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

Following 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:

• NY Times: Charitable Deduction Subsidizes Israeli Settlements, Contrary to U.S. Policy (July 7, 2010)
• Lawsuit: IRS Using Bob Jones University to Deny Tax-Exempt Status to Pro-Israel Charity (Aug. 26, 2010)
• Is Failure to Support Obama Administration's Foreign Policy Grounds to Deny Charity's Tax-Exempt Status? (Nov. 24, 2010)