Justice Department Announces Settlement with Pro-Israel Group Unfairly Targeted by IRS

The Department of Justice announced that it had reached a settlement, including an apology, in a case where a pro-Israel group was unfairly denied its tax-exempt status by the Internal Revenue Service (IRS) in a statement released Thursday.

Z-Street, a pro-Israel organization, applied for tax-exempt status in 2009, and was consistently put off by the IRS. Z Street claimed, according to the Justice Department, that the IRS had “applied heightened scrutiny to applications for tax-exempt status received from organizations connected in any way to Israel.” This is what led to the delay in granting tax-exempt status to Z Street, which finally received the designation in 2016.

The Justice Department noted that this wasn’t an isolated incident but one in “a series of cases brought by groups alleging that their tax-exempt status was delayed by the IRS based on inappropriate criteria, including names and policy positions.”

“Tax exemption eligibility should be based on whether an organization’s activities fulfill requirements of the law, not a group’s policy positions or the name chosen to reflect those views,” Principal Deputy Assistant Attorney General Richard Zuckerman said. “The attorneys at the Department of Justice work hard to ensure that all Americans receive equal treatment under the law. Today’s settlement further illustrates this commitment.”

In an op-ed published Wednesday in The Wall Street Journal, Lori Lowenthal Marcus, who co-founded Z Street along with her husband, wrote that initially they had been told that the exemption was due to terror concerns. But when she investigated, she learned that “within weeks of President Obama’s inauguration, IRS and State Department officials began considering whether they could deny or revoke tax-exempt status for organizations that provided material support to Jews living across the Green Line—the nonborder that delineates pre-1967 Israel from the territories Israel acquired in the Six Day War.”

Because the administration determined that “a Jewish presence in those areas is inconsistent with U.S. policy,” the IRS compiled a list of organizations that should not receive tax-exempt status based on that consideration.

However, Z-Street got onto the list, Marcus pointed out that it shouldn’t have applied to Z-Street, as “we have never spent a penny outside the U.S.”

[Photo: Ken Lund / Flickr ]