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IRS Sent up a White Flag of surrender on Z Street v Koskinen Case

Source: Dr. Rich Swier eMagazine


IRS Sent up a White Flag of Surrender on the  Z Street v. Koskinen case

By Jerry Gordon

Last week, the Internal Revenue Service essentially ran up the white flag of surrender on the strange case of Z-Street, the pro-Israel group. It  filed for a 501c3 tax exempt status in 2009 only to become embroiled in a seven year battle over viewpoint discrimination by the IRS in violation  of the First Amendment  All because the Administration didn’t agree with Z-Street views about Israel’s ancient provenance of Judea and Samaria and the right to build settlements there.

As a member of  board of Z-Street it consternating founder Lori Lowenthal Marcus and fellow members that the original application had been sent  by the Cincinnati tax exempt clearance office to a ‘special unit’ in the IRS  headquarters for processing only to be blocked on the specious grounds that Israel was  a country where “terrorism” occurred. Duh!  Z-Street and other conservative tax exempt filers like Tea Party groups had been similarly blocked because of their views.  Z Street was aroused to file an original viewpoint discrimination case in the Philadelphia federal district court in 2010 subsequently referred to the Washington, DC district court where the IRS engaged in delaying tactics after the lower court granted discovery.  An appeal in the matter of Z Street v Koskinen was brought  by Z Street  counsel Jerome Marcus, Esq. that resulted in a decision by the DC  appellate circuit court  in June 2015 clearing the way for discovery ;” DC Circuit Court of Appeals Affirms pro-Israel Group Z Street Case against IRS .”

A Wall Street Journal article on August 5, 2016, “The Dissembling IRS”, on the background and status of the Z Street case against the IRS noted what discovery revealed following the appellate court ruling:

The IRS has maintained that Z Street’s application was flagged because the group might be working with organizations inside Israel. IRS Exempt Organizations Determinations Group manager Jon Waddell denied that there was an Israel special policy and said in a December 2010 sworn declaration in federal court in Pennsylvania that flagging Z Street was “appropriate” because “Israel is one of many Middle Eastern countries that have a ‘higher risk of terrorism.’”

That’s hilarious, since Z Street supports a country targeted by terrorism. But it also is untrue, which the Administration apparently knew before Mr. Waddell gave his statement to the court. In an October 25, 2010 internal IRS memo on the Z Street case produced in discovery, the IRS acknowledged that when Z Street’s application was being scrutinized Israel wasn’t on the list of terrorist countries, and that an agent may have been using an outdated list.

Discovery has also revealed documents that show the IRS made early attempts to shield and obfuscate its special Israel policy. In a November 29, 2010 email, IRS deputy commissioner Steven Miller asked IRS employee Sarah Ingram about “an article on a letter we apparently sent to an org on Israel settlements. What can you tell me?” Ms. Ingram replied that she “Just told Ruth to pull me out when you have a minute. Not doing email on this.”

There are other emails on the subject that have been produced in discovery but redacted to the point that they are unreadable. The IRS is blocking them on grounds that the documents are protected by so-called deliberative process privilege. But that privilege was created to safeguard internal government deliberations not to prevent the public from getting information about government wrongdoing.

The IRS wants to stonewall evidence production until the clock runs out on the Obama Administration on January 20. Let’s hope the courts keep the pressure on the agency so Z Street can see how and why it was mistreated for partisan purposes.

As Jonathan Tobin noted in a Commentary Magazine article, published today, the IRS suddenly last week after another federal court ruling issued a host of conservative groups and Z Street their long awaited 501 c3 tax exemption, without explanation, “The IRS Scandal Still Matters.”  Tobin  reported:

Years after the Internal Revenue Service scandal broke and long after the media lost interest in the agency’s practice of subjecting conservative groups to special scrutiny and delays, the government is quietly seeking to bury it. A ruling from a federal judge earlier this month demanding that the IRS finally resolve stalled applications for non-profit status has gotten results.


Many of these small groups often affiliated with the Tea Party movement have now been granted the designation they needed to begin fundraising. Among them was Z Street, a pro-Israel group whose tax exemption request dated back to 2010 [2009/LLM]. While the resolution seems to be satisfactory, the result is actually anything but. Rather than a belated triumph for justice, what has happened here is quite the opposite.


Though the Z Street litigation preceded the general outrage about the revelations about the IRS’s discrimination broke in the spring of 2013, it opened a window into the way the supposedly apolitical tax agency operated. IRS personnel didn’t just make Z Street jump through hoops unknown to groups that were not associated with causes opposed by the Obama administration. An IRS agent specifically told Z Street founder Lori Lowenthal Marcus that the government gave “special scrutiny” not only to pro-Israel organizations but also to those that advocated views that “contradict those of the administration’s.”


Though the government fought a long battle to prevent Z Street—which is sympathetic to Israel’s settlement movement—from suing to recover its rights, the courts consistently upheld its right to do so. But thanks to a separate court ruling, the IRS has now waved the white flag on this case and dozens of others that all involved agents opposing or stalling requests from non-profits similarly linked to positions that were not favored by President Obama.


Lori Lowenthal Marcus replied in an email:

We filed for tax exemption nearly seven years ago. The IRS stymied us, delayed and demurred through the litigation, and now, while we are finally in the discovery process, fearing the truth will come out, it just last week  gave us tax exempt status - never having asked us a single question about the alleged reason for sidelining our application. More outrageousness from this Administration. Yet another effort to hide the truth and evade justice. 

Not lost on us is the Administration has other plans afoot.  According to Jonathan Schanzer, Vice President for Research at the Washington, DC-based foundation for Defense of Democracies who said in a WSJ Opinion Journal interview on October 27, 2016, the Obama White House is contemplating six options for punishing Israel. See:  “Obama Plans to Recognize Palestine.” One of them is a possible UN Security Council Resolution declared ‘settlements’ illegal. 

There are days when you wonder whether this Administration understands its obligation to administration of fair justice for the protection of both its citizens and its allies, in this case, Israel. Now in the wake of the latest IRS move in the saga of Z Street, you have the answer. They don’t when it doesn’t suit their nefarious purposes.






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