Paul L. Caron

Wednesday, November 24, 2010

Is Failure to Support Obama Administration's Foreign Policy Grounds to Deny Charity's Tax-Exempt Status?

Z Street Following up on my prior posts:

 Z Street issued this press release on Monday:

Z STREET, an organization devoted to pro-Israel public education, today filed in federal court its Opposition to the government’s effort to continue violating the US Constitution by discriminating against the organization because its views on Israel and the Middle East differ from those of this government.   On August 25, 2010 Z STREET filed a Complaint in federal court charging the IRS with constitutional violations by subjecting Z STREET’s application for tax exemption to a discriminatory process.

Court documents:

Update:  Politico, IRS to Jewish Group: 'Does Your Organization Support the Existence of the Land of Israel?', by Ben Smith:

A conservative Pennsylvania Jewish group that has claimed the IRS is targeting pro-Israel groups introduced in federal court today a letter from an IRS agent to another,  unnamed organization that tax experts said was likely outside the usual or appropriate scope of an IRS inquiry.

"Does your organization support the existence of the land of Israel?" IRS agent Tracy Dornette wrote the organization, according to this week's court filing, as part of its consideration of the organizations application for tax exempt status. "Describe your organization's religious belief sytem toward the land of Israel." ...

Several experts on non-profit tax law said the questions to the organization were unusual, at best, though they were also skeptical of the claim that the IRS is specifically targeting pro-Israel groups. 

"The claims go far beyond what should be the IRS's role," said Paul Caron a University of Cincinnati law professor and the author of TaxProf Blog.

Ellen Aprill, a law professor at Loyola University in Los Angeles said the second question was "appropriate" in the context of an application seeking a tax exemption on religious grounds. "The first one is not the way I would want any of my agents to do it," she said. 

Former I.R.S. Commissioner Sheldon Cohen said he was skeptical of Z Street's motives in its high-profile lawsuit, rather than pursuing its concerns in tax court. "They were hardly into the process when they screamed rape – nobody lifted the dress yet," he said, noting that 501(c)3 groups can't advocate for political positions. But he called the specific questions "unusual." "I've never seen that kind of inquiry," he said.

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I don't know Mr. Cohen, but I too was shocked by the statement attributed to him. I have read many comments by many former Commissioners and Chief Counsels (probably many by him) and cannot recall any statement bordering anything near this one. I agree that more should be made about this unusual statement.

Posted by: taxguy | Nov 25, 2010 7:23:56 PM

Good point, Tax Guy.

I'm still kind of shocked that Sheldon Cohen's gross imagery hasn't been the topic of discussion somewhere, at least as far as I know. Or maybe that level of human sensitivity is what we expect of a former IRS Commissioner?

Posted by: Ron Coleman | Nov 25, 2010 10:40:35 AM

The questions should properly go to the sincerity of beliefs and not their content. But we'll probably see more of this as more and more hardball is played in the middle east. Nothing there seems to follow the normal rules, so why this?

Posted by: michael livingston | Nov 24, 2010 11:33:24 PM

Based on the Z Street Press Release quoted above, I disagree with Ron and Ellen that the second question was appropriate as education, not religion, is the basis for the exemption.

("Z STREET, an organization devoted to pro-Israel public education")

I do agree with Ron, however, that the IRS lacks good faith on the religion issue after the Scientology debacle. A secret agreement that allows Scientology benefits that no other group can obtain stinks like yesterday's fish.

Posted by: taxguy | Nov 24, 2010 5:14:40 PM

Nice metaphor there, Sheldon.

I don't even understand these words: "Does your organization support the existence of the land of Israel?" Is a "land" something one can "support the existence" of? Regimes, states, governments, yes. Labels, yes. But this question suggests not only, yes, a very troubling line of inquiry, but also some seriously crossed conceptual wires.

I would tend to agree with Ellen April on the second question, except that the IRS has lost a lot of credibility on its "religion vetting" in light of the whole Scientology thing, no?

Posted by: Ron Coleman | Nov 24, 2010 2:34:20 PM