Paul L. Caron

Monday, March 5, 2012

District Court Refuses to Dismiss Claim That IRS Ties Tax-Exempt Status to Agreement With Administration's Israel Policy

Z StreetFollowing up on my previous posts (links below): the U.S. District Court for the Eastern District of Pennsylvania has refused to dismiss Z Street's claim that the IRS unconstitutionally tied its application for tax-exempt status to whether the group's positions on Israel are "contradictory to those of the Administration." Instead, the court transferred the case to the U.S. District Court for the District of Columbia.  Z Street v. Shulman, No. 10-4307 (E.D. Pa. Feb. 13, 2012):

The Complaint states, inter alia, “Wherefore, Plaintiff seeks a Declaration that Defendant’s substance and application of the Israel Special Policy to any application for tax-exempt status constitutes discrimination among viewpoints and a violation of the Plaintiff’s right to freedom of speech as guaranteed by the First Amendment to the United States Constitution.”  The Court shares Plaintiff’s view that this is a case about constitutionally valid process, and finds that 26 U.S.C. § 7428 is the statute which establishes Plaintiff’s right to challenge the IRS’s 501(c) classification process. ... 26 U.S.C. § 7428 reads, in pertinent part: “upon the filing of an appropriate pleading, the United States Tax Court, the United States Court of Federal Claims, or the district court of the United States for the District of Columbia may make a declaration with respect to such initial qualification or continuing qualification.”

Prior TaxProf Blog coverage:

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To DDearborn.
It is the UN that is a criminal enterprise, not Israel. It was your arab friends that instigated the 67 war against Israel, seeking Israels destruction. Israel won, and as a result they now own the west bank. If they wish to give some of it back to the muslim aggressors whose stated aim is to destroy them, for the sake of peace, as they did when Sadat sincerely wanted peace, you should thank them, since they could just as well keep it all.

As for the Palestinians being judged by double standards, that is true, they are being judged too leniantly. They are terrorists, and deserve to be treated as such. When they stop sponsoring suicide bombers that murder innocents on public busses, then maybe they will earn better treatment. At the moment, the west bank and gaza are basket cases, that cant govern themselves, sponsor terrorists, launch rockets against civilian populations, and preach hate to their children. If they want to be treated like a real nation, then they should start acting like one. Govern yourselves responsibly first.

Posted by: richard40 | Mar 6, 2012 8:16:46 AM


It appears you have not read the court papers. Z STREET does not provide money to ANY organizations anywhere, including anyone/thing in the disputed territories, so your rant about applying law equally to supporters of "terrorists" is, to say the least, irrelevant.

Lori Lowenthal Marcus
Z STREET president

Posted by: Lori Lowenthal Marcus | Mar 6, 2012 5:12:30 AM

The practice started with the Clinton administration and resumed with the Obama
regime. These two use the IRS as America's Gestapo, without the leather boots.

Posted by: PTL | Mar 5, 2012 1:09:10 PM


It should be noted that in point of fact providing money to any group that is actively engaged in criminal activity is aiding and abetting. Those Israelis building homes on other people's land are doing so illegally. The Un has ruled repeatedly that they are violating international law. So what should be happening here is that those people giving money to these criminal groups should be charged with a crime. And it should be noted that it is ILLEGAL to provide material support of any kind to a long list of Palestinian groups. Clearly there is a double standard here that is just plain wrong. There have been literally thousands of documented terrorist acts commited by these so called "settlement" groups against Palestinians. Terrorist acts which by the way the US and Israel turn a blind eye to.
Clearly the standards used to judge Palestinians should apply equally to Israelis. And equally clearly this is not happening right now. Stealing other peoples land and bulldozing their homes is a crime. Putting up another home doesn't make it legal. These groups are literally criminal gangs and since we are spending trillions around the world to stop terrorism this form of terrorism must be stopped as well. Which means NO money should be allowed to be given by Americans to these terrorist groups. Let alone claiming a tax deduction.

Posted by: DDearborn | Mar 5, 2012 11:03:43 AM

Thank you for the follow up on this. This is a very important case and, without your coverage, I probably would have lost track of this development.
Abe Carnow

Posted by: Abe Carnow | Mar 5, 2012 8:03:55 AM

We have to remember that Obama and his Czar's couldn't be doing this without the connivance and complicity of the Democrat Party. The whole of the Party has turned more criminal than political, first the scams like $4 Billion "Pigford Ripoff" within days of taking office and just lately the "Solyandra Swindle" for his contributors, the Democrats members of Congress voted 100% lockstep for theft of the nations treasury. Now they are using the levers of the State for political ends, who knew that they would turn to Alinsky tactic's so quickly?

Posted by: ronnor | Mar 5, 2012 7:50:31 AM

Yepper, I believe the Tea Party folks might be watching this because they're currently under the IRS thumb for the same issues from what little I've read. On the other hand, we have elected representatives and senators that aren't nearly as interested. One filibuster is all I ask. A real one!

Posted by: SenatorMark4 | Mar 5, 2012 6:27:13 AM

I suspect the Tea Party groups being harassed by the IRS are watching this with interest.

Posted by: SDN | Mar 5, 2012 5:57:36 AM