Perhaps they never heard of the First Amendment to the Constitution (they should have, after all that Constitution thing was in all the papers).

However after four year of IRS delay tactics, two months ago a U.S District Judge rejected the Obama administration efforts to stop Z Street’s legal challenge, giving the organization a green light to go after the IRS.

In her ruling Judge Ketanje Brown Jackson wrote:

Z Street merely asks the Court to require the IRS to go about it[s] usual business of evaluating Section 501(c)(3) applications in a manner that comports with the Constitution. The only matter at issue in the instant lawsuit is whether, in addition to evaluating Z Street’s activities as it would any other organizations, the IRS may constitutionally apply a more stringent standard of review that is allegedly reserved for organizations whose activities relate to the promotion of Israel.

Last week the case began its discovery phase.

The Z Street case has the potential of blowing the IRS scandal wide open. First of all, it is the furthest along, and probably will be decided first. They can put on the stand the IRS employee who said they were being scrutinized because their policy is different than the Obama administration’s, and the lack of terrorism in any of the documents released by Rep. Levin indicates that the TAG manager who said Z Street was being examined because of terrorism in Israel may have been committing perjury.

Despite all the evidence in the Z Street case, the FBI who is supposedly investigating the case has not contacted them. Z Street President Lori Lowenthal Marcus wasn’t contacted by the Ways and Means Committee she was forced to contact them. According to Lowenthal Marcus, they listened and chose to focus on the politically conservative groups). Reps Cummings and Levin who are constantly complaining about the “progressive organizations targeted by the IRS never contact that supposedly progressive organization. And of course with the exception of the Wall Street Journal and Fox News most of the media, even the conservative media haven’t covered the Z Street case.

That’s the real sad part the case with the most potential to blow the IRS scandal wide open is being ignored by the people trying to blow the scandal wide open.

Z Street President Lori Lowenthal Marcus was a guest on the Hump Day Report Radio program this past Wednesday. If you wish to hear the interview and learn more about the case, click here.