Z Street Court Victory May "Blow The Doors" Off The IRS Scandal

Perhaps the smallest and least funded organization involved in the IRS Scandal Z Street, a Zionist rather than a Teaparty group, which sued the IRS before Lois Lerner admitted the bias, may turn out to be the group that blows the cover off the entire scandal.

The pro-Israel organization Z Street was today, once again, vindicated in a court of law in its now nearly five year effort to redress the violation of its Constitutional rights by the Internal Revenue Service. The judges in their Opinion were far more restrained than their reactions to the IRS arguments during the oral argument which took place on May 4, (see Judges Eviscerate IRS Lawyers For Arguing They Can Discriminate Based On Viewpoints For 270 Days) but their conclusion was the same.

In a unanimous Opinion issued Friday, June 19, the D.C. Circuit Court of Appeals agreed with and affirmed the D.C. District Court's ruling that the pro-Israel organization Z Street correctly brought a lawsuit alleging the Internal Revenue Service violated Z Street First Amendment rights by engaging in viewpoint discrimination.

While not a Teaparty organization, Z Street's 501(c)(3) application was held up for the same reason, that they disagreed with President Obama's policy.

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.”

Z STREET filed its lawsuit against the IRS in August, 2010, on the basis of statements made to its counsel by the IRS agent reviewing Z STREET's application for 501(c)(3) charitable tax exempt status, filed in 2009. That agent revealed that the IRS has an "Israel Special Policy" which gave differential treatment to tax exemption applications from organizations holding views about Israel inconsistent with those espoused by the Obama administration, scrutinizing such applications differently and at greater length, than those made by organizations which did not hold such views.

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 in 2013 when Democrats trying 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 IRS attempted to squash the Z Street lawsuit so they would not have to respond to the facts of the case, however in the June 19th decision written by Judge David S. Tatel, rejected every one of the government's arguments. First, the Court of Appeals accepted Z Street’s contention that it  raised a Constitutional violation claim of Viewpoint Discrimination, and was not simply, as the IRS claimed, seeking to evade "the assessment of taxes." What's more, the Court held that the IRS is not entitled to Sovereign Immunity in a case, like Z Street's, which complains of wrongful action by a government agency or its officers or employees.

Of particular significance, the court emphasized the application to this case of ones decided by the Supreme Court that the "tax code may not discriminate invidiously" and that there is a "requirement of viewpoint neutrality in the Government's provision of financial benefits."

The organization says it looks forward to the discovery phase of litigation in which it will seek to learn the nature and origin of  the "Israel Special Policy" which the IRS applied to Z Street’s tax exemption application. Z Street will seek to learn how such a policy was created, who created it, who approved it, to whom it was applied, as well as all other information regarding this policy.

The ultimate value of this suit goes way beyond Z Street, the discovery phase and the eventual decision will have ramifications which will spread to all of the groups damaged by the IRS bias during the Obama administration.

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